At times, it is easy to associate the term ‘digital disruption’ with only negative connotations. However, the process need not be one that is feared and fought. Digital disruption may become a powerful tool that actually enhances the commercial success of a business; ill-conceived consequences are likely the result of ignorance or poor management practices.
What Is Digital Disruption?
Simply put, digital disruption may be defined as the innovation and introduction of new digital technologies, such that commercial ventures are impacted through their existence. As a result, the new ‘disruption’ may have an effect on the value of goods or services within the industry, hence the term ‘disruption’. It often sparks the need for corporate re-evaluation, with the results sometimes holding negative consequences for those who fail to remain technologically current.
Digital disruption also extends to business models, as some organizations hinge on the available technology to take advantage of the available market. Thus, in the calculation of the effects of disruption, the business model must also be considered.
“In some ways, incumbents have a lot of benefits over new players, over start-ups. They have customers, they have great data, they often have a brand. They have financial resources, which a start-up may not have. The question is, can all of those capabilities and assets be deployed in a way that allows you to defend against new attackers as digital disrupts your industry?”
Paul Willmott | Director at McKinsey
Successful Digital Disruption Strategies
Understanding concepts are simple enough; you receive a textbook definition that is easy to regurgitate to colleagues and others in meetings. However, developing a successful strategy that fares well in a competitive environment is another matter entirely. Thus, three steps will be provided that could aid you in constructing a successful digital disruption strategy.
Carefully Consider the Logic Behind New Innovations
There is a certain laziness that exists amongst the upper regions of most entities’ hierarchical structures. Instead of management carefully considering the new technologies being developed before them, they perpetuate in a realm of passivity. As a result, many opportunities pass by, as the technology is quickly adopted by competitors who gain an automatic advantage over the rest of the market.
The first step is simple: weigh up the new technology that is available, whether it be the creation of a new business model or innovative software. Any one of these could become the next industry-changing force that opens up revenue streams that nobody thought possible.
A simple way in which to go about achieving a thorough analysis of the market is to analyze the logic of new entrants. Often, these stakeholders of the market allow for the introduction of new and exciting ideas. Pay particular attention to those with a substantial venture capital backing.
Many organizations coast along with the same business model until they are eventually forced out of the market by a company that provides a more effective market of a good or service. Consider the rise and fall of IBM; what was once the tech giant of the computing world is now not able to compete with the likes of Apple or Microsoft.
Thus, the second strategy is to have a deliberate plan of action in place, one that is dynamic and geared towards change over a pre-arranged period of time. This allows for a focus on consistent improvement, and an increase of revenue is almost guaranteed.
As nearly every disruption causes some change in the level of prices within a given industry, it is vital that entities align their prices as dictated with the current market forces. The identification of factors that affect the level of price also proves vital, as companies are then able to adapt and cater for changes in the price.
Moreover, by maintaining a competitive pricing strategy, businesses are afforded additional demand. Premiums may be charged for the use of USPs or wit the use of technology to add value in the lives of customers.
Uber and Digital Disruption
Over the last few years, Uber has proved a sufficient example of how digital disruption can cause an overhaul of the market conditions. Even though the technology was new, innovative and viewed with a certain amount of suspicion, it still broke into the market as a sensation and has captured a large slice of the transportation industry’s market share.
Digital disruption occurred in the form of an App that combined GPS location services with that of a readily available driver. Through this innovative business model, Uber was able to capture the market share of both private transportation methods, such as privately-owned vehicles, and that of public transportation segments of the market. This was achieved through a hybrid of the two: a vehicle available to private clients at only the times when needed.
As of 2017, Uber was evaluated at a rough estimate of $70 billion (US), an astounding feat that is the result of the digital disruption in the form of both an innovative business model and software features. Moreover, the method by which drivers are incentivized has also proven to be an innovation within the transportation industry, as Uber allows for the entrepreneurial spirit of its employees to drive increased sales. This is achieved through a the profit-sharing, commission-based system which the company has employed.
“We’ve moved from digital products and infrastructure to digital distribution and Web strategy to now into more holistic transformations that clearly are based on mobile, social media, digitization and the power of analytics and we think it’s really a new era requiring new strategies.
” Saul Berman | IBM
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