Can digital native businesses survive the tech wreck?

Can digital native businesses survive the tech wreck?

Kh Mahmudul Alam, March 21, 2023.

In 2022, the Young Rich List [1] marked the onset of the "tech wreck," commonly referred to as "dotcom crash 2.0." Unfortunately, things aren't getting any better in 2023, with venture capital investors warning local tech start-ups to increase focus on profitability and capital efficiency. Even hyper-growth tech businesses like Eucalyptus, Milkrun and others are letting go of 20-25% of their workforce.

This economic downturn is reminiscent of the 2008 financial crisis, raising questions about the survival of early-stage tech businesses. However, there is hope. The technology landscape has evolved exponentially, with the rise of modern cloud and AI, there is a lot of learning and tools available to help navigate through such challenging times. The question is, how tech businesses can leverage these without losing focus on their core value proposition?

The fundamental principles of how digital native businesses succeed haven't changed - "Success or failure of DNBs will be determined by the cost, quality, and speed of innovation". To stay in the game, startups, scale ups and new digital businesses need to look at managing cost, speed, strategic partnerships, and capability through a different lens.

1. Achieve more with less

It’s critical to have the budget and resources focused on generating differentiating value in tech rather than commodity activities. Don’t reinvent the wheel. For every piece of code written, questions should be asked about whether it drives customer value, and growth or differentiates the business in some way.

Cost-cutting can be achieved by doing more with less, focusing resources on generating differentiating value and leveraging existing solution accelerators, best practice platforms, SaaS solutions, vetted cloud solutions (e.g. AWS Architecture Centre, Nimbly accelerators), and open-source options reviewed by experts.

Some great lessons here [2] with examples of how born-in-the-cloud companies fully leverage modern cloud services to free up development and operational resources to focus on innovation and product differentiation.

Adopting generative AI products in the engineering process the right way can lead to a huge productivity boost and change the economics of building and maintaining enterprise applications forever. We managed to leverage Github co-pilot in our last project to reduce the coding effort writing boilerplate code upward of 40%. Learn more [3] on how developers at forward-thinking organizations leveraging generative AI models as their valuable coding partner.

2. Decrease time to market

Reduced time to market enables faster response to customer requests and more frequent value delivery - both go a long way in acquiring and retaining customers in digital businesses. Speed can be enhanced through thoughtful automation, AI-assisted development and partnering with experts who can fast-track this journey and inject such capability rather than building from scratch.

Software infrastructure represents a critical leverage point for DnBs to differentiate in the market and improve customer experience when done right. In a recent SaaS development project, Seeda, we managed to reduce the time to release new features by 80% leveraging end-to-end automation in both infrastructure and application deployment. Here's a great example of how Freshworks, an SMB SaaS provider dramatically improved its response time to customer tickets by leveraging AWS Lambda.

3. Make the most of partnerships

Strategic partnerships are key, and businesses should consider technology and consulting partners who can share the cost of innovation by bringing in the right productivity tools, automation & bootstrapping frameworks, alongside access to industry experts, and advisory groups giving them a competitive edge.

Having been closely involved in the startup ecosystem for the last couple of years, it is quite evident that many DnB founders and C-levels are unaware of the benefits they could leverage from their cloud and technology partners. Many of them do not even know what their cloud spend is as a % of their ARR [4]. This indicates a huge opportunity for them to start looking closely at the potential of their relationship with the cloud and other technology partners. This can open up several opportunities such as:

  • Innovation budgets
  • Proof of concept/experementation support
  • Marketing development funds
  • Co-selling programs
  • Communities & networking events

4. Get more from your data

The ability to deeply understand their customer behaviour from the first-party data and improve the customer experience is something common to most DnBs. Yet many haven't tapped into this potential due to competing priorities and limited capabilities in-house. This presents opportunities beyond the current customers uncovering new ways to monetise application data and extend existing products and services. Few ways DnBs can achieve more from their data:

  • Better customer retention strategy with churn prediction
  • Access third-party data to enrich existing products
  • Extend first-party data sharing to external parties
  • Increase profitability with consumption-based pricing

5. Sell Capability as a Service

Most digital businesses have the potential to package and productise business capabilities as a service to open up new revenue opportunities. This is arguably the biggest of all opportunities discussed so far. This is often overlooked and is seen as requiring an expensive innovation budget and capability to unlock. However, in reality, this can be achieved by a carefully crafted lean product development and design process. We have seen how quickly Covid pushed many physical businesses to go digital and transform forever. The opportunities include:

  • Offer capabilities as API products
  • Package capabilities as mobile and web SDKs
  • License white labelled solutions
  • Offer partner enablement services

6. Invest in the Right Skills

Scaling in-house capabilities too much too soon could lead to significant cost bases in the early-stage tech businesses which inevitably leads to layoffs when the economy turns. Businesses must scale capability carefully by determine what's core, niche and once off. Build core skills internally, leverage a service provider for niche and once off. If you're not sure, engage a service provider on a short-term contract while you make a decision.

Last decade has seen a wide range of skills in commercial application development being commoditised and it can be acquired on-demand at a reasonable cost, enabling businesses to manage the capability budget effeciently.

Digital native businesses must stay focused on their core value proposition while pulling these levers to stay ahead of the competition and emerge stronger on the other side.

How can we help

At Nimbly, we understand the challenges founders and leaders of digital native businesses face while solving core customer problems and scaling a business in a time like this. We can help you unlock the maximum potential as outlined above and help navigate through the challenges as your trusted partner.

Get in touch to accelerate your digital journey.