Dealing with Digital Disruption

Riding the Digital Enterprise Wave

Your business model is under threat from what we call the Digital Enterprise Wave. Are you going to ride it or go under?

Take a look at these slides and let me explain how the business landscape is changing. It’s driven by significant changes in infrastructure and things that we already know about. There are Global economic pressures where access to low wage costs in Asia, Eastern Europe, or South America are facilitating outsourcing and offshoring, all supported by the connectivity provided by the Internet, extended by the huge rise in Wi-Fi access, 3G and 4G so that we now live in an “always on” World. Those things have dramatically lowered the costs and barrier to entry for any business start-up idea. It’s fostering an explosion in entrepreneurship. It’s enabling crowd-sourcing of expertise from Wikipedia to Waze. It’s giving us a new generation of Millennials who have grown up digital so that they think differently, communicate and multi-task in ways that are changing the expectations of the (digital) workplace forever. These are the factors that underpin the ideas in Thomas L. Friedman’s The World is Flat, or that facilitate the access to niche markets behind Chris Anderson’s The Long Tail, or give us Clay Shirky’s Here Comes Everybody. These factors form the foundation of the wave.

Next we have the Big Shift. For the last 50 years Moore’s Law has driven change and innovation in technology. Every 5-10 years we’ve had a major technology disruption that has changed the way we do business, created new companies, and seen the demise of others. We moved from the mainframe to the minicomputer, and then to the advent of the IBM PC back in 1981. We’ve networked computers and created the era of client/server applications and then seen the start of the Internet, web 1.0 and the Dot-com boom and bust. Then things started to get interactive with Web 2.0. However, we’ve never had more than one technology disruption happening at once, until now. Now we have three major technology disruptions happening simultaneously, and that’s never happened before. The shift to the Cloud and web apps is happening at the same time as the shift to social media where all markets are conversations, and that’s happening at the same time as the shift to mobile – smart-phones and tablets mean that most of us are carrying around the Internet in our hands. That Big Shift is the next layer of the wave.

Then on top of that there are emerging technologies like the Internet of Things, Big Data & Analytics, Artificial Intelligence and 3D Printing. Each one of these has the potential for an even more profound effect on the World economy, the global supply chain and the way business works. Today’s marketplace has more demanding customers, faster changing technology and more competition than ever before, and the rate of change is getting faster. These emerging technologies form the top of the wave. Whatever business you are in your business model is under threat by a smarter, nimbler competitor who will be using technology to skip past you in to a new field of play.

The problem is that most companies are too focused on the day to day. They think business as usual. They have legacy business systems, with tired old style user interfaces – systems of record that keep score for the business. There is often a lack of integration. Where social media initiatives or communities have been started, using the new web tools, they slide over the top of existing systems rather than connect properly. They’re alternatives to email for communication instead of changing the game. They are point solutions or provide siloed information, when you need to think in a holistic way about the business. Business as usual will get swamped by the wave.

To ride the wave we need think differently. We need to think “digitally”. We need design thinking and business model innovation. We need to create systems of engagement which connect and engage with our customers and partners. We need to think in terms of using digital and social tools outside, but more importantly inside our businesses to create the connected digital workplace and a new way of working. Digital thinking will help you ride the wave, but it has to be applied to the whole business. We use the McKinsey 7 “S” framework to look at every aspect of the business – it doesn’t matter so much which framework and approach you use, as long as you think beyond just “putting lipstick on a pig” with a dash of digital and social sitting on top of your “business as usual”.

We’re now moving to an “Everything as a Service” World where companies like AirBnB are changing the hotel industry, Uber is changing the taxi business and Apple is about to change the card payment industry. As I said before, I don’t care who you are and what business you are in, your business model is under threat and you need to be using tools like the Business Model Canvas and the Value Proposition Canvas to rethink and refocus what it is that you do.

We are talking Digital Transformation – what is that?

You will have noticed that companies that have been talking social media in business, or enterprise 2.0 or social business have just started to talk digital instead. Social collaboration tools and platforms are an important component that you might use in your evolution or transformation to doing better business. By using the term digital we are highlighting that you need to think further than just adding social and mobile technologies on top of your legacy systems. You have to harness your existing technology, those systems of record, and make them work better. You have to think of using technology to help you go to market faster with new offerings and to reach your customers in new ways. You have to re-evaluate your business and your value proposition and stop thinking business as usual. You have to start thinking “digitally” for your business and an entire new generation of technologies as well as looking at the culture of the way your company communicates and interacts. You don’t have to change your company structure, but you do have to recognise that we now live in a networked World where every person in your organisation can be involved and engaged in the same way that they connect with brands in their personal lives. Smart companies can evolve a digital strategy. Business as usual will get left behind. If you are behind the curve like a Kodak or Blockbuster or even a Phones 4U, you have to think in terms of a more significant digital transformation. But going digital to survive is a given.

Sounds quite interesting, but why bother?

If this still sounds nice to have as an add-on rather than vital, the most important thing is that it works! Take a look at these survey results from Capgemini Consulting and MIT Sloan Management from their report “How digital leaders outperform their peers in every industry“. They split the surveyed organisations in to 4 categories, with the most digitally savvy being called the “Digirati”. Companies in that most advanced category generate 9% more revenue, create 26% more profit and have 12% higher market valuation than the rest. Going Digital makes a direct contribution to the bottom line.

This post was first published on diginomica.com as Riding the Digital Enterprise Wave