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Digital disruption: threat, opportunity or buzz word

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By Mark Atterby

A disruptive innovation is one that helps create a new market and a new value network, and eventually goes on to disrupt the existing market and value network, displacing an earlier technology. The process can take a few years or decades.

CDs and USB flash drives disrupted the market for Bernoulli  disk storage and Zip drives, which had earlier disrupted the market for the 3.5 inch floppy disk drive. Downloadable digital media disrupted the CD and DVD market while cloud computing has done away with USB flash drives.

“Digital disruption” is likewise so defined and accomplishes the same results, but much quicker and without having to replace an earlier technology. By and large, the phenomenon has been driven by the availability of the Internet anytime anywhere, and everyone is online, thus making online communication the norm. While data storage costs have plummeted, data analysis methods and processor speeds have increased tremendously. We even now have software as a service, in the form of cloud computing.

The presence of platforms like Google, Facebook and the strongly evolving Amazon.com has been complemented with the widespread use of the smartphone and tablet, which has also had some influence on the socio-cultural profile and buying behaviour of consumers. Buying online is not only accepted but also becoming commonplace; products and services are increasingly connected to the Internet. The reliability of digital payment systems such as Pay Pal has further boosted this form of commerce.

Many research studies show that digital disruption has gone past being a mere buzzword, with an average 85% of companies surveyed aware of the opportunities that could significantly impact their businesses, although only 35% of them pursued courses of action to implement it.

Meanwhile, many companies have watched hefty chunks of their market share bitten off by enterprising disruptors who have amassed revenues many times over their own by converting most of their customers at a fraction of their operating costs. The most notable casualty often cited is a weight loss /wellness company, in business for over three decades, whose clients were stolen from right under their corporate nose by a disruptor who used a mobile application to update clients on their weight loss/gain on a daily basis. .

Threats and Opportunities

Digital disruption works mainly because the Internet the mobile and social media can rapidly broadcast disruptive ideas to a very large audience. Its impact on a market is much greater, the market swings rapider, than traditional disruption could cause. On the other hand, it is one of the most nearly perfect illustrations of how threats can become opportunities to the same company. The ease, quickness and economy of implementing it make it more appealing, based mainly on the following:

  • The ever-growing number of empowered customers ready to accept new products and services who can be reached anytime anywhere through digital channels
  • The availability of free (or nearly free) digital tools and services that allow disruptors rapidly to come up with comparisons of products and services, and pick out the closest alternatives to those currently offered
  • The rise in digital platforms of such websites as Google and Amazon that can be exploited extensively to reach potential converts to alternative products or services
  • The presence of partners willing to produce goods and services, and to deliver these benefits quickly at a low cost, in consideration of the disruptors’ help in marketing them
  • Full embrace by the disruptor of the bold new idea that the customer ultimately determines and dictates a marketer’s strategy

No patentable technology is required for these, just digital tools to provide more value to more people in more contexts than the competition.

There are other internally generated options that established companies can do to fend off digital disruption and protect its customer base and revenues. Nonetheless, it pays to know what tools disruptors use successfully and to consider the possibilities. Some of these are:

  • Mobile applications on the iPod, Android phone, iPad or smartphone enable the disruptor to have real-time interaction with potential customers, providing the information they want, resolving issues when practicable and using them as touch points for enhancing customer experience.
  • Social media networks such as Facebook and Twitter, being non-voice with limited character strings, are used extensively by disruptors as research tools to determine what consumers need or want, based on users’ posts or those of other disruptors, as well as to introduce their product/service offerings through video. Social media has the advantage of extended public viewing and directories of groups or organizations that can be targeted as market segments or niches.
  • Data analytics, particularly of large data, are very  helpful to established firms, but even more so to disruptors who are usually at the start-up stage of their business. The capability to process huge amounts of accumulated and incoming data, both internal and external, to collate and consolidate those relevant to the business is vital to targeting and reaching potential customers.
  • The cloud is probably the disruptor’s most cost-efficient digital tool and, if he lays his scruples aside, his most potent competitive weapon as well, but it cuts both ways. He can attack the cloud (as so many are wont to do for various reasons) and gain access to confidential data of companies he wants to disrupt, but using the cloud himself can make his database equally vulnerable. Cyber security is hard to enforce in such a great concentration of computing facilities under constant attack from so many sources, many of them with malicious intent.

Needless to say, companies that want to use these digital tools proactively to get ahead of disruptors enjoy the same benefits and are susceptible to the same risks.
September 10, 2013
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