The number of companies that have emerged in the data analytics space over the past decade or so has been enormous. Some have done extremely well and become unicorns with sky high valuations, while others have crashed and burned. The universe has seen the emergence of a group of integrated enterprise vendors (Salesforce, Oracle, Adobe, IBM etc.) and a large number of relatively small point solutions. This universe is now reaching critical mass and the market is likely to enter a new phase of consolidation. For example, in the marketing technology space, Scott Brinker who maintains an authoritative database of marketing technology companies has noted that the universe of companies he follows has leveled off in the past year after many years of double-digit growth, suggesting that the martech universe has plateaued.
This maturation will be compounded by the repercussions of the COVID pandemic – we are entering a new normal where the challenges facing companies will become more urgent and critical. At a high level, many forecasters are predicting such things as:
The face of commerce has changed
The customer journey must guide the strategic roadmap
Data-driven execution is imperative
Customer data integration and predictive modeling must come together to automate decisions
Suppliers need to be reevaluated and supply chains need to be optimized
Financial, operational and functional structures must evolve
What do all these trends mean? In short, it means that there will be too many companies competing for a universe of buyers whose priorities are changing. It means that a process of consolidation that was always likely to take hold will likely accelerate over the next few years. There will be winners, while many of those who are unable to go it alone will be gobbled up and consolidated, or worse yet, shutdown. Quite simply, the broad scope of tools, applications and platforms in the data-driven universe will rationalize.
As the immediate impact of the pandemic begins to wane, management focus will shift from critical short-term firefighting to longer range strategic issues, and executives will be confronted with a fundamentally different landscape. Both threats and opportunities will emerge that will likely transform how companies are positioned within their industry segments.
These changes will likely present themselves from both an operational and strategic perspective:
From an operational perspective:
Re-igniting the revenue engine is a top priority
Identifying opportunities for recurring/subscription revenue
Evaluating acquisition marketing to focus on high-return programs
Analyzing customer marketing spend and reallocating investment to optimize returns
Shifting from cost control and restructuring to strategic capital investment
From a strategic perspective:
● Re-assessing the capital structure and how the business is financed, ensuring it has adequate cash for working capital needs and for longer term growth
● For venture capital, corporate venture and private equity firms, determining which portfolio companies are well positioned to stay independent and which companies, because of industry shifts, may realize greater value as part of a roll-up, integration or divestiture strategy.
● Acquiring other businesses at attractive valuations to add capabilities and strengthen market position, or achieve other objectives
● Many large institutions today rely on an ecosystem of suppliers to provide critical support and capabilities to their core business. If any of these suppliers is financially distressed, it will likely have an impact on operations. Understanding these risks and establishing initiatives to protect such relationships can be critical
In this fast changing landscape it pays to get ahead of the curve and establish the
relationships and decisioning discipline required to make the best possible choices. Understanding the perspectives of various stakeholder groups such as investors, customers, competitors and potentially even employees is important.