Unicorns: 3 important lessons for banking and insurance leaders

Posted on: October 4, 2019 by Bart van der Mark

The times that digital and information technologies were just a means for supporting business operations are long gone. Nowadays, these technologies turn complete industries upside down; we all know the success stories of Netflix, Apple, Amazon, Airbnb, Uber, Google and other such tech giants. And the rise of these tech giants has had an enormous impact on traditional businesses across industries and also increasingly raises questions around digital dilemmas like skills obsolescence, data privacy, transparency and power-concentration.

Now what will the future bring? Who will be the winners of tomorrow? Will their approach be perceived positively by society at large? In this context it is very interesting to have a closer look at the so-called Unicorns. Unicorns are tech start-ups with a market value of over $1 billion.

A short analysis of the unicorn list published by CB Insights mid 2019 shows:

  • There are 403 private companies around the world valued at $1B+
  • Together, they represent a total market value of $1300 billion (more than 2x the combined value of the Dutch stock market)
  • The largest share of the unicorn companies are internet software & services companies, followed by e-commerce and fintech.

The majority of the unicorns have the mission to introduce a disruptive business model based on innovative technology such as robotics and artificial intelligence. A good example is lu.com, a Chinese unicorn that currently has a market value of $18.5 billion and it was founded just over 6 years ago. It provides financing and lending services for small and medium enterprises and individual clients.

Business leaders (especially fast followers) should be closely monitoring unicorns. After all, the unicorns have passed their start-up phase, which means that there is serious market demand, investors are willing to invest large amounts of money in the unicorns and their organizations are fully ready to conquer their target markets and disrupt the establishment. The concepts that are brought to market by the unicorns could serve as an inspiration for business leaders to improve their products and services, and can be valuable inputs for potential defensive strategies aimed at protecting current market positions.

Unicorns show another approach to innovation; many large businesses have difficulties with fast and disruptive innovation since they are slowed down by existing structures and mind-sets. Unicorns are proof that good ideas can grow – in the blink of an eye - into powerful business that can shake up the traditional game. How do unicorns succeed? Three important ingredients are:

1. Platforms: geared to bringing together supply and demand in an accessible, cheap and reliable way. Think of Airbnb and Uber who successfully challenged and disrupted existing supply chains. Their strategy requires low investments in assets and can grow very quickly as there are barely limiting factors such as production capacity, logistics, etcetera.

2. Minimal Viable Product (MVP) thinking: traditionally, products and services are perfected before they are brought to market. This is time consuming and it limits the speed of developing a new product or service to the speed the internal organization can handle. MVP thinking is focused on bringing something to market that is good enough to be readily accepted by consumers. Subsequently, data is continuously collected and analyzed in short and rapid cycles to push through product updates. This leads to faster and better (based on actual user experiences) improvements. Tesla is a good example; their cars are continuously connected to the internet allowing them to send data for analyses and receive product updates in real time. Essentially their cars are designed as data platforms…

3. Thinking exponentially: many traditional businesses think developments in new technologies will not happen so quickly. The reality, however, is that most technologies follow Moore’s law and improve exponentially causing a revolution rather than an evolution. Think of 3d printing. A few years ago this industry was still in its infancy, but nowadays we can print complex products with a variety of different shapes and materials, for instance for medical applications. How long will it take us before we start printing products ourselves at home or in the local 3d printing lab, instead of having businesses deliver products at our doorstep? This scenario could emerge sooner than we think and, in this example, brings up the question to which opportunities and threats this development could lead for logistic service providers and organizations with large production facilities.

Sure enough there is a unicorn - or an upcoming unicorn - in this field that is sharpening its knives. And who is then the next Nokia, Kodak or Blockbuster?

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About Bart van der Mark
Vice President, Head of Financial Services, Atos BTN
Bart has been active in Consulting, IT, BPO and Innovation since 1996, working across Asia and Europe. He is a sales and business leader, a trained non-executive director, MBA lecturer, publisher and key-note speaker at conferences focused on Innovation, FinTech, Governance, Robotics, Artificial Intelligence, Machine Learning, As-a-Service, Digital and Business Innovation. He has worked across industries with a specific focus om Banking and Insurance business and has a strong track record growing businesses. He typically operates at the intersection of business, governance and (technological and business) innovation.

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