Digital Disruption

Digital Disruption

Digital disruption is the change that occurs when new digital technologies and business models affect the value proposition of existing goods and services. In business theory, a disruptive innovation is an innovation that creates a new market and value network and eventually disrupts an existing market and value network, displacing established market-leading firms, products, and alliances.

The rapid increase in the use of mobile devices for personal use and work, a shift sometimes referred to as the consumerisation of IT, has increased the potential for digital disruption across many industries.

Generally, digital disruption happens after a digital innovation, such as Big Data, Machine Learning, or the Internet of Things. Thereafter, Digital innovation affects how customer expectations and behaviors evolve, causing organizations to shift how they create products and services, produce marketing material and evaluate feedback. This shift in digital strategy can occur on an individual, organisational, industry or societal level.

A recent study by Accenture showed that industry leaders expect up to 40 per cent of incumbent businesses to be displaced by digital disruption by 2020.

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Digital disruption is already in play:

A few examples include:

• Online social network LinkedIn is the global leading recruitment business
• The digital camera business which disrupted the industry of film photography and photo processing.
• The largest video service by the number of subscribers is a software company: Netflix
• Facebook is now the largest media owner and yet it doesn’t create any content.
• The largest accommodation provider, Airbnb, owns no real estate.
• Uber, the largest taxi company owns no taxis
• The subscription business model, as used by companies like Amazon and Netflix, caused a disruption within the media and entertainment industries by changing how content is accessed by customers and monetized by advertisers.
• The rise of electronic reading has redefined the print and publication industry.
• The largest communications companies (Skype, WhatsApp, Facebook Messenger, Viber) own no infrastructure

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Importance of digital disruption:

It is important for organisations to embrace digital disruption in order to gain a competitive advantage. When an industry experiences digital disruption, it typically signals that consumer needs are shifting. Therefore, understanding the disruption allows companies to keep existing customers happy as well as create opportunities for new customers. It also gives companies a better idea of human behavior and how trends may occur over time.

When asked what aspects are holding their company back when it comes to digital transformation, the following reasons were cited:

• Lack of resources and in-house skills (30%)
• Security concerns (20%)
• Too many solutions to understand which one is best for the organisation (20%)
• Lack of focus from top management (19%)
• No digital transformation strategy across the company (11%)

Ogilvy states that, Thanks to rapid development across all areas of digital, modern businesses have realised that they must keep up with the resultant changes in behaviour or risk being overtaken by tech-savvy start-ups or early adopting competitors. Technology and the data that it produces present opportunities for businesses to interact with customers in new and more innovative ways – and to gain a competitive advantage because of that.

We should all stop thinking of digital as a ‘thing’, and start thinking of it as a new source of revenue, a way of business and a way of life right now and for tomorrow.

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