WEBVTT - Defining the New Era of Digital Competition

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<v Speaker 1>You are listening to Bloomberg Business Week. Well, our next guest,

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<v Speaker 1>rights at the Rise of the Digital Giants, requires a

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<v Speaker 1>different mindset for success, and that understanding those digital giants

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<v Speaker 1>their DNA specifically, will help the next generation of leaders

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<v Speaker 1>prepare for an environment where everybody wants to rule the world.

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<v Speaker 1>That is the title of his new book that is

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<v Speaker 1>just out, Everybody Wants to Rule the World. Surviving and

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<v Speaker 1>thriving in a world of digital Giants. Joining us right

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<v Speaker 1>now is the author R. Ray Wong. He is founder

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<v Speaker 1>of the Silicon Valley based Constellation Research, co host of

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<v Speaker 1>Disrupt TV. It's a weekly webcast and he looks at

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<v Speaker 1>disruptive technologies and new business models. He's an advisor to

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<v Speaker 1>global companies and he joins us on this Thursday on

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<v Speaker 1>the phone in Las Vegas. Ray, nice to have you

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<v Speaker 1>here on Bloomberg Business Week. How are you. I'm doing well.

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<v Speaker 1>Thanks for having me. Well, it's great to have you here.

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<v Speaker 1>What's your last year been like? Last year has been crazy,

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<v Speaker 1>watching companies go from digital channels to digital business models

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<v Speaker 1>to digital monetization and kind of do it all from

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<v Speaker 1>home and trying to do it with like, you know,

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<v Speaker 1>the most interesting you know, work policies, technologies, and of

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<v Speaker 1>course you know shareholders and of course as a pandemic.

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<v Speaker 1>So how's the proced Have you been about the kind

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<v Speaker 1>of the rapidity and how the cycle of going digital

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<v Speaker 1>has just picked up? You know, we talked about we've

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<v Speaker 1>done five years, three years of changes, our adaptations of

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<v Speaker 1>digital strategies in one year because you had to. It's

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<v Speaker 1>it's because a choice. If you didn't do that, you

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<v Speaker 1>would be out of business. At a small store that

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<v Speaker 1>was taking motors by facts, that wasn't going to happen.

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<v Speaker 1>The large companies that didn't know how many employees they

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<v Speaker 1>had or where their supply chains were going to be,

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<v Speaker 1>they fell apart. The companies that couldn't figure out pricing

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<v Speaker 1>because they figured no demand signals, they had no analytics

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<v Speaker 1>or insight, they weren't able to survive. And we saw

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<v Speaker 1>that and the companies that have emerged over the last

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<v Speaker 1>three to four months have come back stronger and and

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<v Speaker 1>that's the most exciting part about this. Well, and you

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<v Speaker 1>your new book that talk looks specifically at these digital giants.

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<v Speaker 1>You know, what do you mean, are you talking about

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<v Speaker 1>the usual suspects specifically or give us some clarification of

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<v Speaker 1>what you wanted to look at and who we need

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<v Speaker 1>to kind of keep a close watch on is the

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<v Speaker 1>great point, right. It's not the usual suspects we're looking at,

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<v Speaker 1>like the Fangs plus Microsoft, But what we're looking at

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<v Speaker 1>is that emergent class of digital giants, the epic games,

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<v Speaker 1>the roadblocks as the Kupangs, the at financials, the Robin

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<v Speaker 1>Hoods of the world, AIRBMB, door dash um. They all

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<v Speaker 1>have distinctive business models that are that are very very

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<v Speaker 1>different than what digital transformation could do on their own.

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<v Speaker 1>For example, there are five things that are important. It's

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<v Speaker 1>really about different to meeting customer control. They take the

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<v Speaker 1>customer relationships, they aggregated, they own it. If you look

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<v Speaker 1>at door Dash versus Domino's Pizza and Dominoes is an

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<v Speaker 1>awesome company. I mean, they're the poster child for digital transformation,

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<v Speaker 1>but you might order a pizza from them once a week.

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<v Speaker 1>Some people order from door Dash three times a day.

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<v Speaker 1>And that aggregation of businesses and customers over time allowed

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<v Speaker 1>them to gather more data, and data is the power

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<v Speaker 1>behind a lot of this. They know that in your

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<v Speaker 1>zip code, Carrol, that people like Tai food more than

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<v Speaker 1>Italian and the other zip code to the like Chinese

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<v Speaker 1>food more than Indian food, and they use that data

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<v Speaker 1>to maybe build a ghost kitchen, maybe get better at targeting,

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<v Speaker 1>and then they start building big networks. Small restaurants could

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<v Speaker 1>probably have a hundred or thousand customers. These companies have

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<v Speaker 1>aggregated millions of customers, sometimes tens of millions of customers,

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<v Speaker 1>in other cases hundreds of millions of customers, and by

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<v Speaker 1>doing that they have that network effect. And then of

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<v Speaker 1>course they understand digital monetization, whether it's ads or search

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<v Speaker 1>or goods or services or memberships or subscriptions. They figured

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<v Speaker 1>out where they want to play and then here's the kicker.

