We are in the middle of an unprecedented disruption where technology and digital transformation are completely revolutionising the industries. While automation is changing the way businesses operate, business growth is being impacted by digitisation. The hype cycles for emerging technologies is shortening. As a result, new technologies are now making large-scale market impact very quickly and moving to maturity within next to no time.
Technology startups are mushrooming globally to reap the maximum benefits out of emergent trends.
They are ushering in innovative solutions across the value chain by leveraging the latest, most cutting-edge technologies like artificial intelligence, machine learning, the Internet of Things, blockchain,
augmented reality, and virtual reality. This kind of mass technological adoption, again, has never before happened in history.
Consider this: there are around 115,000+ startups currently operational in just five countries. The US has the highest number of startups operating within its borders in the world. India holds the second position in this regard, and is followed by China, the UK, and Canada. More than 50 percent of such startups are techbased, and focus on emerging and constantly evolving technologies such as those mentioned above. This proliferation of tech-based startups indicates just how vibrant and dynamic a space the
global startup ecosystem is at present.
India, in particular, has been creating ripples across the global business landscape as an emerging technological hub, and 2017 was a watershed year for its nascent start-up ecosystem. Indian start-ups
secured capital investments worth approximately $1.7 billion in the first half of 2017 alone. The number of tech start-ups in the country also increased by around 40 percent. There were also some interesting start-up
trends worth noting; 33 percent of the start-up solutions offered in 2017 were focused on e-commerce, while B2B-centric start-ups registered a 16 percent growth in their numbers.
This highlights a clear commitment towards leveraging technology to solve existing business challenges.
Turning the focus to specific industry segments and verticals, there is a lot of buzz around startups in the retail and CPG (consumer packaged goods) domain. Here is the reason for this trend:
1. India’s FMCG market is estimated to be $185 billion
2. 34 percent of this market, which is close to $65 billion, is brand-driven
3. Traditionally, large FMCG/CPG companies have been focusing on manufacturing and selling their goods to retailers, and have gained extensive expertise in these aspects of their operations. Where they miss, however, is the whole Direct-To-Consumer relationship.
4. In the last few years, due to growing mobile penetration and internet-led disruption, greater information availability for the end-consumers has completely changed their behavior and brand awareness. Given the dynamic nature of the information-driven economy that India is becoming, large retail and CPG vendors risk missing out on end-consumer trends, information, and behavioral patterns.
5. Startups understand this space much better and bring in innovative technological solutions connecting the end-consumer and the manufacturers/CPG vendors, thus strengthening the
Direct-To-Customer proposition.
Investors are bullish about aggregators, e-commerce players, and enterprise product-based start-ups. As per NASSCOM, e-commerce players and aggregators in India secured $1.2 billion in funding in H1 2017alone. While B2C start-ups still have a large base in India, it is the B2B enterprise product start-ups that are truly in ascendance, as their offerings bridge the gap between the end-consumer and large retailers/CPG vendors.
The solutions offered by tech ventures are portable across platforms and can be used to complement a wide range of business operations. This includes understanding consumer behavior, driving brand awareness, providing customers an Omni-channel experience, collecting consumer insights to drive the in-store conversion ratio, and online/in-store analytics to improve the RoI of marketing spends.
Tech start-ups can also assist larger retail chains and CPG vendors in optimizing their logistic operations for more seamless demand fulfillment at lower costs. Furthermore, solutions combining cutting-edge
hardware and software algorithms delivers a great user experience.
Many large retail and CPG vendors address the technological gap by acquiring tech startups.
Such new-age acquisitions mark a departure from the traditional approach of acquiring a business in competitive or complementing market segments for scaling of operations.
At Mindtree, we work with many large CPG and retail customers. While we have invested in a Digital Collaboration Lab and Platform Solutions as an internal source of world-class innovation, we also collaborate with leading players in the technology start-up ecosystem to provide a time-to-market
advantage to our customers.
Such partnerships with startups address complementing needs. While we explore newer technologies and business models for our customers to help them be ahead of the market, start-ups look for greater access and penetration into established markets. Together the start-up ecosystem we have built helps to solve the customer challenges and provide them greater experience. This creates a win-win for all.
The author is General Manager, Head of Strategy and Governance, Retail Consumer Goods and Manufacturing, Mindtree.