Despite the rise of digitisation, many businesses are still relying on incomplete or ineffective digital strategies. Even companies which are taking proactive steps to implement appropriate strategies are floundering when they don’t achieve the results they predicted, but why are so many digital strategies proving to be ineffective?
For businesses which preceded the digital revolution, acclimatising to the new landscape has proved to be a hard task. Indeed, many have been unable to do reassert themselves in a constantly evolving market. With some businesses arguably redundant or simply unnecessary as a result of increasing digitisation, it’s not surprising that the companies which remain are fearful of the effects digitisation.
In reality, few established businesses have really embraced digitisation fully. While increased automation has been prevalent in recent years and digital marketing has become a staple business activity, digitisation is far more pervasive than these single entities. Indeed, digitisation is changing every facet of businesses, whether they realise it or not.
Identifying digital disruption
Digital disruption is a common but often misunderstood, concept. It occurs when new business models and technologies impact upon existing models, products and services. No business is exempt from digital disruption, as technology continues to evolve rapidly. While newer businesses may themselves have been disruptive to established companies, these same businesses are now facing digital disruption from even newer and more innovative tech and processes.
By examining the markets, it’s easy to see where digital disruption has occurred. The switch to streaming and downloading rendered established businesses, such as Blockbuster, obsolete, for example. As this digital disruption made itself apparent, some businesses, such as Netflix, were able to diversify and modify their model to embrace increasing digitisation in their industry, but others didn’t have the foresight or resources necessary to do the same.
This highlights the opportunities and threats that digital disruptions can bring. On one hand, digital disruption can be the death knell of a business, on the other, it can herald a new era of innovation and increased profits.
Of course, digital disruptions are easy to identify in hindsight. The real challenge for business owners and managers is recognising digital disruptions in real-time and choosing the right course of action when responding to them.
Understanding the economic impact of digital disruption
The basic premise of supply and demand are the driving force behind many businesses; if you can give consumers what they want or need, you stand to make a profit. However, the economics of digital strategy are upending the existing supply and demand of almost every product or service out there. Indeed, there is no significant demand for products which didn’t even exist two years ago and a desire for delivery methods which were previously unheard of.
While it is important to recognise the digital disruptions threatening your company, understanding why they are a threat to your business is arguably more important. Not every start-up which poses a threat will go on to be a tech giant or a major player. In fact, many may be out of business before the end of the year. However, once the disruption has taken place, the damage has been done.
However, if companies are able to take a strategic approach and examine the deeper forces which are feeding digital disruptions, they will be able to deliver a more nuanced response to them. Rather than focusing on what the threat is, determine why it’s a threat. With this information, you can create reliable strategies to overcome today’s digital disruptions and those of tomorrow.
Digital disruption: Case study
Imagine you’re a major software provider, who has been happily selling out-of-the-box platforms for the last decade. Already used by the vast majority of people, you have a stronghold in the market and almost guaranteed success, right? Not so.
With new startups offering software which is just as functional and, even worse, compatible with your own, you’re now facing a concrete example of digital disruption. Company A may be offering ‘unboxed’ or unbundling software and enabling consumers to simply purchase the program they really need, rather than an entire platform. Company B may be delivering a competitive product which can be used across operating systems and devices, whilst Company C may be promising compatible SaaS and ensuring it can be downloaded instantly.
While each of these companies is presenting a digital disruption, assessing them individually is only of limited value. By evaluating the digital disruption these companies embody as a whole, rather than separately, businesses can gain a greater insight into the impact it will have on supply and demand.
When viewed as a whole, these companies are meeting previously unmet demand by ‘unboxing’ software, offering cross-platform functionality and enabling subscription options. By offering virtualisation and automation in terms of product delivery, they are simplifying and streamlining the supply, as well as ensuring there is an unlimited supply to meet the demand. At the same time, they’re un-constraining the supply by enabling the end-user to only purchase what they want or need.
By identifying digital disruptions and then examining them in terms of economic models and their impact on supply and demand, companies will find it easier to determine exactly why their business is being threatened. As a result, they can recognise the opportunities arising from digital disruptions more easily and use these to their advantage.
Planning your digital strategy
Although businesses should have short-term digital strategies in place, it’s important to take a holistic and long-term view when it comes to digital disruptions. Companies who accurately predict potential disruptions, and take appropriate action, are the firms who will adapt most easily to the changes taking place in their industry. Furthermore, companies which are able to respond effectively to early digital disruptions will have the opportunity to be at the forefront of these industry changes. As a result, they can re-establish themselves as innovative service providers and product manufacturers, whilst still benefiting from the increased customer loyalty and brand awareness their name commands.