In 2007 the world started to feel the rumblings that its platelets were beginning to move. It had an experience like this 10 years before with the dot-com bubble starting to emerge. Fuelled by the expectation that an uncapped revenue source had just been discovered; the dot-com bubble begun to inflate affirmed by Metcalfe’s Law where the number of possible connections will continue to increase, and as the markets believed; translate to supernormal profits. This is when the belief in ‘e-magic’ started to infiltrate the capital markets forgetting about the basics of business where profits, or the plan to make them, are actually what allows businesses to aspire to scale and grow with a sustainable goal. The e-business models of the time; or more realistically, ‘e-business ideas’ still hadn’t worked out how they could turn connections into a revenue flow where value could be sustained. However, to be fair, they didn’t need to while the market and its money people were high on ‘magic happening’.
In the digital era shift, the sole purpose of business still remains – to create a customer. That is someone or an entity that will find value in the goods and services created or distributed and be prepared to transact for their consumption. However, there is a lot of talk across the changing business environment that the customer is now gaining more control over the business proposition by securing a direct stake in how a business structures and outputs to make its money. Well that is true across some industry sectors – but not so for all – yet! It is only a matter of time before lagging industries also begin to feel the direct effects of the changing structural environment and the customer’s place in it.
The digital era has triggered the commencement of a major transformation shift that will see business enter a new stage in its evolution. It has been here before but the scale of the change this time around makes this shift much more significant.
It will deliver some winners for those that choose to rise to the challenge but will also see many businesses become uncompetitive because they have chosen to keep their head in the past – with the hope that the same storybook will continue rewarding a philosophy of ‘volume and numbers’ that allowed many to grow and prosper through the industrial era.
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.
Navigating the new era will be a time for the brave – the timid and late will be faced with the threat of having value propositions eroded and weakened by competitors who have chosen to operate by a new set of rules. Choosing to retain solace in traditional thinking principles will invite new and adaptive competitors to reshape the expectations of your customers.
The context has changed – barriers have now been broken and a globalised world is driving a new business reality. The brave will need to tool-up, re-skill and change shape to meet the challenge.
As more things around us go on-line and people interact to leave a trail for a digital life pushed by the changing trends of ‘mobile’ and ‘Internet-of-Things’; data is becoming the new source of power. It is the raw material that business needs to harness and harvest to gain insights into their customer and unlock previously dormant productivity potential. When plugged in, businesses will have a new sense of real time (the NOW) by aggregating data that will provide a new dimension to business decision-making – leading to greater opportunities. However with this avalanche of new data comes another threat – understanding what data is ‘nonsense’ and what data is ‘not’.
The heart-beat of the business model has changed momentum – stability is an operational mode that a business should not be seeking in the digital paradigm shift. Each day and week should be part of a shifting and changing programme that will be relentless in its demands. If a business chooses to sit in the status-quo and ignore what is happening outside of their walls – the industry and categories where they compete will be transformed and they will be the last to know until the problem comes knocking at their door in the form of declining profitability and lost opportunity.
The challenge will be to adapt and design the BIG 4 – the heart of the business model – to enable the organisation to shift and reshape to meet the challenge as part of its daily rhythm of business
Today we are faced with a world where traditional business principles no longer apply – technology spurred by the connectivity of the internet has changed things. Doing business and understanding how to make money in a digitally effected environment is different – it’s time to forget how you have done things and understand how to do things in the new NOW.