When the World Wide Web was invented in 1990, a significant decision had to be made within almost every market and industry on the planet; adapt their company to the change in environment or perish. Change is absolute in nature and it is no different in business. Let’s take a trip down memory lane for a second and recall a company called Kodak, remember them? Well, to give you a refresher, at one point in time they held significant power in the imaging and photography market. Twenty years ago their yellow plastic cameras were the number one way people took photos to capture precious moments of their day-to-day lives. It seemed that the company was in for a bright future. However, they had a crucial flaw, they were not prepared for change. To make a long story short, they filed for bankruptcy in 2012 as a direct result of digital photography or in better words: digital disruption. Whether you are a photography company or the taxi industry, it doesn’t matter, digital disruption happens to all. The companies that can prepare for when it happens are the ones who have a chance to survive.
Studies are showing that 4 of today’s top 10 incumbents in each industry will be displaced by digital disruption in less than five years. The even scarier part of these findings show that out of all the companies studied, around half of them do not think digital disruption is worthy of a board level discussion and they are taking a “let’s wait and see” approach. The real question is this: are you willing to take a risk and disrupt yourselves before a new and improved company does it for you? What I mean by this is: when change comes for your company, when the better, faster, stronger version of your business starts to take ground, will you be ready to compete?
Cisco and IMD are referring to this digital disruption as a vortex; something so powerful and massive that it exerts a rational force pulling and dragging everything in its path towards its center. The center of this vortex in today’s digital world represents a new kind of business model where products and services are digitized to the extreme. The force created by the vortex represents the inescapable movement of industries towards that center. For the companies that are already being pulled into this vortex, they are starting to strip away and loose everything that inhibits a competitive advantage such as manual labor, paper-based processes, etc. The company then starts to digitize the rest of its components and functionalities, making their business model match that of the center of the vortex. The intent is to maximize their KPI’s in a whole new way – combining the key factors of value, cost, experience, and platform digitally to produce an entirely new and far more efficient way to do business. The companies that can do this successfully are finding out what the front of the pack really looks like and that is only the beginning – do you think Uber is going to just stop with transportation? When you disrupt something digitally, you are creating an entirely new platform to build your business on and from there the potential is endless.
To be clear, the strategy and best practices that have made your company successful in the past are still extremely vital to its future. The difference is that now, in today’s modern world, the competition is no longer a potential threat; it is here and it is on your company’s doorstep. You must challenge previous assumptions that have gained you prior success and introduce a new strategy to deliver value to your customers. To put it simply: The market position and value proposition of your company is going to be challenged by the effect of new digital technologies and business models – and you need to prepare for it. Digital disruption will come rapidly, in the form of a new and improved business that effectively does what you do, but better. They will innovate with speed, easily gaining market share and while at the same time growing in scale. They are free of the barriers that most traditional business models run into such as: difficulty entering into a competitive industry, building brand reputation over the years, and developing key relationships with customers.
The digital vortex is smart just as much as it is dangerous due to its ability to grow enormous user bases in such a short amount of time. It quickly converts those new users into business models that will drastically threaten incumbents in almost every market. Imagine if you will, you are a leader in the telecommunications industry – phones are not going away for a while so how could digital disruption even make a slight impact on your revenue? At first, the conversation would seem pointless and not worthy of discussion but then I tell you that in the next five years, you will experience around a $380 billion dollar loss in revenue. I have a feeling you might be a little more interested now and would then inquire about the steps to prevent such a loss. Unfortunately, this is no tall tale and the digital disruption vortex has already grabbed a tight hold of the market with the brilliant innovation of a simple and free app. The free cross-platform messaging app, Whatsapp, has surpassed normal text messaging and is now venturing into free mobile to mobile calling. The success of this new app in an intricate industry is only one example of what is still yet to come and it poses a serious threat to any business not ready and willing to change.
Keep in mind that this phenomenon is not just an issue for large firms but also smaller and local companies. The fashion industry is starting to get disrupted by the new tech savvy company Burberry while the hospitality industry is going through big changes with the creation of the new businesses Airbnb and Trivago. To give you a quick overview, the companies that are at immediate risk are the ones involved with hospitality, travel, financial services, retail, education, technology products and services, telecommunications, healthcare, media, and entertainment while pharmaceuticals and utilities have greater time to prepare.
Whether you like it or not, the world is changing, and so is business. We can no longer hold on to our past assumptions and rely on them for progression into the future. If you want to survive, it is vital to disrupt yourself before someone else does; be on the forefront of the vortex rather than flying out with the wind. The crazy thing about a vortex is that as objects get closer to the center, their velocity increases exponentially, once caught in its force, there is no escaping it. The physical and digital components of a business will be separated, blurring the fine line between different industries. Physical components will be replaced by digital components and your business will become completely reshaped. You will experience a positive change is customer base, you will create a new and efficient platform to grow and scale your company in ways you could never have done before. It is time you ask yourself: will your business still be here in five years or will you perish with the rest of the non-believers and deniers of change.
Image Credit: http://global-center-digital-business-transformation.imd.org/vortex/
I love the combination of business and technology, not only as a career but as a passion. I found my niche in working closely with people and data and I am constantly applying what I am learning in my classes to real world applications. After 6 years in retail and customer service I know what makes or breaks customer relationships. After 4 years in college with a concentration in Management Information Systems, I have the ability and motivation to put my ideas and knowledge into action. I am fascinated by what technology can do to help further the progress of a business and even more so what I can do with technology to keep that progress flowing.