By Alex Rauser
Alex Rauser, CEO of Prototype Interactive, explains how you can successfully transform your business to excel digitally.
Alex Rauser, CEO of Prototype Interactive, explains how you can successfully transform your business to excel digitally
Digital disruption has been a hot topic in recent years. While companies of all sizes are trying to catch up with technological innovation, pretty much all industries and niches get disrupted daily.
It’s a constant process of innovation and the development of new technologies accelerates the introduction of fresh ideas into the market.
The best a company can do to prepare for digital disruption is by means of creating digital strategies that identify risks and opportunities early enough in order to tackle them and to innovate.
Digital disruption is not a new concept and it has been around since the start of the digital age. It means that a new innovative technology or business model is disrupting an industry and therefore brings a new way of doing business, servicing customers or offering new products altogether.
One classic example of digital disruption would be the personal computer. When PCs became more mainstream they disrupted many industries either by replacing them, for example the typesetter manufacturers, or by changing the way they work, for example desktop publishing. So, if you were in the typesetter business in the 1980s, you wanted to watch out for this new technology and how it would affect your business over time. You would have to change your business model and maybe start selling keyboards to PC companies. Today we need to plan for digital disruption on a much smaller scale and rather than looking at new inventions, we need to look at new ways of doing business or serving our customers. This ultimately affects how we do business altogether.
In my early working days, I experienced digital disruption myself while working at a music record label in Germany. One day, one of my colleagues showed me an article about the increased adoption of mp3s and file sharing, as well as the rise of file sharing sites such as Napster at the time. That was one year before the first iPod hit the market in 2001. We looked at it without giving it too much thought at the time. However, without necessarily noticing it, the industry changed. While the industry was offering more and more digital services over time, we know now over 10 years later the music industry still struggles to figure out how to deal with the change.
In the meantime, companies such as Apple, Microsoft, Amazon and Spotify who are newcomers to this industry are the ones that control the music distribution market leaving labels and their distributors behind. The same happened to the printing press, the hotel industry, the advertising industry… the list goes on.
The question is, what could have happened to these companies if they had managed the disruption to their own advantage?
You may also be asking yourself, how come there seems to be an increase in disruptions? One could argue that there always were disruptions, but they were not that large in scale and they did not cause enough ripples to get noticed. However, there seems to be another movement going on which has to do with entrepreneurship.
More and more people are enabled in our current age to realise the value of their inventions compared to before.
This is due to the ability to easily share knowledge, funds and production capabilities. Think about sites like Kickstarter, the availability of 3D printers, Google’s lending club and the technical capability of companies in China. All these new technologies enable everyone to invent and create in a much higher volume than before.
This is one reason why we have seen more digital disruption in recent years. In addition to this, smaller companies or start-ups have taken over large portions of the market share from very established businesses in no time at all. Consider how Netflix sidestepped Blockbuster Video to take ownership of the video rental industry.
A company like AirBnB is now assumed to be valued more than Hyatt hotels; that’s a seven-year-old company versus a 50-plus year company and AirBnB doesn’t even own any assets.
Today a new breed of innovation disrupts entire industries. In many cases and, as seen in the mentioned examples, it’s new software that enables companies to solve an existing need by providing a service in an original or more efficient way.
But why do established businesses struggle to innovate? The argument: smaller businesses simply move faster in today’s digital age.
Back in the day people said: “You don’t get fired for hiring IBM”, however in today’s age I would argue you may lose your job either way for doing so in the long run. (No hard feelings, IBM)
Large companies tend to buy from other large companies, especially when it comes to technology. What happens, however, is that you have two large companies trying to innovate and essentially compete with that five-man start-up round the corner. We have all seen where this is going to end: they either buy the start-up or end up getting taken for a ride by a bunch of teenage kids.
To achieve digital disruption, companies have a lot of homework to do. The main challenge is to proactively counter disruption by having a working digital environment in the first place.
There are three main factors that are involved in digital disruption: The pace of innovation, the increase in competition and the speed of change.
Innovation is tough and that’s why digital disruption is an imminent threat to any industry or business. The question is what’s the next innovation that will strike your industry or affect your business? Once that question is answered, you wonder who will disrupt the disruptors. This essentially means there is and will be a constant flow of disruptions, because disruption ultimately equals innovation.
In order to identify or avoid digital disruption a company can use different tools:
Self evaluation - digital strategy
Having a clear strategy on how to implement and maintain your digital offering can show shortcomings and opportunities. A good digital strategy will evaluate your business and show you where you stand, but also it will show you where your competitors stand within your industry. It will identify the areas that you need to improve and, by continuously improving your service offering, you will eventually innovate. In this scenario, we can think of innovation as significantly setting yourself apart through ongoing improvements and shall not be confused with creating something totally new also called an invention.
Set up innovation labs
By setting up innovation labs and investing into your own tools and digital offerings, you may be able to create competitive advantages for yourself. Innovation labs are all about improvements and finding new ways of doing things. Try and disrupt your own industry or company from within. Innovation labs, however, need to be managed carefully and are a big commitment and investment for a company. Innovation needs to be planned and budgeted for, otherwise it may not lead to any noticeable success.
As mentioned above, being slow can be fatal. Therefore, companies need to become faster in improving their products, services and operations. Instead of long and painful projects try and create smaller achievable steps and measure the impact your changes bring. Smaller units can also operate more agilely, therefore implementing a governance model rather than a controlling digital body across your entire organisation. This can help to improve turnaround times and digital efficiency.
Partner with the right people
The truth is, not every company can be a digital innovation start-up. The big companies with the right funds can maybe buy their way in, but we all know even the biggest players in technology spend millions to just attract the best talent. Therefore, it can be wise to build the right partnerships with companies that can help you to innovate and take your business or industry to the next level.
Digital disruption is changing the way we live and the way we think. For a business, disruption is unpredictable and can be overwhelming yet necessary, powerful, and in the right company, fascinating. How do you plan on combating digital disruption within your industry to drive more business?