What is Digital Disruption
Disrupt or be disrupted, that is today’s mantra in the digital era. But how do you disrupt? Digital is everywhere, it is the backbone of your personal life and business. There is a fear that prevents businesses from plunging full throttle into digital disruption, the fear of the unknown and of disrupting long standing practices and current profitable processes. However, digital disruption cannot be ignored and businesses that stick with manual, time consuming, obsolete processes will in turn become obsolete too. A digital movement is inevitable if you want to survive the threat of tech savvy start-ups. Digital disruption refers to the change that occurs within an organisation through the introduction of innovative digital technologies. The transformation occurs in all areas of the organisation, structurally and culturally, transforming manual processes into efficient automated processes. But what does it mean exactly to undertake a digital transformation? Does it mean adopting cloud for most services and applications? setting up electronic channels for customers and partners to do business? competing on data analytics? or is it social media? Digital should be adopted in all areas of your business to create efficient processes and deliver efficiently to clients.
Digital And The Organisation
Some truths have emerged about digital transformation. A key factor is that digital transformation is not easy. There is no such thing as a seamless, overnight transformation to digital bliss. An organisation cannot suddenly update manual processes to digital processes, its a process of transforming the business slowly, easing employees into a new way of operating and to find the right form of digital to replace your manual processes. It may seem counter-intuitive but digital transformation should not be pinned to a particular technology, as technology is constantly evolving at a rapid pace. An organisation that implements a technology and thus, refers to themselves as digital is missing the point entirely. An organisation needs to develop the capabilities and change their current processes in order to guide the organisation through not just one change but a number of changes, happening over time as technologies change. A Slow, gradual adoption of digital and altering outdated, time wasting processes can transform your business to a digital enterprise. In a digital organisation, corporate culture and speed matter, having employees that embrace digital technologies does not necessarily create a digitally transformed enterprise. There are two key qualities of a digital enterprise, firstly, a corporate culture that continuously innovates and experiments, with out the box methodologies. Start-ups that are already tech-savvy to a degree possess the what-have-we-got-to-lose mentality and are therefore comfortable applying cloud, data analytics, mobile and social media to allow them the competitive advantage and to propel them ahead or even on the same playing field as established corporations. In addition getting a smaller business to adopt digital is much easier than a multinational corporation as there are so many layers involved in the process. Secondly speed, a digital enterprise operates at 10 times, 50 times the speed as opposed to companies that operate with manual processes. These two attributes are key in transforming a business to a digital enterprise. A leader has the duty of leading the organisation to transformation and this may only be done by unlearning a lifetime of management skills, digital leaders are open leaders, they are open to change, embrace it and are receptive to learning new processes. A digital leader possesses the confidence to believe in the benefits of a digital transformation for the organisation and the ability to transform their way of thinking. Digital transformation means thinking like an entrepreneur, being able to assemble technologies into new ideas and concepts even if it requires straying from the current business model and long-standing practices. In order to adopt to digital, you need to experiment, you need to be adaptable and you need to be fast.
Disrupting Business Models
In order to fully understand digital disruption, we look at 10 real life examples of digital disruptive business models.
The subscription model has disrupted through ‘lock-in’ by taking a product or service that is traditionally purchased on an ad hoc basis, and locking-in repeat customers by charging a subscription fee for continued access to the product/service. Examples of this are Netflix and Apple Music.
The Freemium model disrupts through digital sampling, whereby, users pay for a basic service or product with data or pure sampling, however, they are charged to upgrade. examples of this are LinkedIn and Spotify. The Free model, is the ‘if-you’re-not-paying-for-the-product-you-are-the-product’ model, such as Google and Facebook, it involves selling personal data and advertising.
The Marketplace model refers to the business models of Uber and ebay whereby, they disrupt with a digital marketplace that brings together buyers and sellers in return for a transaction or commission fee.
The Access-over-ownership model refers to a business model used by Airbnb and Zipcar which disrupts by providing temporary access to goods and services, Includes ‘Sharing Economy’ disruptors, which takes a commission from people monetising their assets (home, car, capital) by lending them to ‘borrowers.
The Hypermarket model refers to disrupters such as Apple and Amazon, whereby disruption occurs through brand bombing, using sheer market power and scale to crush competition by selling below cost price.
The Experience model which Tesla and Apple are based on provides superior experience for which users are prepared to pay.
The Pyramid model, disrupts by recruiting an army of resellers and affiliates who are often paid on a commission-only model.
The On-demand Model, Uber and Taskrabbit are examples of this business model through which they disrupt by monetizing time and selling instant access at a premium. Includes taking a commission from people with money but no time who pay for goods and services delivered or fulfilled by people with time but no money.
The Eco-System Model, refers to the business models of Apple and Google, whereby, they disrupts by selling an interlocking and interdependent suite of products and services that increase in value as more are purchased. Creates consumer dependency.
In this digital era, not transforming to digital and ultimately a culture of innovation and open thinking will result in your business becoming stagnant. With disruptors such as Uber, Airbnb and Apple, who have become successful through innovation, it is crucial that all businesses quit conforming to their norm and adopt disruptive practices too.