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December 2016

The shift to digital is picking up pace

A growing part of everyday life is shifting online creating opportunities for strategies investing in corporations that profit from the transition to digital.

Companies with new business models like Airbnb and Uber have shaken entire industries to the core. Traditional players will have to adapt to a new way by doing business with activities shifting to digital, or risk becoming obsolete. These changes are being driven by several megatrends.

One of these is technological progress. The rise of smartphones and tablets has made it possible to shop, arrange for transportation and manage one’s financial affairs at any place that has access to wireless internet. There is currently a worldwide penetration of 48.7% estimated as of June 2016, which corresponds to 3,6 billion people online1. Another megatrend fueling the move to digital is demographics.

Growth of digital business models is four times higher than those of traditional activities, thanks to several megatrends.

Millennials have grown up in an increasingly digital world. Other influential megatrends are individualization and the network economy. The strength of these megatrends will ensure that changes keep taking place at an increasing pace.

The digital shift is taking place in almost every industry. The establishment in the financial industry has to respond to the emergence of online lenders and adapt to new technologies for digital wallets and making payments with a smartphone. Similar changes are sweeping through the medical industry. Data on patients are increasingly kept online and it is not unusual to arrange a consultation through the smartphone rather than at the general practitioner. The new business models have enormous growth potential. Online accounts for less than 2% of the total loans market in the United States2. And despite the success of internet retailers like Amazon, over 90% of all retail sales is still generated offline3.

The balance is shifting among all industries, as the growth of digital is on average four times as fast as that of traditional activities3. Thanks to the power of megatrends and emerging themes such as the internet of things, big data and artificial intelligence, the sector may well continue to make a difference.