The return of the incumbent?

March 31, 2023

The return of the incumbent?

Pim Korsten
March 31, 2023

The return of the incumbent?

A reflection on the demise of Big Tech and the return of industrial incumbents
Pim Korsten
March 31, 2023
© iStock / dickcraft

The return of the incumbent?

March 31, 2023

For a long time, it seemed as if Big Tech would become the dominant factor in many markets through horizontal expansion into nascent markets or vertical integrations of supply chains into their platforms, at the cost of many incumbent firms and traditional market players. This was both because of the huge number of mergers and acquisitions by Big Tech with or of other companies as well as the promise that everything would become a digital product or service (and therefore drawn into the digital ecosystems of BigTech). Recently, however, there has been a deluge of news about tech companies massively laying off employees and closing side-businesses following disappointing growth figures.

The rise of these “digital conglomerates” accelerated during the pandemic in 2020–2022, when “everything” went online and many consumer practices became much more digital. However, Big Tech has been in relatively bad weather recently. For instance, Amazon closed some of its Fresh supermarkets and Go convenience stores to curtail expenses, hoping to find the “economics” for its business to become profitable.

In today’s macro-environment, horizontal expansion and/or vertical integration (often through mergers and acquisitions) are becoming much harder to finance now that interest rates are rising. Moreover, investors increasingly expect real profitability instead of experimentation with innovations. As a result, demand will rise for product development with a clear focus on societal problems, such as ageing societies and rising healthcare costs, climate change and decarbonization costs. This will require skills beyond designing good consumer products and scaling them up via online platforms with nice product design, and smooth user experiences, and upscaling on a digital platform. Non-data driven approaches will also be needed to come up with solutions, such as building and manufacturing sustainable, resilient and safe production lines—or just grocery stores. These are things incumbent companies have experience with and on which they have non-digital expertise. As such, could this macro-environment be the start of a period in which incumbent companies set or raise the bar in their specific core-market?

Burning questions
  • Will we see a rejuvenation of trusted brands and/or incumbents?
  • Will the effect of establishing a “digital conglomerate” based on combining various datasets vanish?
  • What areas will see a consolidation and “push-out” of newly entered digital players?
About the author(s)
Pim Korsten has a background in continental philosophy and macreconomics. At the thinktank, he is mainly involved in research and consultancy projects, as well as writing articles on the latest developments in technology, politics and the economy. He is also very interested in the philosophy of history and economics, metamodernism and cultural anthropology.
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