The center of gravity is shifting from big, legacy companies to smaller, more agile businesses that can innovate more quickly and embrace the power of digital platforms. These digital disruptors are reshaping markets much faster than anyone had predicted. They will tell you which nearby Chinese restaurant is worth trying out. They will help you take care of your neck pain via activity-tracking through a wearable device. Perhaps most notably, they do all this at one-hundredth the cost with an enormous focus on customer experience. Our upcoming thought leadership paper on ‘Digital Transformation in Asia Pacific’ highlights that more than 60% of companies in the region are either concerned or highly concerned about the increased competition from new disruptive startups capturing customer attention.
Even highly regulated industries, such as banking which is well protected and requires high capital cost, is not immune to digital disruption. Payments that account for 20-25% of banks’ revenue are currently being challenged by new digital entrants. For instance, Alipay, China’s third-party online payment company is the largest online payment processor in the world today. Mint Wireless, a third-party payment provider, was ranked ahead of many banks in the list of the 50 most innovative companies in Australia in 2014.
Digital is no longer a “bonus” channel for companies, but rather the most profitable path to their future. Unfortunately, many companies ignore early disruption and by the time they realize it, their knee-jerk reaction of getting defensive doesn’t work. They continue to lose customers and ultimately end up in business extinction. Companies like Kodak, Barnes & Noble, Borders, and many others have had to pay the price for their ignorance. The soonercompanies realize that even a small change in their industry will have a tremendous impact on them, the better prepared they are to handle the disruption. Some thoughts on how companies can identify disruption early and act fast are summarized below:
Challenge the underlying industry principle of your particular business. Why does the business need to be conducted as it has been done for several decades? For instance, why do banks need to have a physical infrastructure in place? What if the physical infrastructure moves entirely virtual? This belief gave birth to the concept of an all-digital bank like Atom, which will be operational soon. Do not wait for startups to destroy your business value or for customers to change their demands – Start challenging your industry and business fundamentals to find innovation.
From now on, digital disruptors are your best friends. Thebiggest mistake that companiesmake is ignoring digital disruptors until they become too disruptive to handle. Traditional companies must follow startups in their own and other industries to generate ideas and learn new ways of conducting business in a particular sector. C-suite executives must not view digital disruptors as enemies, but rather friends with whom they can collaborate.
Allocate a dedicated budget to experiment with disruptive technologies. With the advent of emerging technologies, there is a lot of debate regarding the fact that everything around us will have built-in chips, sensors, and much more in the near future. The question is not whether all this will become a reality; the real question is how fast it will happen, who will enable and manage this revolution, and how privacy-related issues will evolve. The key is to be aware of get involved in these new technologies (3D printing, robotics, Internet of things etc.) in the early phase of their disruption so that when they go mainstream, most (if not all) businesses can successfully ride on that wave.
How are you responding to digital disruption in your company? If there are any other best practices that have worked for you, let us know!