Think like a Digital Disruptor: Embrace Digital, Innovate & Disrupt

A disruptive technology alters the landscape of an established market, significantly changing the way businesses have traditionally operated. These disruptions force industries to adapt or risk becoming irrelevant, and can even lead to the birth of a new industry.

The key factor that defines digital disruption is change. It’s all about redefining things and changing things so the status quo is dislodged. Digital disruption paves the way for evolution and growth, and companies that utilize this are poised to reap the benefits of the new opportunities digital disruption provides.

This is not the first time in history that innovation and technology have fundamentally changed the way we live and work. But it is the first time we’ve been exposed to change at this scale and speed. In addition, the speed of transformation is astonishingly fast. In the past, change would take place over years, even decades. Today, entire industries can be disrupted in just a few months.

And it’s no longer only large corporations with vast resources that are at the center of change. We’ve configured a world that’s highly democratized, which means that today, anybody can change an industry. Together, these elements have created a perfect wave for the age of digital disruption. The question is: How should businesses respond?

Companies will effectively navigate the challenges posed by digital disruption if they look at them as organizational and managerial problems, rather than technical ones. Many treatments of digital disruption regard the rapid pace of technological innovation as the key problem facing organizations.

It’s true that technological innovation is happening at a faster rate than ever before. Computers continue to become smaller, cheaper, more powerful, better connected, and embedded everywhere. Yet while the increasing rate of technological innovation is a significant part of the digital disruption challenge facing companies, it is not the problem in and of itself. It’s not even the most important part of the problem.

The true key problem facing organizations with respect to digital disruption is people — specifically, the different rates at which people, organizations, and policy respond to technological advances. Technology changes faster than individuals can adopt it, individuals adapt more quickly to that change than organizations can, and organizations adjust more quickly than legal and societal institutions can and each of these gaps poses a different challenge for companies with respect to digital disruption.

Despite the many advantages that digital disruption gives, many still stubbornly cling to the old ways of doing things. But change is inevitable. A Forbes study reported that a third of executives say that competition from companies that take advantage of digital and data technologies have a profound effect on the market. 51% of surveyed executives said that digital disruption employed by technology-driven startups as well as digital innovations by incumbent companies posed a high level of risk in terms of market share and revenue.

All things considered, digital disruption is a good thing for businesses and customers alike. The move towards a more digital technologically-enabled operation and workflow is inevitable, and those who have embraced it have been seeing marked improvement in their operations across the board.

When you first hear about a new digitally enabled competitor, you may tell yourself that company can’t succeed. It’s operating in a narrow niche, and it won’t be profitable at scale. Hundreds of executives of established companies have made this mistake, dismissing such innovations as the photocopier, steel mini-mill, graphical user interface, smartphone-embedded camera, and video streaming service. Instead, view each upstart competitor as a company you can learn from.

There’s always logic behind a new entrant’s business model, a reason it is being introduced. It meets customer needs more effectively than you do, offers consistently lower prices, or makes better use of assets. Chances are, it does all three.

In addition to studying your new competitors’ logic, look closely at the assumptions embedded in your company’s current business model. Keep in mind what you know digital technology can do for you. How could you redesign your capabilities to deliver better value than your competitors can? What aspects of your business model could you change to deliver better value, on a grand scale, than any upstart could? What would you have to do differently to make your own disruption work?

Innovation isn’t about the technology itself. It’s about new business models that leverage technology. It’s about finding a problem and creating an approach that changes the way the problem is solved today.

Innovation is only one part of the answer. For any company, in any industry, these three strategies are mandatory: Run your business. Change your business. Reinvent your business. The fact that you need all three strategies running at the same time is often overlooked, because organizations tend to focus mostly on innovation.

Evidence from multiple industries and companies shows that this is the primary source of the failure of radical innovation. To address disruption effectively, companies need to decouple radical innovation from their core business:

• Set up a team whose sole mission is to reinvent.
• Give the team the authority to create a whole new way of doing business.
• Isolate the team members from the basic operations of the company and your core business.
• Let them start small and explore.
• Once they’re big enough, they can either come back into the business or develop as a separate, radically different enterprise.

