Markets and the year(s) ahead: Digital edition

An outline of the digitized economy today (A), and for a while to come (B):

(A)

1. It has taken over fast, but the market seems to have caught up with massive currents — analytically and operationally — even if short- vs. long-term divergences remain, and there is a macro-economic fog.
2. Data is expanding its footprint at the core of virtually all enterprise, enabling corresponding expansions in product; those who lag in the former are also prone to lag in the latter.
3. Segments are converging as their common bond in data/analytics forms a bridge between them (e.g., media/commerce/finance/messaging, or hardware/software/IoT).
4. As distinctions between traditionally separate categories fade and the lines of definition blur (where does Amazon belong? Apple?), competitive reconsiderations follow.
5. Incumbent sector leaders are actively transforming to keep up with software transformations and data possibilities (GM, GE, IBM, GS/JPM, VZ)…
6. … while new entrants are gaining fast, enabled by the same data/analytics competitiveness (Tesla, Uber, Airbnb).
7. Fundamental drivers are in a transitional state: supply is becoming information supply and demand is becoming attention to it.
8. Disruption is no longer a surprise, but is expected; thus, even the established leaders are incubating and building optionality.
9. Investment and speculation now shape a balanced portfolio dynamic, such that business strategy and financial asset management are not so different.
10. Organizational rigidity is a liability — as debt is not only financial when most businesses have startup/venture aspects — and volatility creates openings and drives opportunity.

(B)

1. In this environment, two basic asset forms are beginning to take shape: (a) the technology/product/service, and (b) the network/platform.
2. The former can be short-lived, require constant upgrade and reinvention, and are always at risk of disruption or commoditization.
3. The network effects of the latter category make it more robust and a base for steady growth.
4. Companies of the product/service variety are advised to create network effects, or to combine with networks.
5. Networks are advised to develop additional dimensions — enabled by deep data troves — to enrich and further solidify their presence.
6. The deepest/broadest networks are best positioned to expand into new fields (e.g., AI, AR/VR, automotive, robotics, health)…
7. … and have been recognized by markets for their value (AAPL, GOOG, MSFT, AMZN, FB).
8. It may thus be argued, circa 2017, that the lower-risk tech assets (the multi-dimensional networks) also have the greatest upside potential.
9. We may thus begin to notice that convexity & a competitive Power Law distribution in all categories, are conjoined.
10. The goal is to be at the head and to avoid the tail, as always, but maybe much more so, around this time, than ever before.

Related reading:

To the gravitational centers

Ten questions for the new economist

The artificial-services economy

Networks 3.0: defined by digital dimensions

Networks, products and their relativity

Tools for a new trade