Defining the New Era of Digital Competition

now is the author R. Ray Wong. He is founder of the Silicon Valley based Constellation Research, co host of Disrupt TV. It's a weekly webcast and he looks at disruptive technologies and new business models. He's an advisor to global companies and he joins us on this Thursday on the phone in Las Vegas. Ray, nice to have you here on Bloomberg Business Week. How are you. I'm doing well. Thanks for having me. Well, it's great to have you here.

What's your last year been like? Last year has been crazy, watching companies go from digital channels to digital business models to digital monetization and kind of do it all from home and trying to do it with like, you know, the most interesting you know, work policies, technologies, and of course you know shareholders and of course as a pandemic. So how's the proced Have you been about the kind of the rapidity and how the cycle of going digital

has just picked up? You know, we talked about we've done five years, three years of changes, our adaptations of digital strategies in one year because you had to. It's it's because a choice. If you didn't do that, you would be out of business. At a small store that was taking motors by facts, that wasn't going to happen. The large companies that didn't know how many employees they had or where their supply chains were going to be,

they fell apart. The companies that couldn't figure out pricing because they figured no demand signals, they had no analytics or insight, they weren't able to survive. And we saw that and the companies that have emerged over the last three to four months have come back stronger and and that's the most exciting part about this. Well, and you your new book that talk looks specifically at these digital giants.

You know, what do you mean, are you talking about the usual suspects specifically or give us some clarification of what you wanted to look at and who we need to kind of keep a close watch on is the great point, right. It's not the usual suspects we're looking at, like the Fangs plus Microsoft, But what we're looking at is that emergent class of digital giants, the epic games, the roadblocks as the Kupangs, the at financials, the Robin

Hoods of the world, AIRBMB, door dash um. They all have distinctive business models that are that are very very different than what digital transformation could do on their own. For example, there are five things that are important. It's really about different to meeting customer control. They take the customer relationships, they aggregated, they own it. If you look at door Dash versus Domino's Pizza and Dominoes is an

awesome company. I mean, they're the poster child for digital transformation, but you might order a pizza from them once a week. Some people order from door Dash three times a day. And that aggregation of businesses and customers over time allowed them to gather more data, and data is the power

behind a lot of this. They know that in your zip code, Carrol, that people like Tai food more than Italian and the other zip code to the like Chinese food more than Indian food, and they use that data to maybe build a ghost kitchen, maybe get better at targeting, and then they start building big networks. Small restaurants could

probably have a hundred or thousand customers. These companies have aggregated millions of customers, sometimes tens of millions of customers, in other cases hundreds of millions of customers, and by doing that they have that network effect. And then of course they understand digital monetization, whether it's ads or search or goods or services or memberships or subscriptions. They figured out where they want to play and then here's the kicker.

They can lose hundreds of millions of dollars a year, but Song, the growing mind market Shire, their shareholders don't care, and that makes it so hard to compete against them. If you're traditional business. You were talking about data UH and the data domination, and it's not the typical firms that we all talk about RAY when it comes to data. It's not the big famous saying stock specifically, which are now in UH. You know, regulators cross hairs around the world.

But you talk about the robin hoods the Airbnb is the door Dash. These are the ones that are increasingly accumulating data. And what do we need to learn from What do we need to be wary about? Yeah, what we need to know is that they're competing on data. And that is the heart of every one of these digital companies is the fact that they've got a data driven digital network. That's the hundred your platform that anticipates

what a customer wants. It identifies a trend that hadn't been thought about, It mitigates a risk that someone that can't anticipate, and and that's their heart. They build that information insights over time and soon every company is competing on a concept we call decision velocity. You and I make, you know, make a decision per second. You could take us two weeks, a quarter, even a year to get

something out of management committee. But machines are making decisions at talent times per second, and that asymmetry is called causing the decision velocity that was required. Every company is going to have to make faster and faster decisions, and the decisions that are being brought in are creating competitive

mode and that information in that business graph. Like social networks have social graphs that tell you what people are going to do or help with the understanding that business graph is powering their AI and the machine learning engines which allow them be smarter. Those are the brains of

the operations over time. And it's interesting you bring that up because a great conversation I had with the Raytheon CEO Greg Hayes yesterday and I highly recommend everybody go to our podcast feed at Bloomberg business Week dot com UH and Bloomberg dot com to check it out. But he did talk about increasingly to the use of AI when it comes to defense and helping to make those decisions. And that's kind of where we're moving. Are you basically saying?