What does your customers’ future look like? Think about meeting their needs in a more fundamental way, so that they continually want more contact with your company and its offerings. Your mission, as Steve Jobs told his biographer Walter Isaacson, “is to figure out what they’re going to want before they do.” This will require imagination and insight; they won’t be able to articulate it if you ask them. Creating your customers’ future may require an obsessive focus on them. Make their problems go away. Remove the friction in their lives. Make things easier and less complex, while reducing the price they have to pay.

The most effective consumer-oriented companies rely on privileged access to their customers. For example, IKEA has an extensive program for sending executives to the homes of customers, who welcome them because the company has enhanced their daily life. You can also learn a great deal from co-creating your products with customers, involving them in design and development. Adobe Systems, for example, routinely consults with graphics professionals in designing new packages for them. Google and Facebook had a huge advantage in the large number of sophisticated early adopters in their own workforce. The companies continually sampled their employees’ reactions and adapted their offerings accordingly.

Disruptive companies don’t do everything themselves. They rely on the capabilities provided by others. Those capabilities will be more widely available as vast business-to-business platforms emerge. A platform is a group of interoperable technologies that provide a basic infrastructure into which applications and processes from a host of companies can fit, working together seamlessly. The new digital platforms will help transform enterprises in the same way that their online predecessors, such as Google, Facebook, and Amazon, helped change consumer habits. A platform provides access to others on the platform, new ways of creating value from digital assets, and a much greater scale at minimal cost. Just as it’s vital to know what your company is best at, it’s critical to know where you can rely on others’ technology and solutions.

Most companies have been experimenting with new technologies for years. But the relatively few companies that embrace digital technology successfully have used it as a catalyst for changing the way they operate. They rethink how sales, IT, and finance work together, and every aspect of their organization embodies that understanding.

Start with recruiting. Don’t look for cloud architects or blockchain specialists. Assemble teams of people who can combine skills in business strategy, consumer experience, and advanced hardware and software development. (We call this BXT, for “business, experience, and technology.”) Along with your coders and spec writers, include creative designers, anthropologists, finance people, data analysts, and psychologists who can understand when something is drawing people in, as opposed to pushing them out. Look especially for “helicopter quality”: the ability to operate at two conceptual levels simultaneously, one close up to the detail and the other lofty enough to provide an overview, moving rapidly from one to the the other. Seek out these people at every level of the hierarchy, so they can make technological and design decisions on the fly that are in harmony with the larger business strategy.

When you combine technological acumen, strategic purpose, and an appreciation for customer experience in one group, it enables you to imagine products and services that you wouldn’t have thought of otherwise. For example, Apple defined itself as the creator of a digital hub in 1999, and everything the company introduced after that, from the iTunes store to the iPhone and iPad, followed from that identity. Amazon defined itself as a store that connected with customers online, with a new and innovative interface that allowed people to exchange views about the value of its products. Scandinavia’s Danske Bank redefined its business around a peer-to-peer smartphone payments app that is used today by more than half the Danish population. Its subsequent products, including innovative mobile mortgage and wealth management offerings, followed naturally from that digitally enabled logic.

If you don’t know where to begin, start with customer and employee experience. Best Buy CEO Hubert Joly, for example, began to reshape the company’s digital identity by canvassing employees about their experience on the job. When they complained about a faulty internal search engine that misinformed them about out-of-stock items, the search engine was immediately upgraded. That early step paved the way for continuous improvement of the customer-facing and backroom operations.

Digital disruption can seem like a threat, but it can truly be a game-changer for you. Your opportunities to rethink your business have never been so great. The challenge facing you, no matter how mature your enterprise, is the same challenge facing any upstart: to create a new business model, value proposition, and system of customer-facing capabilities, positioning your enterprise for long-term success.