Digital Transformation
Jun 19, 2018

Digital disruption: Threat or opportunity?

Digital disruption is accelerating: Data shows the average lifespan of S&P 500 companies has shrunk from over 60 years – the average several decades ago – to fewer than 20 today. Credit Suisse blames this disruption on technology. This blog looks at the underlying cause of this change and provides recommendations for how enterprise leaders can turn disruption from threat to opportunity.

Digital disruption is business model disruption

Digital disruption has been a boardroom topic for years now. Harvard Business Review has described industries being “disrupted the most by digital" and McKinsey has advised how to “face up to disruption" and “reinvent the core." However, recent IDC research indicates that while 85% of organizations have embarked on digital transformation journeys, only 7% can be classified as digital transformation leaders. These leaders have a full digital strategy in place and earn more than 30% of their profits from digital products and services.

Why so few leaders? Why so difficult? Because in the end, disruption requires an enterprise-wide digital effort. It is primarily not about the technology; rather it is about imagination, focus, courage, collaboration, and culture.

Although referred to as digital disruption, this phenomenon is really about business model disruption. Disruption occurs within an industry when the prevailing business model shifts to a new one. And these business model shifts are accelerated with the advent of digital technologies. Examples of business model shifts include:

  • When more consumers stream video vs. get CDs in the mail
  • When more value comes from data about a transaction than the transaction itself 
  • When people are more willing to pay for mobility services than purchase vehicles

While disruption has been around long before today's digital technologies, digital disruption has blurred industry boundaries, lowered barriers for entry, reshaped value chains, and accelerated a host of business model shifts. In order to thrive today, business leaders needs the right mindset, plus the ability to leverage new technologies in order to lower costs, create superior customer experiences, and better utilize assets. These abilities will accelerate your company's digital transformation and increase your probability of becoming a digital disruptor.

How to accelerate your digital journey

Genpact, where I work, is a global professional services firm that makes business transformation real. Guided by our experience running thousands of processes for hundreds of Global Fortune 500 companies, we drive digitally led innovation and digitally enabled intelligent operations for our clients. Based on learnings from our own digital transformation, and from our work helping our clients, here are five recommendations to accelerate your company's digital journey.

  • Embrace disruption top-down to foster creation of a new business model: While it's difficult for a company to disrupt itself, that is a favorable scenario compared to being disrupted by an upstart challenger. Senior leaders from the board and CEO on down must embrace this coming disruption, create a new vision, and drive the significant change management challenges which accompany the creation of a new business model.
  • Understand your company's unique brand value: To “know thyself" is as important an injunction for companies as it is individuals. What is your unfair advantage? How do you make it sustainable? This self-examination, with external validation, enables the necessary focus and realization of new skill sets, capabilities, and other ingredients – all of which are needed to repeatedly deliver on your company's unique brand promise.
  • Be bold and invest enough to make an impact: Corporate inertia, personal career worries (i.e., protecting one's power), and the natural instinct of the body to reject outside organisms increase the difficulty of successfully developing new business models within existing enterprises. Leaders must be bold with their investments and supportive to incubate the teams which are trying to disrupt the core business. Digital leaders invest more boldly than laggards.
  • Know your role in the value chain and partner with others: Digital leaders don't try to do everything themselves; instead, they “stand on the shoulders of giants." That is, they build onto existing platforms and develop their own platform to exploit new ways of generating value at scale and at minimum costs, all while providing access to others. Leaders recognize the importance of partnering to develop an ecosystem to deliver whole product solutions for their clients. Not even the largest companies can go it alone anymore.
  • Embody your new culture and encourage experimentation: Change is not easy, but leaders must live the change they want to see and encourage an experimentation culture throughout the organization. Remember: culture eats strategy for breakfast, lunch and dinner – so this is the most important element to accelerate your journey. A company's transformation goes far beyond technology, and culture tends to be the biggest stumbling block. Leaders must have courage and persistence here.

In sum, digital disruption can seem like a threat. In fact, it should… or you and your leadership team have been sleeping at the wheel. However, digital disruption can also become the driving factor in rethinking your business. The challenge for large enterprises is the same as that of startups: to create a new business model, value proposition, and system of compelling customer-facing capabilities that will position your enterprise for long-term success. This is every company's challenge today, and the opportunity has never been so great.

About the author

Dan Glessner

Dan Glessner

Vice President, Digital

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