Direct Investments

Digital disruption – Dr John Ashcroft

21st October, 2021

Our guest contributor in this edition is Dr John Ashcroft, a consultant, non-executive director and broadcaster who specialises in economics, strategy and financial markets. He is the founder of The Saturday Economist and Dimensions of Strategy.

In November 2019, I was in Moscow as a guest of Gazprom. The theme was digital disruption. ‘A threat to business goals or financial objectives which can be attributed to a digital product or platform online’.

My corporate strategy mantra was foremost. We call it CBS News. A constant monitoring and benchmarking of CBS; Competitors, Buyers, Suppliers, and News. New products, new players, new platforms; especially screening for the challenge of digital innovation.

The Kodak moment when the leader in camera film stepped away from digital cameras should send a shiver through every boardroom. The fact that Blockbuster could have picked up Netflix (market capitalisation $260.0billion) for just $50.0 million dollars should also be on the boardroom wall.

Digital acceleration

With the advent of the pandemic, thoughts of digital disruption were cast aside. It was the year of survival and ‘The Year of Digital Acceleration’.

Satya Nadella, CEO of Microsoft would say, “We have seen two years of digitalisation in two months”. Some would recall the words of Lenin, “There are decades when nothing happens, then weeks when decades happen.”

Online and into the cloud became the mantra for all businesses. Communication systems flourished. Zoom became the hot ‘verb’ for online communications. Microsoft Teams, GoToWebinar and Cisco Webex joined the fray.

Businesses were forced to centralise communication networks and data storage. Microsoft 365 had set the standard for online data exchange, storage and communications. Microsoft Teams offered chat, calls and video.

Google offered Workspace; Facebook developed Workplace. Slack enabled collaboration among team members with features including direct messaging, private groups, and channels organised by topic.

Instant messaging services included WhatsApp, WeChat, Telegram, Signal, Skype, Viber and Discord. Data exchange platforms included Box and Dropbox. CRM systems had to be upgraded and integrated. All Smart businesses were experimenting with ‘Agile’ and ‘Scrum’ software.

Businesses became leaner and flatter in organisational terms. Organisations had to be “always learning, always challenging”. No room for complacency with exciting developments in enabling technology and data exchange for better team management.

So, what’s in store post pandemic?

The pace of change is increasing. The UK’s Technology sector is on track for a record year of investment. New data from the UK’s Digital Economy Council confirm venture capital investment increased to £13.5billion in the first six months of the year. The first half figure, is more than was achieved in the whole of last year.

Notable funding rounds included Revolut, Cinch, the car sales platform and Hopin, the online events company. Over 1,400 UK tech companies benefited from the first-half funding.

Sectors leading the funding round were Fintech, Health Tech, Enterprise Software, and Robotics. Fintechs accounted for 11 of the 20 companies to became unicorns in the first six months of 2021.

The challenge of disruptive innovation…

Our work on digital disruption now includes the challenge of disruptive innovation: the introduction of a technologically enabled new product or service that will change the way the world works.

We identified five primary disruptive innovation platforms capable of creating trillions of dollars in added value over the next ten years.

The five platforms are: Artificial Intelligence (“AI”), Robotics, Blockchain, Energy Storage and Genetics. It is important to view the innovators not as silos, but as platforms working across many industries.

As Peter Dines, COO, Mercia explains: “Innovation in fields such as AI, Machine Learning, the Internet of Things (“IoT”), Digitalisation, Materials, and Mobility move across core segments such as Diagnostics, Devices, and Digital Health to drive remarkable synergies and improvements in the quality of life.”

No shortage of buyers…

The good news for investors is that there is no shortage of exit options. According to the Financial Times, Apple, Facebook, Google, Amazon and Microsoft snapped up smaller rivals at a record pace in 2020. Data from Refinitiv reveals tech companies have spent at least $264.0billion buying up 9,222 potential rivals worth less than $1.0billion since the start of 2021.

Tech companies have inked a record 9,222 transactions to buy start-ups worth less than a billion dollars over the period. Apple, Facebook, Amazon, Google and Microsoft made 616 acquisitions valued at more than $1m.

The Empires of the Cloud are the Leaders in Artificial Intelligence in the world of the West. The battle ground is forming for the advances in Augmented Reality and Virtual Reality. The mantra of Masters of the Metaverse is yet to be claimed. Facebook’s Mark Zuckerberg has an eye on the prize. The Empires of the Cloud are making the moves to compete.

Pace, innovation and disruption…

The Mercia theme of pace, innovation, disruption and enabling technology is perfectly positioned to benefit from the fast-moving marketplace. It is the era of the digital deal. As CEO, Mark Payton explains, small businesses are the catalyst of growth and change. It is clear that Mercia is ready to invest to maintain the growth momentum.

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