Every business is becoming digital, but the concept is often misconstrued

Technology has creeped into almost every daily activity we perform. Technology in a business context can be used in two main ways.

As an Equalizer

In today’s highly competitive business world, technology has become an equalizer in terms of improving reach and efficiency. Social Media has allowed small businesses to reach a wider base of customers at a smaller budget, breaking down barriers that larger incumbents enjoyed. Newer, more nimbler companies that use technology to coordinate and automate their operations for improved efficiency compete successfully with larger corporations and grow faster. 

As a Barrier

On the flip side, technology can also be used as a barrier, to prevent competitors from eating into your market share. It could be a proprietary algorithm, a hardware specification or a system that gives unprecedented advantage to your company over others.

Where does this go wrong?

However, problems start cropping up when technology is used as a proponent to alter the underlying, fundamental business models; to help put up a fake facade to make the business look like something it’s not. 

If a mango juice company decides to sell its products online directly to the consumer, it does not make it an E-commerce company like Amazon. It cannot and should not operate like one. It’s still a mango juice company that has a new online sales channel. The unit economics and growth rates of a mango juice producing and selling operation is vastly different from the operations of an E-commerce store. 

A taxi company with an App to book rides, is still a Taxi company with substantial operational overheads. Even if the company manages to artificially boost its growth rates to the levels of a SaaS company by burning cash, once the funds dry up and investors start scrutinising the operations in search for profits, the facade will gradually fall off as the reality sets in. 

Companies come up with these false narratives for their businesses for a multitude of reasons; to drive up valuations and attract substantial investments, attract top talent or to rejuvenate the business’s fading image in the market. However, this practise is not sustainable. The reality check will always come and the deeper the companies dig into their own misconstrued business concepts, the harder the fall from grace will be. This was evident in many SoftBank-backed startups that recently flared up and went into “Safe Mode” to reevaluate their business models. 

Therefore, it is important that entrepreneurs do not get lost in the Tech buzzword bubble in search of rapid bursts of growth, as a digitally aided, steady and sustainable business operation will add much more value in the long term.

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