New companies utilising technologies that didn’t exist or were considered science fiction 20 years ago, now dominate our daily lives. They are the highest valued organisations in the world, 5 of them making up one fifth of the value of the S&P. And 3 of those 5 firms didn’t exist thirty years ago. We are in the age of instant entrepreneurism.
Companies born digital – both culturally and structurally – are now the ‘safe bets’ and institutions of tomorrow. This trend of successful digitally born companies is important to the way we have designed our investment strategy.
The Downsides to Staying Traditional
“Born-traditional companies boast mature governance and business processes, as well as operational and risk management expertise. Yet many are vulnerable to the pace of change driven by digital technologies.”(Linkedin)
Traditional companies have their merits but many suffer from an inability to adapt. In the age of instant entrepreneurism, where CEO’s like Evan Spiegel (Snapchat) and Brian Chesky (Airbnb) are some of the youngest billionaires in the world, digitally-born companies are at the forefront of industry innovation and profitability.
One of the downsides to investing in companies that don’t utilise modern technologies is that you are limiting your opportunity to develop in the future. You can’t deliver great customer service to a wide audience without sophisticated digital tools. Similarly, your compliance department will quickly become outdated if they lack digital solutions.
Being born digital in a digital world has its advantages. “Born-digital businesses excel at agility, speed, customer access, and automation”(Linkedin). They are more inclined to adopt digital technologies and press for innovative solutions.
The entrepreneurs of today can expand their companies in ways that traditional companies cannot. “Airbnb, Uber and Spotify – are all three examples of firms providing digital products and services on an international scale…. All of them existed in more than 50 countries already within 7 years after their establishment and were founded with this rapid internationalization in mind.”(Strandberg).
Companies that are both culturally and structurally digital are able to think big because they are not limited by traditional infrastructures. This trend is one that we believe will continue throughout the 2020s.
Those belonging to the millenial and Gen Z sectors of society are more digitally literate than any preceding generation. They think, speak and live digital. Even a decade ago the success of companies like Uber and Airbnb would be unimaginable. But digital literacy isn’t the exclusive dominion of the young – ultimately digital in this context is a cultural phenomenon – and anyone with a digital mindset can participate.
The path to success over the next ten years involves trusting these digitally born companies to succeed. They attract the best talent, they innovate faster and they design with tomorrow in mind. They are socially and environmentally conscious and they understand the value of the digital experience.