The term ‘digital disruption’ is being used on a daily basis to describe changing events, strategic initiatives and in some cases different technology applications. The misconception in many of these references is that it’s about the actual technology solutions. Rather, digital disruption occurs more from the effects of the technology and how this impacts the economic potential of the business model.
The business model is the focus of the potential disruptive effects because that’s how a business makes its money. If the level of profitability and further economic potential is being affected, then the business model is facing disruptive effects that is heading down a pathway of becoming unprofitable if it chooses to persist with the same business modus operandi.
In terms of technology solutions, these are an important contributing factor if they integrate to form a more competitive focus in their application. In most instances however, technology solutions don’t provide for disruptive effects – they simply provide for better alternatives for businesses to achieve efficiency and productivity gains that contribute positively to adding-value to the businesses proposition.
Some technology providers claim they have disrupted paper, email or the short message service (SMS) with their developed applications. This is not the case. In many instances they have provided for a better alternative in terms of delivering a benefit that increases productivity and provides an efficiency gain. Further as technology evolves and provides for more choice, it will come down to preferences and the promise of the added-value potential to which option is chosen by business – but the technology chosen will not necessarily have disruptive effects.
The real disruptive effects will come from business models that have either achieved a new level of performance; made an entry into an established industry sector; or presents a different option that fulfils the same customer need. They all add-up to one thing – they have a business proposition that gives them an advantage in attracting your customers to them – hence setting-off disruptive effects for the more traditional and legacy bound business models.
THE BUSINESS CHALLENGE
The real question being posed to business in the digital paradigm shift is – how will it make its money into the future – and will it be at risk of becoming digitally disrupted in its quest to do so? This is essentially the business challenge.
In considering this challenge, it’s not all down-side. This era-shift will bring a great deal of opportunity for many traditional businesses providing they choose to be brave and take it on. That means being prepared to reshape organisational structures and adapt business capabilities to suit a changing business model that can take the new challengers on.
The opportunity will be centred on harnessing the power of technology and moving it into a more competitive focus – that is to integrate and internalise it as the business strategy. In the past technology was largely bolted-on and operated independently. Now business strategy needs to incorporate digital into its physical environment to create one integrated pathway forward to protect against being digitally disrupted and thus remain competitive.
The real change for business is that traditional thinking had structure and order. Organisations had control over their proposition and how they were externally perceived by stakeholders and customers. Digital has changed that. Digital has now entered into businesses acting as a rolling river flowing in with on-going ripple effects, demanding to be made sense of with immediacy. That is effectively the business model challenge – and to develop a ‘lens’ that will allow organisations to see in a digital effected environment will put new opportunities into clear focus.