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Digital Disruption: So, what is the big deal?

Digital Disruption: So, what is the big deal?

Digital disruption – yes, I struggle with it: the moment I think I have the hang of it, I listen to a talk that makes me realise that I know less than Jon Snow. I was fortunate enough to attend a talk by Professor John Deighton from Harvard Business School last week at UCT Graduate Business School. Here are some of the learnings that I took from the night that I thought worth sharing.

1.    Experience is obsolete

What happened to experience? How did Donald Trump outperform experienced politicians in a national election? All the experience he ever had was run a real estate company. Mark Zuckerberg’s first job was inventing a platform that a third of the entire world uses. The most successful advertising campaigns are the ones that go viral – and none of these actually directly sell the products. They found unconventional ways to advertise and have had major successes. We are seeing more and more of these cases and what they are doing is disrupting our fundamental understanding of marketing.

Why? 

2.    Platforms are more powerful than products

The top brands in the world used to be products: Coca Cola, McDonald’s, Toyota, etc. However, currently, the top brands are all platforms: Apple, Google, Amazon and Microsoft.  

So What?

Whom is Amazon competing with? They created a platform, see what they said about their brand in annual reports below – initially in 1994 their objective was to be the biggest bookstore in the world. In 1997, they wanted to be the leading retailer of information-based products and services. By 2004: The earth’s most customer-centric company; a place where people can come together to find and discover anything they might want to buy online and by 2010: The earth’s most customer-centric company. Can you see how they gradually refined their brand?

Who is vulnerable to Amazon? Everyone… Start thinking about your competitors differently and start looking at what innovative platforms could potentially impact your business!

We cannot compete with a traditional mindset in the disrupted world!

3.    The world before specialisation was far more imaginative!

If Henry Ford listened to his clients, he would have figured out how to make a faster horse! He knew that cars were the way of the future. Even though radical innovations like these are absolutely devastating for incumbent firms, it changes the way that society operates. He abandoned the dominant design to be at the forefront of innovation. Today, Elon Musk is going back to the world before specialisation – where he is driving the crazy idea that is transforming the multi-billion-dollar automotive industry globally. But is society ready to accept electric vehicles and are we educating the general public enough so that they buy-in to the ideas instead of resisting the inevitable change?

It is not just the automotive sector that is affected by innovation! This is also true in the traditional banking industry. As the world is aiming to professionalise certain industries in order to raise standards and Governments regulations are becoming more rigid – are disruptors like cryptocurrency and unregulated businesses not getting a competitive advantage as they do not adhere to the Government regulations. Are these regulations helping to drive innovation, increase the use of best practices standards or potentially harming the formal sectors?

4.    What are the driving forces behind innovation?

Consider this model

If we use the telephone for example. Before Alexander Graham Bell invented the telephone, the telegraph was the star of the day. Did you know that people asked him who would stay at home to wait for the phone to ring if they would be out and receive a telegraph? As such, the telephone is a radical innovation that was new technology in anew market. The digital phone was a disruptive innovation as it they were using new technology in an existing market. When the smartphones got features such as touch ID, face recognition, etc – it was merely incremental innovation as it was existing technology in an existing market – but the biggest change was the phone as an app platform.

Why?

The day Steve Jobs allowed external apps on the app store; Apple’s stock started rising. The phone now had more functionalities and impacted more businesses than what they ever imagined. It started the ‘There is an app for that’ revolution that changed the lives of everyone today. But it was not the phone that did it, it was merely a new market for existing technology. So, what makes architectural innovation so disruptive?

5.  Architectural innovation solves problems no-one realised were problems

The concepts of money and the international currency is no new invention, trading across borders has become increasingly popular with the rise of globalisation, however, could anyone foresee the effect that cryptocurrency will have on banks. Why would you go through conventional ways to transfer money overseas, when you pay an exorbitant amount of interest? 

Take Garmin – who would have thought that Apple would be their biggest competitor? No, I have not lost my mind – just think about it: Google Maps almost sunk Garmin and all of the traditional GPS system producers. What did Garmin do to overcome this challenge? They did not decide to give up! They decided that their core competency is navigation and they explored niche markets. You can buy a Garmin that helps with fitness – did you know that the golf watch comes pre-programmed with over 41000 golf courses from around the world?

My point is – they realised that their core competency is navigation. They decided to expand into new markets when their biggest cash cow was hit by smartphones. They pursued golf, mountain biking, running, smartwatches, wearables, dog products (yes, that’s a thing – you can track your dog), action cameras, motorcycle, marine, aviation and many more!

So why did I tell the Garmin story? Are you aware of companies innovating in such a way that they can solve a problem superiorly to the way you solve your clients’ problems? Are they more convenient? Cheaper? And when this happens – do you cry and close your doors? Or do you get up and find a new way to market your core competency in markets that you potentially never imagined? Do you think the Google maps app developer even considered the effect that they would have on Garmin’s business? 

6.    How can you deal with digital disruption?

There are 3 ways to deal with digital disruption:

·        Retreat: Build your business on someone else’s platform

This is like you becoming an uber driver. You see it works, so you embrace the change, but what happened when the platform either closes or decides to suspend your contract? Think of what happened to Angry Birds when Facebook no longer supported it. It became a distant memory tucked far away. Will this solution be sustainable?

·        Meet it: Find a digital solution to your customers’ pain points

Create an app that solves the problems that your clients’ experience – whether they are aware of the problems or not. If you can make their lives easier, it will be good for your business as they will support simplicity. If you can market your product in a different way – or have an add-on service that solves problems for them, they are more likely to stay loyal to you.

·        Beat it: Build your business on a platform architecture

Be the next Amazon, Facebook or Apple…constantly expand and offer your platform to others to market their products on. Just remember – this is a capital intensive, although a sustainable solution. 

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