Demonstration against “application” on Monday, March 14 and 22, 2016 erupted in Jakarta and quite took our attention. When I chatted with the taxi drivers I rode that day, he complained of the drastic decrease in his income, and he blamed the “application”. The intended “application” of course is a digital-based application for transportation services such as Uber, Gojek, Grab and others who have started crowding the roads, especially in Jakarta.
Currently, the field of technology and business information shows various terms such as information technology, information and communication technology, electronic technology and digital technology. Digital technology these days is increasingly being used even though the definition is not clear and agreed upon. Digital technology in this paper is the term used for a technology that synergizes the capabilities of technologies such as information, communications, networking, computing, big data and other smart devices that can execute processes with a high complexity quickly and flexibly.
It should be understood that the implementation of digital technology in daily life is disruptive. Disruptive here does not mean destructive, but to make an existing business model, the way we work, and the value chain model becomes irrelevant. The life cycle of new business model also did not last long, the product cycle is also getting shorter. There were products that were dead because of the penetration of digital technology. SMS killed by messenger (BB, WA, and others). Circuit Switch-based telephony (such as are still in use today) will be replaced by phone over data. People are now able to call by using messenger applications such as WA, Line, Skype, Gmail and others. Mail delivery business has long become irrelevant because of the emergence of email.
As well as being disruptive, smart and connectivity elements of digital technology changed the nature of formerly discrete products and services and seeps through the now wide range of products even industry boundaries and establish a set of products. This makes the product of Uber or Grab difficult to define, whether the taxi or intermediary services that connect people in need of transportation services to people who have a vehicle. Grab/Uber product already incorporates the capabilities of the vehicles, smartphone, telecommunications networks, GPS, big data technology and other smart devices that form a service with a more complete feature than discrete taxi services.
The development of this technology inevitably has forced traditional owners and management of companies to rethink their business models. So it is relevant when Philipp Gerbert and his colleagues described the phenomena created by digital technology with the phrase “Digital Storm” in their book published 15 years ago. Since the technological revolution of internet not only changes the business landscape but also causes turbulence that makes organizations or individuals who are not ready to be extinct by the storm.
So, the relevant question is not really a way to inhibit the penetration of this technology, but how to adopt, treat and regulate these technologies in order to provide more value in life.
Primary Objectives of Digital Technology
Digital technology has three main objectives. The first is to empower people and redistribute power that had been owned by a particular company/people. When using digital technology, then people will feel that they are getting empowered, entitled to vote, and individuals made very powerful. But on the other hand, this technology can also reduce or even eliminate the privileges that had been enjoyed by certain companies. Digital technology is distributing both opportunities and threats.
The second target is the inefficiency of conventional business model and technology. Digital technology has been successfully optimize idle personal assets. The nature of assets that can be physical and non-physical. The example of physical assets are idle vehicles and property. The examples of intangible are our idle time and energy. Consequently, digital-based transportation business does not need to buy a taxi or motorcycle, and no need to hire a driver and provide workshops. The lodging business like Airbnb, does not need to own a building and does not have to pay various types of hospitality personnel.
The latter, the targets of digital technology are ideas and thoughts. To take advantage of other people’s ideas came open innovation application that wants to use any ideas to solve the problems that are offered. Management of open innovation application does not need to have buildings and laboratories, and does not need to hire researcher.
The solution for those who want to survive
Is the penetration of digital technology in everyday life can be inhibited? The short answer is no, the regulator can only slowing. It is irony, if in a country that uphold the sovereignty of people, the penetration of digital technologies that provide convenience to the public and open employment, is inhibited. Digital-based transportation, for example, provides employment and business opportunities for people who have an unutilized vehicle and idle time.
The solution must come from both parties: traditional companies who feel threatened and also from the government. Traditional taxi company will not be effective if just think to inhibit the penetration of digital-based transportation services. General Electric CEO Jeff Immelt declared that “every industrial company will become a software company”. The statement stressed that if company wants to stay competitive, especially manufacturing firm must create software-based innovation in order to adapt to the digital business environment. Zipcar a service that implements the shared-usage model that provides service that connect customer who need a car and people who have a car, potentially reducing the need for vehicle ownership. But this threat is positively responded by car manufacturers by entering the car sharing market, by creating innovative services such as RelayRides from GM, Drive Now (BMW) and Dash (Toyota).
To accelerate adaptation to digital business ecosystem, traditional company must adapt itself with the new business models, recruiting Gen Y who experts in information technology in the ranks of the executive, or the company may merge or acquire digital company that threats its existence.
The traditional companies’ failure to adapt to digital business ecosystems, can reduce their role in the industrial that had been theirs. They no longer kings in the industry, but it can only take part in one or two value chains in new business models. For example, the traditional taxi company only acts as a driver and car provider for digital-based transportation services that have widened the definition of transportation service such as Uber and Grab.
Expected solution from the government as a regulator is to publish new regulation that is adaptive, futuristic and conducive to the birth of local entrepreneurs. The regulation also applies not only for transportation sector but also for other industries to anticipate the nature of digital product that encompasses and integrates a variety of discrete products. This regulation is no longer concentrating the authority to regulators but began to distribute the power to the stakeholders in the digital business ecosystem including the community as a user and perpetrators. In addition, the government could be involved in the transition to new business models, such as transferring people who have worked in traditional business-to-digital business and facilitating local digital start-ups.
By : Paul Lumbantobing
Head of Digital Task Force Mitratel