Digitalization, the growing use of digital technologies in the ways businesses interact with each other and with their customers and suppliers, has radically changed the rules of the market game in almost every industry.
So has globalization, the integration of domestic and overseas markets.
In some industries, digitalization and globalization have created a winner-take-all game in which the company that wins the game accrues almost all the pay-off.
How? By attaining either a scale or a network advantage.
A scale advantage is the cost gains associated with large production size. A network advantage is the revenue gains associated with a large distribution network.
A good example is the e-commerce industry, where Amazon has achieved the size to be the winner-take-all. Then there’s the search engine industry, where Google is the winner-take-all player. And the social media industry, where Facebook is the winner-take all.