We live through a Tsunami: Digital Disruption
The current digital landscape
If you are in the music, travel, newspaper, retail, or telecommunications industry, you are being hit by the tsunami of digital disruption. During the last few years, we’ve all witnessed the triumphal, agile and fast arrival of Airbnb, Uber, Tinder, Netflix, drones and their impact on many industries and processes.
Annet Aris* made a very interesting analogy between digital disruption and snakes. One minute, a reptile is calmly enjoying the sun, the next moment it lunges forward. Before you know it, you’ve received the deadly bite and if you do not administer the antidote as quickly as possible, you are finished.
All of us, not for profit and for profit organizations are wondering and must be expecting a fundamental disruption in their industries. The question is not really who will be impacted, but rather at what point will they be disrupted and how much time do they have to prepare for survival.
So, what should you watch out for to see if your industry is next?
Will your industry be next?
It would be naive to assume that this predictive exercise is easy and straightforward. I attended several presentations by startups in Toronto, San Francisco and Madrid, and each time I was inspired by the drive and the innovative ideas being worked on. These companies are targeting various areas and industries where opportunities and challenges exist.
However, there are common factors to consider in our exercise to see if your industry will be hit soon by the Tsunami of Digital Disruption. These are not meant to be comprehensive nor they are they form a magic patch and remedy for digital disruption. They are meant to be indicative of:
- Your position in the value chain: The closer you are to the customer, the more vulnerable you are. For many years, banks have been dealing with customers directly with hefty bank commissions, payments options and financial plans. They are all in the midst of a tsunami and are working in a speedy manner to keep their market share. Bitcoin challenged the banking industry with new innovative payment options using Blockchain technology. Artificial intelligence is being used in financial models and it has opened the door for new players in the investment sector.
- The amount of waste in your industry: The lean methodology talks about seven types of wastes. Among these wastes we find is extra capacity. For example, take into account cars that are used on an average of 30 mins/day. We are also faced with defects and quality issues that require rework and hence waste resources and time in process. Other wastes include excess in processing, inventory, moving items and non-utilized talent. Industries that have high cost wastes are currently being targeted by digital disruption and new technologies.
- The complexities in your industry: This includes complex, manual processes such as data entry, data validation, system integration, transfer of data and documentation of processes. Over the last ten years, we’ve seen how accounts payables can be completely automated using Optical Character Recognition (OCR) and robotic processing leveraging Artificial Intelligence (AI). Enterprise Content Management (ECM) and Customer Relationship Management (CRM) are digital technologies that are changing the way we work by adding high-value automation tools to our workflows.
- The power of you as producer over the customer: If you are forcing clients into straitjacket because it better suits your production processes, then be prepared to face the tsunami that will arrive sooner rather than later with new competitors offering your customers more convenient, completely transparent and tailor-made products.
- Regulation: The more protected your industry is, the more time you have. You aren’t protected forever but you have time to prepare for the digital disruption.
Your strategy in anticipation for the tsunami
We live in a new era where emerging digital processes coexist with traditional ones. The introduction of digitization is dictated by the threat of the digital tsunami, the new digital competitive environment, the need for an increased visibility, the reduction of transactional cost and compliance with the company policies.
Even though the digitization strategy has its costs, the modern technology promises a positive Net Present Value (NPV) and higher Return On Investment (ROI). For example, a company trying to launch a new e-commerce business within a tight timeframe can find itself pulled back by the high IT-spending and the lengthy approval process for the new project. This time-to-market problem is a dilemma that many companies face as they seek to develop new products at a faster tempo, digitally optimize processes, or place major strategic backups in response to the digitization of their businesses.
To overcome such challenges, we recommend that companies reframe their information technology strategies while following these three principles:
- Implement a two-speed system: Companies will need to adopt effective solutions to address digital timing challenges such as creating a new budgeting and approval process in which projects supporting major digital strategic thrusts are treated separately from the rest of the IT budget. We recommend creating a speedy process for functions that address evolving customer experiences and a transaction speed for the remaining functions where the pace of adjustment can remain more measured.
- Make the digital dialogue more strategic: Establishing a new budget and approval process works only if there is clear agreement on what constitutes a digital priority worthy of a speedy process. Hence, the digital dialogue has to become strategic to convince top management. In response, the company’s top management may engage the board in a discussion of digital priorities that could redefine the business model. Once it’s clear that certain types of technology spending are key investments in new business strategies, they quickly realize that the resulting initiatives should be implemented quickly.
- Evolve the organization: When strategy is formulated, the operations team has to follow up on execution. When the IT organization is asked to release new digital functions on a faster deployment cycle, it requires new levels of flexibility and coordination that may involve substantial organizational change.
For example, one industrial company recently established digital product management as a separate organizational unit that is accountable not only for the company’s website, mobile applications, digital interactions and new functionality, but also for collaborating closely with business and IT leaders. This type of setup allows individual businesses to identify and prioritize their IT requirements and then tackle priority projects without compromising the development or maintenance approach needed for core transactions which are managed separately.
Digitization has led to fierce competition that challenges monolithic corporate structures. A two-speed approach to architecture will help companies navigate what’s likely to be a tricky period of transition.
How can we help?
We at 360 Business Ventures aim to help customers prepare and embark on a digital transformation, mainly in Enterprise Content Management (ECM) and Smart Data Capture. We leverage new technologies such as Artificial Intelligence, Machine learning and Blockchain in our applications.
Our areas of expertise include:
- Smart Data Capture to automate and enhance data entry in various industries: Finance, Insurance, Logistics, Health Care and Accounting.
- Enterprise Content Management to store, preserve and swiftly share documents and data for easy retrieval and efficient collaboration.
It’s clear that sooner or later every single company will have to bite the digital bullet. History has shown us that it’s prudent to prepare for the snake bite rather than scrambling with short time to find an antidote.
*Annet Aris is adjunct professor of digital strategy at INSEAD since 2003. She was nominated in 2010 and 2011 for the best teacher award by the MBA students. She named one of the 50 most inspirational women in the European technology sector for 2016 by Inspiring Fifty
