Digital disruptors at the gate!
The din of digital technologies hitting the market is now everyday news. The pitch is reaching a crescendo with nearly all discussions in the IT industry circles ending with more than a note or two on digital disruption and its impact.
However, as with any major IT trend that reaches such noise levels, it’s always prudent to test the waters where it matters most –the end customers. And, it was no surprise that the reaction from the user industries is mixed & concerning.
Outlook for the incumbents
Accenture’s mid-2016 report – ‘Thriving on Disruption’(i) which surveyed a large sample of Chief Strategy Officers across 10 industries had this insight to share:
“93% agree that new technologies will rapidly change their industry in the next five years, only 20% are well prepared for sudden industry disruption”.
So, keeping the above observation in mind it was time to pull back a bit from all that Digital excitement and address the basic issue of Digital Disruption to the corporate world. The threat of digital disruption is real & getting closer.
Digital disruptors at your gates
Consider the flow of battle that is unfolding, initiated by the digital disruptors on the existing incumbents.
Digital disruptors are breaching your fort by unleashing the two classical market maneuvers,
- Obliterating entry barriers of the industry
- Making the impenetrable moat of the incumbents increasingly irrelevant
Now compare the nature of the competitors in this battle,
Yours: Large established firms
- Size: Very large workforce with multiple businesses units
- Focus: Silo orientation with departments, regions, divisions etc.
- Quarterly target driven culture
- Capital intensive & ROI driven innovation process
- Response systems slow
- Size: Highly agile with team size of one person to a few innovators (five being the typical team size, rest outsourced to specialists)
- Focus: Each disruptor focuses on one specific target area only, together that could mean all parts of your business
- Costs: Nearly zero cost of tools, no upfront capital investment through platform & cloud
- Promiscuous partnering focussed on achieving the end result
- Real-time feedback from customers; co-create product experience for & with the customers
The order of battle
While many complex strategies have been highlighted about the digital disruptors, some common elements highlighted by Harvard Business School researchers Thales S. Teixeira & Peter Jamieson are “unbundling & decoupling” waves (ii),
- Attacks from the digital disruptors are in waves & unrelenting in frequency
- Wave 1 of disruption: Unbundling
- Focuses on Unbundling your offering to the market
- Customer can choose the components that are of interest to them
- Google unbundled news items, while Craiglist targeted the classified
- Wave 2 of disruption: Decoupling
- Breaking the chain of jointly consumed components of your offering
- Removing the unnecessary components that the customers find non-value adding
- Removing the Ads (non-value adding) from TV programs (value creating)
Result of this unequal market battle is,
- Disruption starts through digital and then accelerates to the physical, leaving the physical assets of the incumbents irrelevant or highly eroded (iii)
- Disrupts matured processes in partnering, alliances, human capital, pricing, customer relationship & assets
The only option for the large firms is to initiate Digital Transformation in a significant way; Digital Transformation being a response mechanism to digital disruption.
"The trigger for digital transformation is digital disruption; the end result of this transformation is a brand new digital disruptor - You" Vivek Vishnu
Image Credit: Image credit: SplitShire | CC0 Public Domain | image location
(ii) The Decoupling Effect of Digital Disruptors by Thales S. Teixeira & Peter Jamieson
(iii) Book: Digital Disruption: Unleashing the Next Wave of Innovation by James McQuivey