The Power of Digital Companies
Once Germany got obsessed with the digital revolution, one can get easily the impression that an insurmountable force is pounding at European companies. Some industries are already hit more than others. The media industry has been in the middle of an ongoing disruption for years. Other industries are at the crossroads, but may not want to admit the disruption that’s starting right in front of their eyes.
Even though everyone feels the forces coming, they are rarely cast into numbers. And then the news hit a few weeks ago that Tesla became the most valuable American car company. And this all with a hundredth of the cars produced by GM. And just this week Tesla is close to surpassing with BMW the first German car manufacturer in market capitalization.
Looking closer at the market evaluations shows, how differently investors trust the companies in creating and surviving the future. Among the six largest American companies, five are in the digital business. Apple, Amazon, Alphabet/Google, Microsoft and Facebook have a total market capitalization of 2,8 trillion dollars. Compare that to the value of all 30 German companies listed in the DAX: a total of 1.1 trillion Euro. The most valuable of them is SAP, a digital company evaluated at 100 billion dollars.
What’s furthermore stunning is that two of those five digital companies are not older than 45 years, three younger than 25 years. Also SAP is 45 years this year. The other leading German companies are more than 100 years old. Siemens, BMW, Mercedes, VW, Bosch or German pharamceutical companies were founded around or before 1900.
The 20 largest US corporations have annual revenues of 30 trillion dollars, almost twice as much as the US GDP. Alone Facebook reaches with its services two billion people.
The influence and power of digital companies often seems stunning for executives of traditional industries. But data is the new gold, and employees who can make sense of data and create new services around it become the most important resource. The automotive industry is a good example. Not metal-benders, but AI, sensor data, or machine learning experts are the hottest talents in demand. And US-companies are ready to spend billions on them.
The practical approach working with data and the speed with which US-companies are acquiring startups and talent make European companies look old. As much as the quality of the craft from European companies is appreciated, when it comes to disruption other qualities become dominant. That’s what Kodakt or Polaroid had to learn the hard way. Both manufcatured the best film and instant cameras. But with digital cameras the paradigm shifted and even though the initial digital cameras had lower photo qualities than films, the way people used the new technology changed everything and started the demise of those two companies.
The numbers and facts behind the power of digital companies make it clear how close we are to losing more of some traditional companies. Here is an overview of how those digital behemoths are making their money.
This article has also been published in German.