Although we’re in at least, the sixth decade of the Digital Era, the knowledge, skills, and strategies of the Industrial Era still dominate the thinking and behavior of most individuals and organizations even today!! This is particularly frustrating for consultants and change agents who have been ch
Although we’re in at least, the sixth decade of the Digital Era, the knowledge, skills, and strategies of the Industrial Era still dominate the thinking and behavior of most individuals and organizations even today!!
This is particularly frustrating for consultants and change agents who have been championing the idea of social business, social enterprise, and enterprise 2.0.
Some of the buzzwords you will hear when you walk into any of the swanky coffee shops that dot the hilly streets in San Francisco are as follows: “Social”, “Mobile”, “Real-time”, “Cloud”, “Bid Data” “Geo-loco”, “Ephemeral”, “Wearable”, “Sharing economy”, “Beacons”, “IoT”, “AR”, etc, These are referred to as “Wheels of Disruption”
To use another buzzword, these technologies are in fact disrupting markets as they influence changes in everyday consumer behavior and customer expectations.
Emergence of ‘digital disruption’
The term Digital Disruptionis used in professional literature and at conferences only for the last couple of years. Before that, the term disruptive innovation was mainly used for innovations that threw overboard the rules of the game for an existing market and created entirely new markets and value networks at the expense of the existing market.
Today’s digital capabilities are the driving force behind radical innovations. The technical jargon has now acquired the logical concatenation of the terms digital and disruption. The impact of digital disruption on a market is very much greater than from traditional disruption, and the market swings are much more rapid. The power of the Internet and existing mobile and social media infrastructure can rapidly broadcast disruptive ideas to a very large audience.
There have been only a handful of companies that have challenged their own business models to bring in disruption and transformation. Companies preparing for transformations require organizational restructuring and cultural shift. Amazon and Netflix have been the first few pioneers that championed digital disruption by challenging the dominant brick & mortars stores. Companies like Airbnb & Uber have already redefined the multi trillion dollar hospitality & transportation industry.
Newcomers entering a market often have disruptive business models that would have been impossible without the current digital infrastructure:
- Using rather than owing: Spotify, Netflix
- Freemium: Skype
- Peer-to-peer commerce: AirBnB, 99dresses.com
- Creativity of the crowd: threadless.com
- Mass personalization: chocstar.nl, shirtbyhand.nl
According to Forrester Research, digital disruption is relatively new. Currently, only a few industries have experienced this phenomenon. The most obvious example is the music industry where due to digital disruption total sales reduced from 14 billion in 1990 to 6.8 billion (including digital) in 2010. In the meantime, the Spotify business model has again turned the music industry on its head.
Traditional disruption versus digital disruption, Forrester Research 2011
Navigating these waters leaves many businesses facing the toughest question of all: how quickly should they pull back from their traditional, profitable – but nonetheless shrinking – operations to invest in the digital future?
This is the “Innovator’s Dilemma”, as described by Clayton Christensen, a Harvard Business School professor. Incumbents can find it hard to respond to newcomers with a good enough product, since doing so often involves turning away from doing profitable things.
“Digital Transformation” and “Digital Disruption” are proven keyword phrases to drive traffic to marketing and thought leadership content. But how do these words translate into the way you do-or need to do-business? And, should you “transform” or “disrupt”? Maybe both?
- Digital disruption, “occurs when past proven practices no longer produce predicable results.”
- Digital Transformation is, “the use of technology to radically improve performance or reach of enterprise, as per MIT Sloan Management Review.
“Digital disruption is more than just a technology shift. It’s about transforming business models and how we engage”
To succeed, we can’t just look at the latest cool set of technologies of the day. We have to think bolder about transforming business models. This means understanding the one or two key metrics that a business must measure to ensure their success.
“Transformation is crucial when digital disruption is the norm”
According to Eric Clemons, Professor of operations, information and decisions at The Wharton School of Business “Digital transformation is really just a different way of thinking, enabled by technology”.
While several road-maps for Digital Transformation are beginning to emerge, the problem faced by many organizations is deciding which road-map to follow. Choosing a wrong one could cost millions of dollars and drive away top performers and your company’s best customers.
Owing to new technologies and their adoption among a growing number of businesses, organizations today are finding new and novel approaches to create structure around workflows and optimize processes with technology.
The combination of new digital technologies such as Social, Mobile, Analytics (Big Data), Cloud and Internet of Things gave rise to “digital disrupters” such as Uber, Airbnb and PayPal.
