Disruption, and in particular digital disruption, is a bit of a buzz word these days. It’s the bogeyman who is coming to get you. He’s lurking behind the next corner waiting to jump out and take your customers. The scary thing is, unlike the bogeyman, it’s true.
Disruption has been around since the dawn of time. It’s evolution, survival of the fittest, those most able to adapt to change etc. etc. From the first people who farmed the land instead of hunting, to the industrial revolution and urbanisation of the population, people and businesses have always had to adapt and update to survive disruption. It’s at the very core of societal development and advancement.
But disruption is getting faster AND it is getting easier for your competitors and future competitors to steal a piece of your pie.
Traditional industries and value chains are becoming ‘unbundled’. There used to be large barriers to entry in many sectors that technology simply does away with. This makes it easier for a new wave of tech savvy entrepreneurs to enter most industries significantly easier and cheaper than it ever has been.
In IT, no longer do you have to invest in monolithic ERP software that locks you into an ecosystem that will cost you millions of pounds to implement and run. An ecosystem that typically is okay at everything, but not great at anything other than running a business at scale. It’s now easier to plug and play best in class systems to create an IT environment that gives you everything you want, nothing more, nothing less. You don’t have to buy it, you rent it. You don’t have to invest in big servers, it’s all in the cloud. And it’s massively scalable and every individual piece of software can be as generic or specialist as you want it to be. And when that one bit no longer offers you a service that you want, or need, or is no longer best in class, you simply plug in something new that does fit the bill. You don’t have to be a big player to access this and you don’t need a massive blank cheque to take part. The investments are (relatively) small and the payback is huge.
The music industry is great example of where digital disruption and unbundling has seen a seismic shift on the business model – record labels used to control everything from artists through to distribution. The move to digital downloads was ignored by many and in jumped the likes of Spotify and Apple with new business models that tore apart the traditional value chain. The music labels were simply too complacent to the threat and too slow to react and although they still exist, they’re no longer the industry powerhouses that they were.
In other industries, the unbundling has started, and is heading towards peak disruption. Personal transportation will undergo major disruption over the coming years. Uber, Lyft, Tesla, self driving cars, subscription cars, electric cars, electric scooters, e-bikes, rental bikes, drones, robot deliveries…it’s all happening and will have a profound impact on our society over the coming years.
In retail, consumers are moving online and the likes of Amazon are sweeping up. Brands are moving more towards a direct-to-consumer model to improve profits and also control the consumer experience of their brand, in turn tightening the screw on multibrand retails such as the traditional bricks and mortar department stores like Debenhams and House of Fraser in crippling fashion. Successful adapters such as John Lewis have reacted to this early and and well prepared in developing their ecommerce offering, but also ensuring that their customer service proposition adds further value.
One of the biggest transformations has been at Shop Direct, a well documented move from mail order AND physical stores to being a pureplay ecommerce business. Not just reacting to the disruption, but also creating it in the industry and thriving as a result. Physical stores aren’t necessarily dead just yet, but they do need to offer more than just a location to purchase your goods. Consumers will do that online. They need a reason to come into stores, either a transactional benefit or an emotional one. You then tie in the changes that are happening with personal transportation and try to overlay that impact on your store estate, and you can see that things will never be the same again.
So we know all of this, and yet some businesses still choose to do nothing, or delay doing anything. They think that the strength of their current offering and business model will carry them through. Whilst those strengths shouldn’t be thrown away, what made you great 5, 15 or 50 years ago, isn’t going to the stuff that keeps you great for the next 5, 15 or 50 years. You have to adapt. You have to disrupt yourself and because things are changing so quickly, you have to make yourself nimble and agile, and be able to react to that external disruption when it comes. If you aren’t ready or able to adapt, it might already be too late when the bogeyman shows up.
So the earlier you start to work out how your industry is going to be disrupted, and the further ahead you look, the more chance you’ll have to be a digital winner. Get to it.