Development

Digital Disruption – What Is It and How Will It Impact Your Business?

Digital disruption is a disruption that is caused by emerging digital technologies and business models. These innovative new technologies and models can impact the value of existing products and services offered in the industry. Therefore, the term ‘disruption’ is used, as the emergence of these new digital products/services/businesses disrupts the current market and causes the need for re-evaluation.

While digital disruption is predominantly used in a business context, it also impacts other organizations such as governments, public sector agencies and organizations which are involved in tackling societal challenges such as pollution and aging populations by leveraging one or more of these existing and emerging technologies.

Digital disruption typically marks changes in consumer needs and therefore working with the tide allows you to fulfil these emerging needs, keeping existing customers happy and opening opportunities for new customers to find what they need from your brand.

The development of new competencies revolves around the capacities to be more agile, people-oriented, innovative, customer-centric, streamlined, efficient and able to induce/leverage opportunities to change the status quo and tap into big data and new, increasingly unstructured data sources – and service-driven revenues, with the Internet of Things as a vital enabler. Digital disruption efforts and strategies are often more urgent and present in markets with a high degree of commoditization.

A digital disruption strategy aims to create the capabilities of fully leveraging the possibilities and opportunities of new technologies and their impact faster, better and in more innovative way in the future. A digital disruption journey needs a staged approach with a clear roadmap, involving a variety of stakeholders, beyond silos and internal/external limitations. This roadmap considers that end goals will continue to move as digital disruption de facto is an ongoing journey, as is change and digital innovation.

Technological innovation, ranging from cloud computing, big data, advanced analytics, artificial intelligence, machine learning and mobile/mobility (a key game changer) to the Internet of Things and more recent emerging technological realities are 1) enablers of digital disruption and/or, 2) causes of digital disruption needs (among others as they impact behaviour of consumers or reshape entire industries, as in the digital disruption of manufacturing), and/or 3) accelerators of innovation and disruption. Yet, technology is only part of the equation as digital disruption is holistic.

Digital business disruption can be motivated by several factors. In some cases, it comes from consumers, who are better informed than ever before. Consumers today are actively searching for enhanced service, lower prices, and higher levels of quality. The showrooming phenomenon in retail environments, where consumers visit physical stores to see items and then order them from online vendors, is an example of the increasing sophistication of customers to seek the best deals.

The impetus for disruption might also come from new competitors with enhanced offerings, better engagement models, or lower prices. There are many examples of firms like Amazon or Google entering new markets and disrupting incumbents. The disruption can also come from the inside.

The end goals of the business, customers, and stakeholders, however, do drive the agenda. The central role of the organization is to connect the dots and overcome internal silos in all areas to reach these different goals as interconnection is the norm. In other words: although the focus shift towards the edges, the central capabilities are realized to work faster and better for and at the edges. This happens for instance at organizational (integrated, ecosystems), technological (an ‘as-a-service approach’, cloud and agility enablers) and at a cultural level.

What to disrupt?

Digital business disruption can take many forms and smart disruption requires prioritization. We see 7 distinct categories, any of which could be disrupted digitally. The categories are: the business model (how a company makes money), the structure (how a company is organized), the people (who works for a company), the processes (how a company does things), the IT capability (how information is managed), the offerings (what products and services a company offers), and the engagement model (how a company engages with its customers and other stakeholders). These categories make up the most important elements of an organizational value chain as it relates to digital disruption.  Some guiding questions for each category are shown in the following table.

