Digital Disruption: a new imperative for business

For nearly every industry the impact of new digital technology is fundamental, even existential, stirring up business critical agendas for the boardroom and their IT departments.

 

 

History is littered with examples of industry-dominant businesses being dethroned by eager new upstarts. Worse still, many of these brands disappeared without a proper fight, choosing to ignore rather than challenge the newcomer.

Take Blockbuster for instance. Once the default choice for home entertainment, consumers would spend hours browsing racks of VHS tapes, looking for something to watch. But when Netflix appeared on the scene in 1997 to provide DVD rental by mail, Blockbuster made a critical mistake.

Deciding that consumers would rather drive to their nearest store to rent a movie immediately, rather than wait a few days to receive a disc in the mail, Blockbuster left their operating model unchanged. Ironically, they were half right – instant gratification did win, just not in the way they expected.

As technology evolved, Netflix went from delivering physical DVDs, to streaming content online to paid subscribers. Which meant that viewers could watch what they wanted, when they wanted – without the hassle of driving to a store. Today, the company has an estimated paid audience of 100 million, with the number growing steeply year on year.

Technology is the new driver of change
The Netflix takeover could not have happened without major technological advances like broadband Internet access and auto-scaling Cloud services. Across every industry today, technology is shaking the foundations of existing business models, driving the agenda for the boardroom and IT departments everywhere.

“For new start-ups, digital disruption can offer a real opportunity. But for well-established businesses it can be a fundamental - even existential - threat.”

Improved technology and instant access to information has created a new breed of consumer as well; one who expects to receive goods and services in almost real-time. Young and old, buyers now expect to shop and interact whenever and however they choose, 24 hours per day, 365 days per year. And they expect the same seamless, enjoyable experience to be delivered across every channel and device.

There are major implications for all businesses here. Having become accustomed to personalised services, each buyer expects us to know (and apply) their preferences. Fail to deliver, and we can all now expect instant feedback, delivered in the public arena, via social media, customer forums, or dedicated review platforms. Which means all businesses need a new generation of data management and analytics tools to keep up.

The need to collect data presents problems, however. Increased regulation – such as the upcoming General Data Protection Regulation – will have major repercussions for personalisation in the future. Those data stores are also incredibly attractive to cybercriminals, forcing businesses to increase security provisions – and the complexity of their operating environment.

Digital disruption - threat or opportunity?
For new start-ups, digital disruption can offer a real opportunity – not least because they are free from the legacy “baggage” that encumbers established industry players. In the age of Cloud services, new businesses can launch operations without massive capital investment. They can simply rent the services needed, scaling capacity and resources according to demand, never paying for anything they don’t actually use.

But for well-established businesses who operate on an IT infrastructure that has developed organically over many years, digital disruption can be a fundamental - even existential - threat. How do you keep up with new entrants who have the benefit of a blank slate on which to build?

Nevertheless, there are similarities for both parties - everyone will find IT complexity increases quickly as new technologies and opportunities arise. Only through effective IT and digital leadership will businesses be able to thrive in this new data-driven marketplace.

Priorities and challenges
For our 2018 Beyond Digital Transformation survey we interviewed 750 senior IT and Digital decision-makers across Europe – and revealed several common trends, regardless of industry or company age:

1. Disruption demands innovation

Innovation is crucial to establishing a competitive advantage – or to keeping pace with newcomers insistent on disrupting your sector. Yet 81% of those surveyed believe that their organisations do not invest enough time or resources in experimenting with new processes and technologies.

Many IT decision-makers appear to have prioritised GDPR-compliance and security over innovation. Both these factors are extremely important, but without innovation, businesses risk becoming the next Blockbuster.

2. The customer experience challenge

European businesses are switched on to the importance of customer experience, making it their main strategic priority for the foreseeable future. Unfortunately, the majority routinely fail to meet customer expectations.

Most firms believe that the digital experience will improve only after realignment of IT operations and services with customer preferences. There will also need to be significant work undertaken to unlock the full value of existing data stores – just half of those questioned believe that they are consolidating and analysing their data effectively.

3. IT and Digital leadership needs to evolve

If businesses are to achieve effective leadership to define a more innovative future, they will also need to change their approach to the marketplace. Innovation requires proactivity, but nearly half of those organisations surveyed take a reactive stance, adjusting operations in response to events as they occur, rather than trying to meet them in advance. Or to actually create industry-changing events.

Technology will facilitate the necessary changes in people, processes and corporate culture – but this is not just an IT issue. Every aspect of the organisation top-to-bottom will need to be involved.

Strong and stable – loses elections and market share
“Heritage” and “Legacy” are words that carry positive connotations, but their importance is actually being downgraded in the fast-moving digital marketplace. As business leaders are forced to innovate, traditional processes and structures will need to evolve – or be replaced.

The Blockbuster vs Netflix scenario is being played out across Europe repeatedly. And just as media streaming killed VHS tapes, there will be losers in the very near future.

 

This article reflects the views of 750 IT and Digital leaders in our most recent annual survey.

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