Companies will face seismic shifts in business, caused by the proliferation of new tech, social mass media and disruptive digital ideas. Read what disruptions are and how enterprises suffer from or thrive on disruption.
The word disruption is frequently used in business contexts, but what does it really mean? We'll warm up on a few disruption examples in analog business, before moving on to digital disruptions.
Analog Business Disruptions
Industry sectors and society in general have gone through massive, abrupt transformations many times. The adaptation in practical life of steam technology, electricity, combustion engines, telegraph, telephone, radio, TV, electrical appliances, airplanes, cell phone technology, and many others have fundamentally changed the competitive landscape of everything. Companies that were once great have ceased just a couple of decades later.
Such transformations are called disruptive when most companies in a sector can’t handle it: Technology innovation in Japan almost led to extinction of the Swiss watch industry. Globalization led to super chains like Walmart, Tesco, Carrefour to extend world-wide. Process optimization and innovation based on Kanban, SixSigma and Lean lead to huge successes in the Japanese automotive industry. Outsourcing led to significantly reduced cost in manufacturing everywhere. Reorganization and operations harmonization using common ERP systems led to higher efficiency. And off-shoring led to use of low cost countries in service delivery.
Such transformations are still important, but companies are doing it to gain competitive parity. Because everybody is doing it, it is no more than an expected hygiene factor, something that all CEOs must master, but will earn no special credit for achieving.
Digital Business Disruptions
The most recent disruptions are digital and based on internet technology. Unsurprisingly, these are called Digital Disruptions. Many industries have transformed massively over the last 2 decades due to digital services; Internet technology led to the use of web-based self service, web-based commerce, digital delivery and digital communities. The first wave of digital business took approximately 20 years to settle in.
In the late 90’ties there was initially much skepticism, arrogance and “not invented here” heard in large corporations, when web-strategy was discussed. But many then-CEOs would be forced to eat their hat, if someone had recorded their statements then and played it back to them now. As a result of this skepticism, many companies ended up dipping their toes in the pool of digital business opportunities instead of plunging in. Except Amazon, Ebay, Baidu, Google, eBay, Ratuken, Alibaba and the other pure-plays. The won the first round convincingly.
Many enterprises still suffer from a fairly traditional view on how digital services and products can be utilized commercially. And in that process, their shareholders suffer a spiral of death with promises, reconstructions, hope, continuous disappointments and value destruction.
Yet some companies figure out how consumers can be served faster, smarter, cheaper, more convenient, cooler – or plainly with another product or service the consumers want more. It’s called disruptive because the rest of the sector can't handle it. Disruption is not about who dies, but about who wins.
Future Digital Disruptions
The second digital business wave is coming faster and harder in an ever-accelerating spin of technology adoption and business model transformation. Because of rapid technology adoption, massive volumes of online consumers, massive availability of analytical data and abundance of cheap, smart technologies, the digital business is expected to accelerate again. Try look for the following signs of possible disruptive company and business idea:
- Intensive use of online interaction with customers and consumers
- The use of smart phones and tablets
- The use of big data analysis
- The use of sensors and controllers that are internet enabled
- The use of social media to access the consumers in targeted communities of interest
- The use of digitally transformed operating models totake out significant cost and latency of the value delivery system.
- The use of cloud based systems
- The use of broadband technology
- The use of artificial intelligence
- The use of new extra-enterprise integration techniques
To spot a possible digital disruption, one must identify a company or cluster of companies that have better vision, stronger execution and outperforms its competitors, based on the use of digital business ideas. These companies will be the cause of the Digital Extinction Event, that disrupts industries and wipes out the dinosaurs of each industry sector.
The quest will continue, and search for the core disciplines that stellar digital leadership feeds upon. Read on to the next post, where you will find my view on what the pure digital operating model is really about.