In the spirit of Halloween, I’m going to write about the bogeyman of almost every industry out there: GAFA. In the last few years, I have answered many versions of the same question: what will Google (insert Apple/Facebook/Amazon) do to us (insert financial services/healthcare/retail/media)? This fear is grounded in some reality. All four firms are innovative, aggressive, cash-heavy, and firmly embedded into the lives of millions (if not billions) of customers globally. And of course, they’re not the only ones executives worry about. There are multiple versions of GAFA, depending on your industry or geography (FAANG also adds Netflix into the mix; BAT focuses on the dominant players in China and, increasingly, Southeast Asia — Baidu, Alibaba, and Tencent; or in India, you have Flipkart — now owned by Walmart — and Paytm).
The impact of these tech giants varies strongly by industry and geography. For example, Amazon’s entry into banking is rightly making financial services sweat. But solid predictions require a crystal ball (to continue the Halloween theme), as these businesses are complex and their strategy malleable: Experiments often remain just experiments as management decides to focus on something else (as was the case with Google’s foray into payments or financial products comparisons). Since I’m not really in the business of fortune telling, here are a few comforting facts to get you through the chills:
- These companies aren’t coming after you. They’re not competing with you or trying to disrupt you (although, as my colleague James McQuivey has written previously, disruption of your industry can be a side effect of their strategy). They are mostly competing with each other. This matters because it goes some way into explaining their strategy of adding ever more services to their portfolios. They are trying to build stickier, more profitable customer relationships, provide appeal and utility to their business partners and customers, and develop data and analytics capabilities to uncover new opportunities.
- They are not invincible. The political mood has soured, with Trump criticizing the impact of Amazon on retail, the EU keen to get digital giants to pay more tax, and India challenging GAFA with data localization. Facebook itself is a brand in crisis. Its share price has been volatile this year (see the chart below) as a result of the Cambridge Analytica scandal and the coming drop in operating margin. Ongoing success of GAFA depends on their ability to navigate these turbulent waters and to keep innovating to stay ahead of their competitors and stave off hyperabandonment by consumers drawn to something new.
- They are not identical. While GAFA has a good ring to it, these four businesses are very different. Although services are growing as a percentage of Apple’s overall revenue, accounting for nearly a fifth of the company’s income, Apple still makes the vast majority of its revenue from sales of devices. Despite Google’s Android strength and renewed commitment to hardware, online advertising remains Google’s cash cow. This matters because, despite their fears, companies can’t bypass advertising through Facebook, Google, or Amazon or outsource their mobile payments to Apple.
Rather than fretting about when GAFA is going to come after you, you should be understanding the different profiles and ambitions of these different players, how you can use them to interact with your best customers and win new ones, and how you can copy some of their winning characteristics and strategies. In my upcoming speech at Forrester’s CX Europe 2018 Forum, I will discuss the top three features that these mature digital businesses share that you can learn from and replicate in your own firm: leading customers in innovation, empowering your ecosystem, and attracting and nurturing top talent. I look forward to exploring your own GAFA fears and strategies at the Forum!