Disruption CategoryGuiding questions to ask of each organizational
disruption category
Business Model
(how you make money)
What are your routes to market? How relevant is digitally enabled commerce, i.e. e-commerce, m-commerce?
Where does most of your revenue and profit come from?
What are your main customer segments? Do these need
to change?
How are you differentiated from your competition?
How relevant is this for the future?
Structure
(how you are organized)
What type of organizational structure do you have?
What is the balance between local and global decision
making? Does this make sense for the future?
Where do different aspects of ‘digital’ sit in your
organization? Are they effective?
People
(the people who work
for you)
How digitally savvy are your employees across different parts
of your organization?
How digitally savvy are your leaders?
What new capabilities are required? How will you
acquire them?
Processes
(how you do things)
To what extent are your processes automated and digitized?
To what extent are your processes consistent across your
organization?
To what extent are your processes adaptable to change?
IT Capability
(how you collect and
manage information)
How effective is your IT infrastructure: core systems, networks, databases? Is it able to support your digital ambitions?
How effective is your forward facing IT: websites,
mobile sites, social media?
How effective is your customer relationship
management system?
Do you have a clear IT strategy linked to your
corporate strategy?
Are your “dark assets” connected so you have
all the data you need?
Are you deriving value from your data?
Offerings
(your products
and services)
How digitally enabled are your products?
How digitally enabled are your services?
Engagement Model
(how you engage with
customers, suppliers,
etc.)
How strong is your relationship with customers?
How many customer touchpoints do you have,
i.e. web, mobile, mail, face to face? How often do
you engage with them?
How loyal are your customers?

By answering these questions an assessment can be made within each category of the current level of disruption and anticipated future required level of disruption. Thus, an organization can see a visual map of the existing state of preparedness for digital business disruption along with the desired state. The difference between these two states represents the amount of disruption that is required. In some cases, the difference might be relatively modest, requiring incremental change. In other cases, the gap might be large, suggesting the need for more radical change. Following table is a worked example for a company that was pivoting from its traditional European retail markets for designer fashion to As

Digital Agility

The differences in digital maturity and potential for disruption among industries is substantial. Because of this variation, there is no one-size-fits-all approach to successfully accomplishing digital business disruption. It is hard to achieve digital business disruption benefits by making single changes or by employing single technologies. Lasting change can be accomplished much more effectively by transforming multiple categories and multiple technologies simultaneously. This level of change requires focus, as there are thousands of potential combinations, and a high degree of collaboration, which is part of the reason that many organizations fail in their digital disruption initiatives.

However, regardless of which digital roadmap is pursued, we have determined that organizations need to develop a fundamental capability that we call digital business agility. This capability is made up of three components: hyperawareness, informed decision making, and fast execution.

Hyperawareness

Hyperawareness is an organizational capability to recognize future trends that will impact an organization. In an environment characterized by accelerating rates of change, it is imperative for organizations to sense the factors that will affect them.

Informed Decision Making

Having a strong hyperawareness capability is necessary, but not sufficient for digital business agility. Often, organizations collect interesting and relevant data and information that is subsequently ignored. Informed decision making is the capability to actively analyse information that comes in through hyperawareness. Like hyperawareness, informed decision making has a strong digital component: knowledge management systems to organize insights, collaboration systems to facilitate remote conversations, dashboards to display relevant information, and analytics systems to provide evidence-based insights to support decision making. Decisions are ‘informed’ due to the currency of the data and the rigour of the analysis.

Fast Execution

Hyperawareness is crucial to understanding relevant trends, informed decision making is critical to deciding upon the right response; however, neither of these matter if an organization is unable to quickly execute the necessary changes. Fast execution combines two elements: speed and implementation. Both are critical to achieving successful digital business disruption. Fast execution is a response capability that incorporates turning decision into action. In our research, respondents told us that fast innovation and high agility were the two most dangerous capabilities of emerging digital disruptors. Another aspect of fast execution is the ability to move resources quickly and efficiently to where they are most needed. High levels of bureaucracy and organizational silos are the enemy of fast execution. Organizations that execute quickly are typically empowered to act at lower levels of the company hierarchy. Resources are digitized to the highest extent possible to allow for easy and frictionless movement to where they are needed.

Conclusion

Understanding the need to transform and having a good grasp of what must change are important, but the key to success lies in the implementation. How to transform is where most organizations fail. While there is no one-size-fits-all roadmap for organizations across every sector, we found that a digital business agility capability is positively and significantly linked to both positive financial performance and the ability to respond to digital disruption.

Codacity Informatica Group have the experience you need to guide you through the process of identifying your next digital business disruption. We are in the age of ongoing business disruption and adapting to a dynamic market environment means addressing the silos in your organisation and understanding how to reorganise your business for sustainable growth.