Is the net net the payoff here that those companies that are using technology, using their data, using AI, making those decisions instantaneously in terms of what is going to happen to their consumer base or what their consumer base wants, they are going to have uh the advantage going forward

and and they need to be copied. Basically, you know it's true, it's right, pal, but it's not just the technics advantage that the hundred advantage because they can move faster, they have better information, they can act on that information and that gives them an advantage. And if you're smaller business, you're going to want to plug into one of those networks.

But if you're a regulator, you're gonna want to think about what you can do to put competition when that data aggregation is concentrated by such a few group of individuals. And that's where it gets interesting. So I think about

our audience ray very smart, very locked into the financial market. UM. A few months ago, I was sitting down with Cathy Wood and I think at that point that week they had gotten out of their shares of Apple, and she's like, that's maybe not the forward you know, that's not the companies that I'm going to be focusing on. I'm looking for the innovator's disruptors. That's her strategy. So for our investment audience, you know, how should they take the information

that you're presenting here and run with it. Yeah, it's important to find the next group of digital giants. We know tech is where the growth is. We've seen the ship from value investings back to growth stocks again, we've seen the relation trade go back into big tech. But not all big tech companies are created the same and

that's the important thing. You're looking for. Companies that have actually figured out how to disintermediate customer account control, companies that compete on data, companies that have a long term mindset where they can lose money but gaining market share, Companies that understand digital monetization, and then companies that understand how to build fast networks. Those are going to be

the next winners in the digital economy. So are you saying robin Hood Markets is going to be one of those? Robin Hood Markets could be one of them. Starlink is going to be one if they do go public. If you see what happens you know with the go Jet go to like uh companies in Indonesia, those are one of those as well. What they're building out reliance and India is going to be one of those. Robots is a great example that at the Games has that capability

as well. So a lot of opportunities coming up well, and it's interesting, you know you mentioned a lot of overseas companies. I do think we talk a lot about the emerging markets, and that's where you see increasingly companies um that are started their innovators, their disruptors, because those are markets that really need something an urgent need, and we've seen that and certainly in fintech play out when

it comes to some of those emerging markets. Is that where you really look for the innovators in the space. Is it going to be a geographical difference, because that's at a necessity or not necessarily, the geographical markets are going to play a role, but at some point um the regulators in each country are going to ensure that you know, another country is you know, big tech giant is not going to invade their country, and I think

we're starting to see that happen around the world. You're also seeing governments regulate the big tech companies a little bit more for fear of that kind of dominance and power, and so you'll see, you know, companies that emerge for regional winners. For example, Aazon is going to have a tough time getting into South America or getting into Asia, be very hard for them to battle there. But they might have a shot in India, but even that looks

very limited. And so there are geographical constraints and a lot of these types of companies, So is that regulations. Is Amazon a company that gets crushed because you are looking at the companies that you think will ultimately thrive in this environment. You've mentioned a couple of them. Um, who gets crushed? Is it an Amazon? Going forward? They're huge now, no doubt about it. You know, here we are, you know, getting ready to watch Jeff Bezos go into space.

Uh and you know has created incredible amounts of wealth, certainly for his company and for himself. And it's a stock that's just been off the charts. But is that a company that ultimately gets crushed in your view? No, I actually think Amazon is one of the winners. It's because the ethos and the culture the organization, there's a fear factor of always failing. They always start thinking about

working backwards and trying to innovate into new markets. The only thing that will stop Amazon is really regulators UM and other industry obvious who do not want Amazon in their industry. And that's where we're starting to see some

of these anti drug bills play a role. Hey what about something like you know, I think I've talked a lot about the food chain or we should we be looking at companies that are playing into that particularly, or gathering data and tapping into the strains and stresses on our our food supply chains as being some of the future winners, and just got about thirty seconds short answers. Yes, and that's why you're seeing a battle for Morrison's. That's

why retail is a great place. That's why that's why i'm the B two B side the trading networks and the trade for commodities is another great space for those demand signals. You've got it, Carol, That's exactly the point. Alright, great stuff and fun to talk with you. Thank you so much. Good luck with the book very long. He is founder of the Silicon Valley based Constellation Research. His new book out, Everybody Wants to Rule the World, Surviving and thriving in a world of digital giants.