A Framework For Assessing Whether A Company Can Prosper In A Digital Economy

The internet has really taken off since the early 2000s. In the process, it has brought about huge changes in the way business is conducted, and a company’s function.

Today, many investors count a company’s digital strategy as one of the key things to look at when evaluating the company as a potential investment target. It is well known now that a company without a viable digital strategy is less likely to grow at a fast clip, if it even survives.

I recently started reading a book by Peter H. Diamandis and Steven Kotler titled Bold: How to Go Big, Create Wealth, and Impact the World. In the book, the authors touched on six key areas – they are named as the “6 Ds” – that companies need to address if they want to prosper in an increasingly digital world.

Let’s look at the first two “Ds”.

Editor’s note: Articles touching on the next four D’s have been published. They can be found here and here.

The first is Digitization. Digitization has transformed the way we share information in this era. In the past, we got information either from talking to people, or from the newspapers or TV programs. Information exchange was rather slow. But, with the appearance of the internet, sharing of information has become much faster.

One of the main advantages of digitization is that information can be shared with millions of people at the same time, and it can also be reproduced easily.

What this means for a company with a digital presence is that it can reach out to millions of people more then it could have otherwise. And this means it has the possibility of growing much faster.  “Anything that becomes digitized (biology, medicine, manufacturing and so forth) hops on Moore’s law of increasing computational power,” wrote Diamandis and Kotter in their book.

Digitization, when applied to most industries, opens the door to the possibility of high growth – it’s just about finding the most suitable way to digitize.

The second “D” is Deception. As stated in the book: “Digitalization follows deception, a period during which exponential growth goes mostly unnoticed.”

The Deception period can be looked at as an incubation period, during which a young company is slowly taking market share from competitors, unnoticed. This is because the development will initially be so small that no one will pay much attention to it. Deception is also a period during which older companies may be complacent, thinking that competitors can’t replace them. This mentality could prevent the incumbents from innovating, or realising the gravity of the situation.

As the numbers get larger during the Deception phase, growth explodes, and the young company would have little chance of being caught. The deceptive growth has now become apparent.

These are the first two “Ds” in the list of six. When you evaluate companies as potential investments, make sure you spend time thinking about the two Ds and what the companies are doing about them.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.