Samiron Goshal, Partner & Adviser, EY, says: “Whether your company is among the early adopters who are disrupting the market or among those forced to follow is dictated by how you understand and respond to opportunities and risks that digital presents.”
In a digitally driven era, companies need to step up their innovation and operational efficiency, customer experience, brand and marketing efforts, as well as cut cost. To achieve this, they rely on certain factors, popularly referred to as SMACi:
- Social media: to interact with their customers
- Mobility: shifting the focus of application development to a “mobile-first” approach
- Analytics: enabling enterprises to explore large volumes of data to gain insights and drive strategic decisions
- Internet of Things: opening significant opportunities by connecting everything to internet
- Cloud: reshaping the way software and services are sold and delivered
These technologies have become integral for digitizing products and services, customer experience, operations and workforce.
A recent report from McKinsey suggests there are at least nine important questions that an organization should ask itself if it wants to get its’ Digital Transformation right:
- Where is digital having the greatest impact on your business?
- How can you use digital to improve the customer experience from beginning to end?
- Is there visible support from the CEO and a clear mandate for cross-functional teams necessary to support digital transformation?
- Do you continually test and measure new concepts with customers?
- Is your budget responsive to progress instead of the standard three-to-five year business plan?
- Are digital experts asking tough questions about proposed ideas in an effort to uncover problems quickly?
- Are your employees “Empowered” to act quickly, bypass lengthy corporate processes, in order to embrace change?
- Is IT building a separate system that can provide nimble customer-facing capabilities?
- Is each initiative clearly aligned with the broad business strategy?
What’s driving digital transformation?
- Executives leading digital transformation must remember that digital transformation isn’t an end goal; it’s a continuous journey. It’s the result of learning more about the relationship between technology and customer behavior to earn relevance among them.
- Digital transformation touches many areas of an organization – from interactions with customers to the company’s vision, operations and culture, and the process of digital transformation is impacting all levels of the customer journey across every sector of the information landscape.
- Today’s consumers use screens and what they expect to accomplish does not mirror traditional customers of the past. Their values are shifting. And, how they make decisions no longer aligns with a traditional funnel model. Expectations are reshaping engagement and, ultimately, the way their relationships with companies unfold.
- For those CEO’s who are willing to embrace this change, digital transformation can provide the opportunity to rethink how they use technology at the most fundamental level. This can help businesses to improve their service offerings while also building a more meaningful relationship with the new generation of customers.
- For instance, Nestlé’s Global Head of Digital and Social, Pete Blackshaw, embraces innovation and experimenting along the way to ultimate transformation. Although Blackshaw believes Nestlé is still in the process of becoming “transformed,” the company is setting out to answer difficult questions to understand and optimize the customer experience.
- To lead transformation, Nestlé formed an innovation acceleration team and opened an innovation outpost in Silicon Valley, California, to “deepen relationships with consumers online and in social media.” The company is seeking strategic partnerships with innovative companies to better understand consumers’ needs and respond to them more quickly.
At a Gartner symposium/IT expo in Orlando, Hung LeHong, VP and Gartner Fellow, advised CIOs to think of digital disruption in terms of their companies, customers, and markets to drive the move from digital business to autonomous business. Seek to understand citizen and consumer needs by observing what has already been implemented in other industries.
For example, study how 3D printing has been used for toys or how smart machines in banking customer service deliver value. With news of 3D printing, drones, and smart robots, it can be hard for CIOs to get their arms around digital disruption. What’s close at hand or farther out on the horizon?
“Disruption is in the eye of the beholder,” ~ Hung LeHong
Remember to pursue value, not disruption. After all, Uber disrupted the taxi business, not consumer’s needs for easy transportation. It also takes time for general acceptance of digital disruption: Uber was founded in 2009 and took several years to reach broad use.
And, this is just the beginning……………..
Digital Disruption and Transformation represents a journey for businesses who seek to compete for attention and affinity of a different type of customer, a customer who requires a different set of human-centered paths, touch points, and outcomes.
“However, for some business leaders, the idea of transforming their organisation remains a deeply daunting thought. Instead of adapting, these organisations would prefer to bury their heads in the sand and hope that “Digital” will pass them by without “Disruption”;)))”
Thank you for reading! Follow me on twitter @radhyka
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**//**Additional inputs from Information Age, Cmswire, Forrester Research, Global center for digital & business transformation, Mckinsey.com, venturebeat & Gartner; Image credit “wheels of disruption”: Brian Solis**//**
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