How Digitization Is Changing World Business
It's easy to say that technological innovation has transformed the way global business is conducted. But how, exactly, has this happened? Jonathan Woetzel, director of the McKinsey Global Institute (MGI), provided an Asia Society audience with a memorable formulation for thinking about these changes: the three "D's":
- Disintermediation. Or, more colloquially, cutting out the middle-man. Three decades ago, consumers wouldn't dare make travel plans without consulting a travel agent who would book flights and hotel rooms and devise itineraries for them. Now, of course, travel websites allow travelers to handle these tasks on their own.
- Disaggregation. This, Woetzel says, is essentially the sharing economy: "take something big, cut it up, share it with a lot of people, and match supply and demand," he said. Think of Airbnb or Uber, where people monetize unused space in their homes or cars.
- Dematerialization. It used to be that you had to buy a magazine to read its articles or buy a CD to hear its songs. In the digital world, these physical items can be divided and consumed in parts. Woetzel pointed out that the development of 3D printers place unexpected industries, like construction, at risk.
These trends are not new — but taken together, they will continue to be highly disruptive:
"Every industry is going to see big changes in how the customer is reached: it’s going to be much more direct and more customized," said Woetzel. "We’re also going to see big changes in how we invest. We’re not going to invest in big assets reserved in big companies. They’re going to be shared. They’re going to be integrated across entire value chains. Finally, we’re going to see some things that are simply going to disappear. It’s a radically new world for most industries."
Woetzel's appearance at Asia Society was in conjunction with the New York launch of China's Digital Economy, a major report published by the MGI. Following his remarks, he participated in a panel discussion with Jiong Shao, managing director of CEC Capital, and Yu Zhou, professor of geography in the Asian Studies department at Vassar College. The conversation was moderated by Vijay Vaitheeswaran, U.S. business editor for The Economist.
Watch the complete event below: