We users have really been played for mugs!
Three ways big tech got it wrong
Racing for scale with buggy, money-losing products doesn’t work in most sectors.
Brooke Masters
Jan 16, 2023 – 3.15pm
It’s time to unlearn the lessons of big tech.
For 20 years, the Silicon Valley giants and their peers have set the standard for corporate success with a simple set of strategies: innovate rapidly and splash out to woo customers.
Speed rather than perfection, and reach rather than profits proved key to establishing dominant positions that allowed them to fend off, squash or buy potential rivals.
Most of big tech got rich on software, which is easily updatable and basically free to distribute at scale.
Entrepreneurs everywhere took note, and an assumption that scaling up and achieving profitability would be the easy part took hold far beyond the internet platforms where these ideas originated.
Investors, desperate for growth and yield amid historically low-interest rates, were all too happy to prioritise the promise of growth over short-term earnings.
During the pandemic, the trend became extreme, as the shares of companies with big dreams and equally large losses soared to dizzying heights.
Those days are over. Inflation and rising central bank rates have changed the financial calculus. When investors can earn measurable returns from bank deposits and top-rated bonds, speculative investments that promise growth lose their edge.
The share prices of Google, Amazon and Facebook are down between 40 and 60 per cent year on year, and their younger emulators have done even worse.
A Goldman Sachs index of unprofitable technology companies has fallen by 77 per cent since its February 2021 peak.
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Back down to earth
Still, scaling up has not proved easy even for a company that is already the world’s largest maker of roofing materials. Like much of corporate America, GAF has run into a labour shortage. So, it has ended up having to start a training programme that prepares military veterans, people coming out of prisons and at-risk young people to work in the roofing sector.
The third big mistake that big tech emulators have made has been to assume that first-time customers would stick around.
Too many digital service and e-commerce companies believed that their rapid growth during pandemic lockdowns heralded a lasting uplift in revenues, rather than a one-time extraordinary bump that quickly subsided in the face of renewed competition.
Pandemic high-flyers such as Zoom Video Communications, Delivery Hero and Peloton are among those being brought back down to earth.
“In tech generally and software specifically the network effect is a potential source of advantage, but ... the model of racing for share does not work in many other sectors,” says David Garfield, global head of industries at AlixPartners.
Take the time to get the product right sounds a lot less exciting than “move fast and break things”. But for most companies, in most sectors, it is almost certainly the ticket to more lasting success.
Financial Times
More here:
https://www.afr.com/technology/three-ways-big-tech-got-it-wrong-20230116-p5ccvb
I think that this article is really pointing out that the ‘worm has turned’ and that customers really are sick of rushed and still only 90% finished software and systems. The last paragraph is unquestionably true and applies as much to Digital Health solutions as to any other software domain.
Of course, in Digital Health, there are also patient safety issues to be considered – so the stakes are significant.
Right now we are also seeing some paradigm shifts happening to the industry with the likes of ChatGPT challenging all sorts of established wisdom – in unexpected ways!
This is surely a time for ‘big tech’ to retreat, reassess and regroup and plan a way ahead in a new world! I am not sure what will emerge and who will lead even 5 years from now!
I wonder how long the humble blog has left!
David.
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