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Video streaming is just one example of a digital economy where competition is intensifying. Many so-called legacy companies are embroiled in a battle with digital competitors, and by now the born digital companies have had their lunch. Walmart (and every other physical retail store, from Macy’s to Best Buy) is in a constant duel with Amazon, and banks and credit card companies are competing against PayPal and Apple Pay.

In the meantime, the digital giants are fighting each other for market share and dominance: AWS from Amazon compared to Azure cloud services from Microsoft. Consumer goods companies, retailers, and manufacturers have hundreds of ecommerce startups nibbling on the fringes of their market share with niche products sold directly to consumers online. Think P & G’s Gillette razors sold in stores versus the Dollar Shave Club, which is based on online subscription and sells direct to consumers.

The common thread in these erupting battles is digitization. It has changed the nature of today’s competition and obsolete the 20th century way of thinking about competitive advantage.

The old saying “stick with the knitting”, for example a slang version of “build on your core competency,” tends to limit a company’s imagination. A bold imagination is a prerequisite for leaders today. Netflix, Amazon, Facebook, and Google would not be what they are if their CEOs and leadership teams hadn’t envisioned a future that didn’t already exist.

A clear view of the competitive landscape suggests that some of the early generalizations about “first mover advantage” and “winner takes all” are not holding up, especially as digital giants challenge each other.

First movers may be able to scale up quickly, but others are sure to step into the large market spaces they create. Because of this, the winners really don’t take it all, at least not forever. And if new competitors don’t get into the fray fast enough, antitrust regulators can step in.

As early and dominant as Amazon was in e-commerce, it is hardly alone. Alibaba, Tencent and JD.com are strong global competitors, and traditional retailer Walmart has been moving into the online space since it acquired Jet.com and acquired a majority stake in Flipkart, India’s largest e-commerce company. By linking its online sales to physical stores, the company has grown in importance. In Brazil, B2W has kept Amazon, a relative newcomer, in check.

The outcome of these competitive battles is uncertain. However, some fundamental differences in the competition between digital companies have become apparent. If you disassemble the Netflixes, Amazons, Googles and Alibabas of the world, you can see that they have certain elements in common:

1. You imagine 100 times the market area that does not yet exist. You envision an end-to-end experience in a person’s life – when the individual is traveling, eating, shopping for goods, or seeking medical care or entertainment – that could be vastly improved, and if it were, this would be one large number of people want to do. They think about how technology could be used to make the seemingly impossible possible. They concentrate on the end user, even if there are intermediaries between them and the consumer. They know that if their offering is suitable for the end user they can scale very quickly as the news spreads almost instantly. Netflix believed that large numbers of people would prefer to discover and enjoy videos in the comfort of their own homes rather than going to a movie theater and putting up with overpriced snacks and annoying neighbors or watching TV at prescribed times that are provided by entertainment companies or by the entertainment companies were set up networks. At the age of $ 50 for cell phones and low cost internet connections like India, the potential market is exploding.
2. You have a digital platform at its core. A digital platform is an expertly composed mixture of algorithms that store and analyze data for a variety of purposes. It allows for quick experimentation and price adjustment, and makes it possible to reach a huge population worldwide with minimal additional cost. Netflix can easily stream its repertoire across geographical boundaries. Artificial intelligence and machine learning algorithms can correct themselves as they learn more about customer behavior and preferences, improve personalization, and thereby increase customer loyalty.
3. They have an ecosystem that accelerates their growth. Ecosystem partners take many forms, e.g. B. Third party vendors on the Amazon website, independent drivers from Uber, or app developers from Apple. They allow the company to expand capacity quickly, often without capital investment. They enable cross-selling to make innovations accessible to a wider audience. You can also activate a new moneymaking model or provide a missing feature. Most ecosystems share data and thus contribute to rapid scaling. Netflix would not exist without the content licensed from its ecosystem such as WarnerMedia’s Friends TV series and NBCUniversal’s The Office. Companies don’t compete with each other – their ecosystems do.
4. Your money making is tied to cash and exponential growth. Digital companies know that after a period of intense cash consumption, if the offer is successful, returns will rise sharply as the additional cost of the next unit sold or added subscribers decreases. They focus more on cash than on accounting operations. Funders who recognize the law of increasing earnings are ready to solve the liquidity problems early in order to achieve exponential profits later.
5. Decision making is designed for innovation and speed. The downside of growth, and a major reason for the decline in returns on traditional businesses, is the increased complexity and bureaucracy that come with growth. However, increased bureaucracy cannot be taken for granted for companies that focus on a digital platform. Teams close to the action can make decisions and take action without being overlooked as they have easy access to real-time information. You can move very quickly. Accountability is built in because the digital platform makes a team’s progress visible to everyone in the company who needs to know. Overhead is kept to a minimum, even as the company expands quickly. Amazon’s general administration costs are only 1.5 percent of sales. The recruitment of employees who are self-motivated and can be successful in a team-based environment makes the company innovative and agile.
6. Your leaders drive learning, reinvention, and execution. Digital executives have different skills and competencies than conventional managers. They have in-depth technological knowledge, far-reaching imagination and the ability to combine their overall thinking with execution at ground level. Your use of data takes execution to a whole new level. And their constant communication with their teams as well as their determination to shift resources make the organization agile. The fluidity of their thinking drives continuous change and growth. They are creating the change that executives in many other companies are struggling with.

The digital giants and upstarts of today are therefore intensely focusing on the experience of a single consumer and opening up large new market spaces. They scale quickly, aggregate data and draw relevant partners into their ecosystem. Their business models focus on gross margin, cash generation and exponential growth. They are given lots of cash to fund their growth from VCs and investors who understand the new patterns of making money. And their dedicated leaders and employees are purposeful, focusing relentlessly on what’s next, driving speed, continuous innovation, and disciplined execution.

Contribution to Branding Strategy Insider by: Ram Charan and Geri Willigan, excerpted from their book RETHINKING COMPETITIVE ADVANTAGE with permission from Currency, reprinted by Random House, a division of Penguin Random House.

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