The rise of the digital disruptors

by Deepak Sharma, Vlad Flamind, Gehan Wanduragala and Guillaume Santesmases | 01 August 2016

A new force in the Indian economy has upended the traditional formula for growth and is impacting every industry

Digital disruption is now a major force reshaping the business environment for India Inc. From being a laggard at the start of the dotcom boom in the 1990s, India has now emerged as a leader in digital innovation.

Huge and growing user base

The rise of digital disruptors has been enabled by the rapid expansion of India's internet user base, principally driven by the penetration of mobile internet. Around 65% of India’s internet traffic comes from mobile, second only to Nigeria. While smartphones arrived later in India than in other countries, growth is fast catching up. In fact, Kanvic analysis shows that smartphones are driving India’s e-retail growth along the same trajectory as China’s.

As a result of this smartphone penetration, India is ranked either first or second globally in monthly active users for most internet leaders such as Facebook, WhatsApp, Twitter, and YouTube.

Internet user growth and online penetration in India, 2009 - 2016

The rise and rise of start-ups

Spurred on by the country's expanding user base, India now has the third largest number of digital start-ups globally. Funding for start-ups has skyrocketed over the last few years with particularly intense activity in India’s e-commerce space. In 2015 alone, over USD 9bn was invested in technology start-ups, around 50% of the total investment the sector received in all previous years. The effect of this massive capital infusion will undoubtedly be felt in the coming years as these companies rapidly scale-up new business models.

Indian startup funding, 2010 - 2016

All sectors are ripe for disruption

Digital innovators in sectors including retail, transportation, food services, healthcare, finance, and education are all posing a threat to incumbents. For example, India has become one of the largest markets in the world for taxi aggregators like Uber and home-grown Ola Cabs.

Digital disruption will not only impact businesses through changing consumer behaviour. The impact will also be felt internally as digital technologies transform the way work is done. For example, India’s large IT sector has been a key contributor to the country’s growth story and a major generator of employment. Yet in 2015 the leading IT exporters added 24% fewer employees than in the previous year due to increased automation.

While the march of automation and artificial intelligence may be most advanced in the IT sector, the proliferation of such technology into other industries is inevitable, and it will profoundly alter the capabilities and cost base of companies. Those that fall behind in the race to digitalisation will be at a competitive disadvantage.

Digital disruptors in India by industry sector, flipkart, snapdeal, zomato, swiggy

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