The specter of disruption looms large
Disruptive technologies like data analytics, robotics, machine learning, and (mobile) internet are putting existing business models under enormous pressure. Sometimes they can topple entire industries, like music distribution and publishers.
The specter of disruption can make any board of directors break out in cold sweat. As a director, manager, or consultant, you have to know how to face these risks. How do you build an agile, innovative organization that can handle these challenges?
- Where is the danger, and which risks is your organization facing in this digital age?
- How could the future unfold, and which scenarios can play out?
- How can you arm yourself against disruption, and who should you involve in this project?
- How do you successfully set up a disruptive business model, and what role can IoT play?
- How can the processes of the organization be designed in a flexible way? How should labor be organized?
It’s not easy to answer these questions, because every organization that wants to survive has to become unique in some way. Passionned Group’s disruption specialists would like to help you face these challenges with advice, a management training, or implementation.
Digital disruption in the spotlight
Digital disruption can be seen as new organizational models coming into existence due to the fading borders between the digital and the physical. It’s the convergence of people, business processes, and “objects” (Internet of Things, or IoT) that are shaking up existing revenue models. What really separates digital disruption from the e-commerce boom of the first internet wave is the seamless integration of very diverse connected, intelligent entities (sensors, cars, devices) with people and organizations.
No new phenomenon
Digital disruption isn’t brand new. The consequences Kodak suffered as a result of the invention of the digital camera – invented by them in 1975, no less – proved to be disastrous. The scope of the opportunities and risks that come with digital disruption have only been exacerbated by time. The companies that can spot these opportunities first (and act on them) will be able to achieve a better competitive edge, strengthening their position.
Traditional mid-sized companies in trouble
The disruptive properties of technology and the exponential nature of its development are expected widen the gap between large and small organizations. Start-ups that have disruption coded in their DNA can quickly grow into worldwide businesses. Large disruptive businesses just keep growing. Small companies will always have a place, but the traditional mid-sized company will be in trouble, because they lack the change potential and money to successfully deploy the technology.
Digital disruption comes in waves
As with the industrial revolution, we can see digital disruption in waves. We’re on the precipice of the third, most impactful wave of digital disruption. This is going to have far-reaching consequences. Not just for ICT strategy, but also the structure of organizations, and even entire industries. We’re seeing this happen in finance right now, thanks to the rise of Blockchain technology. The new possibilities (and risks) create an entirely new playing field, with its own rules and dynamics. To successfully navigate this turbulent environment, you need a new plan and a new approach. To that end, we need to understand which factors cause these disruptive waves, and which new strategic questions they bring up.
The first wave: the dot-com boom
In the first wave of digital disruption, the dot-com era, decreased transaction costs caused a change in the traditional relationship between wealth and the spread of information. Rich information could suddenly be shared on a massive scale, at marginal costs. This permanently changed how we make and sell products. Companies were forced to make difficult choices about which parts of their companies they wanted to protect and hold on to. Existing value chains were “broken down” by new competitors who thoroughly changed the landscape. Microsoft started giving away the Encarta encyclopedia to stimulate the sales of personal computers, thus undermining the business model of the centuries-old Encyclopaedia Britannica.
The second wave: web 2.0
The second wave, often called Web 2.0, was the important strategic insight that the traditional economics of scale for many activities were disappearing. It was the age of the “long tail” and collaborative production on a large scale. Small businesses and independent communities surprised us by being able to execute certain tasks better and more cheaply than large companies. That’s how Linux and Wikipedia came into being. These communities can grow and co-operate regardless of geographical boundaries. That enabled them to do important and valuable work at considerably lower costs.
Smart companies adopted and adjusted these new business architectures. IBM embraced open source in order to attack Microsoft’s position in server software. Apple and Google started communities of app developers so they could compete on the mobile market. SAP recruited thousands of app developers from their own user community. Facebook thoroughly transformed marketing by turning a billion “friends” into advertisers, merchandisers, and customers, all at once.
The third wave: hyperscaling
Now we’re on the precipice of the third wave of digital disruption, also called hyperscaling. Contrary to Web 2.0, the focus is now on big: Big Data, Big business, Cloud computing, etc. Big is beautiful. On the other end of the scale – where competitiveness is outside the reach of individual business units or companies – hyperscale demands a new architecture for companies and organizations and their partners. The clearest example of this is Amazon.
Amazon as Web 3.0
In the wake of its successful web 2.0 business (online book sales), Amazon has massively expanded its services. Its services now cover the entire chain, from ordering to delivery at the door. They built a worldwide network of over 80 distribution centers and expanded their product range. That now spans almost every product that can be transported by a truck. They also offer delivery services for smaller businesses. That allows them to deliver almost as efficiently as a Walmart. At the same time, Amazon expanded its data centers at a massive scale.
Next, they packaged their own IT infrastructure as an independent product. The first step, in 2003, was to standardize the interface between the data services and the rest of Amazon’s processes. In 2006, CEO Jeff Bezos launched Amazon Web Services (AWS) – a cloud computing center, as a stand-alone service. This started as a simple renting out of raw computing power. It’s grown into a complex collection of computing services. Amazon even sells its services to competitors like Netflix.
The consequences of disruption for your organization
What impact will the developments above have? In which area can you expect to be affected, and how? Digital disruption affects 4 important business domains:
- Customer Relationship Management (CRM): how can you get insight into the needs and experiences of customers? In which customer contact points should you invest in order to optimize their experience? What technology is most suitable for this?
- Digital revenue models: how does your company create value? Is your revenue model still effective? How can you move your products and services to a platform? How can you transform your business model and processes to the digital age?
- Digital and agile organization: how can you support your employees in their work more intelligently? How can you implement the necessary organizational and cultural change?
- Business Analytics: how can you use information to generate valuable and new business insights? And how can you apply this to generate value for your customers and organization?
The benefits of digital disruption are especially evident in the last area: customer insight.
Contact us for the first disruption
Feel free to contact one of our disruption specialists and let yourself be surprised by our approach. Together, we can enter into a disruptive discourse to generate ideas for new business concepts.