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<v Speaker 1>They can lose hundreds of millions of dollars a year,

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<v Speaker 1>but Song, the growing mind market Shire, their shareholders don't care,

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<v Speaker 1>and that makes it so hard to compete against them.

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<v Speaker 1>If you're traditional business. You were talking about data UH

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<v Speaker 1>and the data domination, and it's not the typical firms

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<v Speaker 1>that we all talk about RAY when it comes to data.

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<v Speaker 1>It's not the big famous saying stock specifically, which are

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<v Speaker 1>now in UH. You know, regulators cross hairs around the world.

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<v Speaker 1>But you talk about the robin hoods the Airbnb is

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<v Speaker 1>the door Dash. These are the ones that are increasingly

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<v Speaker 1>accumulating data. And what do we need to learn from

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<v Speaker 1>What do we need to be wary about? Yeah, what

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<v Speaker 1>we need to know is that they're competing on data.

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<v Speaker 1>And that is the heart of every one of these

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<v Speaker 1>digital companies is the fact that they've got a data

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<v Speaker 1>driven digital network. That's the hundred your platform that anticipates

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<v Speaker 1>what a customer wants. It identifies a trend that hadn't

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<v Speaker 1>been thought about, It mitigates a risk that someone that

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<v Speaker 1>can't anticipate, and and that's their heart. They build that

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<v Speaker 1>information insights over time and soon every company is competing

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<v Speaker 1>on a concept we call decision velocity. You and I make,

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<v Speaker 1>you know, make a decision per second. You could take

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<v Speaker 1>us two weeks, a quarter, even a year to get

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<v Speaker 1>something out of management committee. But machines are making decisions

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<v Speaker 1>at talent times per second, and that asymmetry is called

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<v Speaker 1>causing the decision velocity that was required. Every company is

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<v Speaker 1>going to have to make faster and faster decisions, and

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<v Speaker 1>the decisions that are being brought in are creating competitive

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<v Speaker 1>mode and that information in that business graph. Like social

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<v Speaker 1>networks have social graphs that tell you what people are

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<v Speaker 1>going to do or help with the understanding that business

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<v Speaker 1>graph is powering their AI and the machine learning engines

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<v Speaker 1>which allow them be smarter. Those are the brains of

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<v Speaker 1>the operations over time. And it's interesting you bring that

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<v Speaker 1>up because a great conversation I had with the Raytheon

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<v Speaker 1>CEO Greg Hayes yesterday and I highly recommend everybody go

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<v Speaker 1>to our podcast feed at Bloomberg business Week dot com

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<v Speaker 1>UH and Bloomberg dot com to check it out. But

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<v Speaker 1>he did talk about increasingly to the use of AI

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<v Speaker 1>when it comes to defense and helping to make those decisions.

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<v Speaker 1>And that's kind of where we're moving. Are you basically saying?

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<v Speaker 1>Is the net net the payoff here that those companies

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<v Speaker 1>that are using technology, using their data, using AI, making

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<v Speaker 1>those decisions instantaneously in terms of what is going to

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<v Speaker 1>happen to their consumer base or what their consumer base wants,

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<v Speaker 1>they are going to have uh the advantage going forward

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<v Speaker 1>and and they need to be copied. Basically, you know

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<v Speaker 1>it's true, it's right, pal, but it's not just the

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<v Speaker 1>technics advantage that the hundred advantage because they can move faster,

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<v Speaker 1>they have better information, they can act on that information

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<v Speaker 1>and that gives them an advantage. And if you're smaller business,

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<v Speaker 1>you're going to want to plug into one of those networks.

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<v Speaker 1>But if you're a regulator, you're gonna want to think

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<v Speaker 1>about what you can do to put competition when that

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<v Speaker 1>data aggregation is concentrated by such a few group of individuals.

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<v Speaker 1>And that's where it gets interesting. So I think about

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<v Speaker 1>our audience ray very smart, very locked into the financial market. UM.

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<v Speaker 1>A few months ago, I was sitting down with Cathy

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<v Speaker 1>Wood and I think at that point that week they

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<v Speaker 1>had gotten out of their shares of Apple, and she's like,

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<v Speaker 1>that's maybe not the forward you know, that's not the

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<v Speaker 1>companies that I'm going to be focusing on. I'm looking

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<v Speaker 1>for the innovator's disruptors. That's her strategy. So for our

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<v Speaker 1>investment audience, you know, how should they take the information

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<v Speaker 1>that you're presenting here and run with it. Yeah, it's

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<v Speaker 1>important to find the next group of digital giants. We

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<v Speaker 1>know tech is where the growth is. We've seen the

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<v Speaker 1>ship from value investings back to growth stocks again, we've

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<v Speaker 1>seen the relation trade go back into big tech. But

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<v Speaker 1>not all big tech companies are created the same and

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<v Speaker 1>that's the important thing. You're looking for. Companies that have

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<v Speaker 1>actually figured out how to disintermediate customer account control, companies

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<v Speaker 1>that compete on data, companies that have a long term

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<v Speaker 1>mindset where they can lose money but gaining market share,

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<v Speaker 1>Companies that understand digital monetization, and then companies that understand

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<v Speaker 1>how to build fast networks. Those are going to be

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<v Speaker 1>the next winners in the digital economy. So are you

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<v Speaker 1>saying robin Hood Markets is going to be one of those?

