Weekly Business Insights from Top Ten Business Magazines | Week 314 | Strategy & Business Model Section | 1

Extractive summaries and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Since September 2017 | Week 314 | September 15-21, 2023

The plucky firms that are beating big tech

The Economist | September 12, 2023

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Big tech keeps getting bigger. So far this year the combined market value of America’s five digital behemoths—Alphabet, Amazon, Apple, Meta and Microsoft—has soared by half, to around $9trn. That is almost a quarter of the total for the S&P 500, an index of America’s largest companies (which has risen by just 17% in the period). The five account for almost 60% of sales, profits and spending on research and development of all the technology firms in the index. They are widely expected to be the main winners from the artificial-intelligence (AI) revolution.  

Governments view this dominance with increasing trepidation.  The giants have grown so gigantic, the world’s trustbusters argue, that they suck all the oxygen out of the tech ecosystem, driving challengers to extinction or, at best, making it hard for anyone else to prosper. Just ask Snap, Spotify or Zoom.

Like natural ecosystems, though, commercial ones present opportunities for newcomers. To keep growing at the blistering rates their investors expect, the big five pay most attention to markets vast enough to make a meaningful difference to their revenues, which collectively touched $1.5trn last year. That means they ignore certain areas that are smaller but potentially still lucrative. The ingenious companies that identify such niches and are able to exploit them don’t just get by, but thrive in the shadow of the giants.

Garmin which focused on high-end watches and fitness trackers, some of which sell for several times the price of the top-end Apple Watch; Another company to successfully exploit an underserved tech niche is Dropbox which survived against giants such as google cloud based on its superior functionality including recently added AI-powered search tool to find and summarise documents; An exploitable niche can also be geographic. MercadoLibre, an Argentine e-commerce firm, is a case in point which compete well against Amazon in Mexico and Brazil.  MercadoLibre has succeeded by adapting its business model to local conditions. 

Finding a niche is not enough to guarantee success. Garmin, Dropbox and MercadoLibre have other things going for them. All three still have at least one of their founders in executive roles. Winning against big tech requires an obsessive focus on product development and the stomach for long-term investments. It helps to have experienced operators at the helm who aren’t swayed solely by quarterly targets.

3 key takeaways from the article

1. Big tech keeps getting bigger. So far this year the combined market value of America’s five digital behemoths—Alphabet, Amazon, Apple, Meta and Microsoft—has soared by half, to around $9trn. 
2. Governments view this dominance with increasing trepidation.  The giants have grown so gigantic, the world’s trustbusters argue, that they suck all the oxygen out of the tech ecosystem, driving challengers to extinction or, at best, making it hard for anyone else to prosper.
3. In addition to finding a niche which helped Garmin, Dropbox and MercadoLibre to survive all three still have at least one of their founders in executive roles. Winning against big tech requires an obsessive focus on product development and the stomach for long-term investments. It helps to have experienced operators at the helm who aren’t swayed solely by quarterly targets.

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Topics:  Strategy, Business Model, Technology, Marketing