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<v Speaker 1>Robin Hood Markets could be one of them. Starlink is

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<v Speaker 1>going to be one if they do go public. If

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<v Speaker 1>you see what happens you know with the go Jet

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<v Speaker 1>go to like uh companies in Indonesia, those are one

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<v Speaker 1>of those as well. What they're building out reliance and

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<v Speaker 1>India is going to be one of those. Robots is

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<v Speaker 1>a great example that at the Games has that capability

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<v Speaker 1>as well. So a lot of opportunities coming up well,

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<v Speaker 1>and it's interesting, you know you mentioned a lot of

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<v Speaker 1>overseas companies. I do think we talk a lot about

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<v Speaker 1>the emerging markets, and that's where you see increasingly companies

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<v Speaker 1>um that are started their innovators, their disruptors, because those

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<v Speaker 1>are markets that really need something an urgent need, and

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<v Speaker 1>we've seen that and certainly in fintech play out when

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<v Speaker 1>it comes to some of those emerging markets. Is that

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<v Speaker 1>where you really look for the innovators in the space.

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<v Speaker 1>Is it going to be a geographical difference, because that's

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<v Speaker 1>at a necessity or not necessarily, the geographical markets are

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<v Speaker 1>going to play a role, but at some point um

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<v Speaker 1>the regulators in each country are going to ensure that

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<v Speaker 1>you know, another country is you know, big tech giant

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<v Speaker 1>is not going to invade their country, and I think

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<v Speaker 1>we're starting to see that happen around the world. You're

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<v Speaker 1>also seeing governments regulate the big tech companies a little

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<v Speaker 1>bit more for fear of that kind of dominance and power,

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<v Speaker 1>and so you'll see, you know, companies that emerge for

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<v Speaker 1>regional winners. For example, Aazon is going to have a

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<v Speaker 1>tough time getting into South America or getting into Asia,

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<v Speaker 1>be very hard for them to battle there. But they

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<v Speaker 1>might have a shot in India, but even that looks

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<v Speaker 1>very limited. And so there are geographical constraints and a

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<v Speaker 1>lot of these types of companies, So is that regulations.

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<v Speaker 1>Is Amazon a company that gets crushed because you are

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<v Speaker 1>looking at the companies that you think will ultimately thrive

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<v Speaker 1>in this environment. You've mentioned a couple of them. Um,

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<v Speaker 1>who gets crushed? Is it an Amazon? Going forward? They're

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<v Speaker 1>huge now, no doubt about it. You know, here we are,

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<v Speaker 1>you know, getting ready to watch Jeff Bezos go into space.

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<v Speaker 1>Uh and you know has created incredible amounts of wealth,

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<v Speaker 1>certainly for his company and for himself. And it's a

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<v Speaker 1>stock that's just been off the charts. But is that

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<v Speaker 1>a company that ultimately gets crushed in your view? No,

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<v Speaker 1>I actually think Amazon is one of the winners. It's

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<v Speaker 1>because the ethos and the culture the organization, there's a

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<v Speaker 1>fear factor of always failing. They always start thinking about

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<v Speaker 1>working backwards and trying to innovate into new markets. The

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<v Speaker 1>only thing that will stop Amazon is really regulators UM

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<v Speaker 1>and other industry obvious who do not want Amazon in

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<v Speaker 1>their industry. And that's where we're starting to see some

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<v Speaker 1>of these anti drug bills play a role. Hey what

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<v Speaker 1>about something like you know, I think I've talked a

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<v Speaker 1>lot about the food chain or we should we be

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<v Speaker 1>looking at companies that are playing into that particularly, or

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<v Speaker 1>gathering data and tapping into the strains and stresses on

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<v Speaker 1>our our food supply chains as being some of the

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<v Speaker 1>future winners, and just got about thirty seconds short answers. Yes,

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<v Speaker 1>and that's why you're seeing a battle for Morrison's. That's

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<v Speaker 1>why retail is a great place. That's why that's why

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<v Speaker 1>i'm the B two B side the trading networks and

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<v Speaker 1>the trade for commodities is another great space for those

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<v Speaker 1>demand signals. You've got it, Carol, That's exactly the point. Alright,

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<v Speaker 1>great stuff and fun to talk with you. Thank you

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<v Speaker 1>so much. Good luck with the book very long. He

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<v Speaker 1>is founder of the Silicon Valley based Constellation Research. His

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<v Speaker 1>new book out, Everybody Wants to Rule the World, Surviving

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<v Speaker 1>and thriving in a world of digital giants.