Understanding digital disruptions

The impact of digital disruptions is being felt all around us and I don’t have to really write about it for all of you to realise it. Its impacting all our personal lives and the businesses we operate in.

Look at how television watching is being disrupted with digitally accessible content allowing viewing and interaction with content from around the world. Its allowing access to content anywhere and at any time of your liking. This is also providing opportunity for rise of content and talents who may not have got featured on television, ever. Raising questions on what really is the role of a television channel in the future and if there actually is a role, or not?

The queues in bank branches have been cut short as most financial transactions are now remotely done in a digital manner. But this has also given huge power to the consumers who can check returns across banks in a few seconds, get reviews from existing consumers…providing transparency and taking power away from the traditional financial advisors. This has also resulted in rise of new players who can enter the financial industry without any branches or existing customer relationship, key strengths in the past for banks.

Telecom industry is similarly getting disrupted as voice, messaging and such highly profitable services are now being delivered by services operators utilising the data access capabilities. Giving rise to new communication providers who can provide telecom services without the need for setting up expensive infrastructure.

Similar scenarios are being played out in retail where large retail players are being displaced by asset light e-commerce players that are able to offer products at cheaper prices.

The healthcare industry is being disrupted by remote care, physical storage device industry by rise of cloud storage… The list continues as a host of diverse industries get impacted by digital disruptions.

It is these disruptions that are changing the future of a lot of organisations, as many of them traditional businesses close down unable to compete with the new breed of competitors. The Forbes listing of highest valued companies is reflecting these changes, as century old large corporations give way to younger digital organisations…

Personally, I have had the opportunity to see first-hand these digital disruptions and even played a part in creating some of these disruptions. What intrigues me the most is getting to the core and understand the elements that are causing these disruptions across industries.

Below are some of the factors that I see are enabling these disruptions:

1. The virtual nature of the digital businesses reduces significantly costs of doing business – real estate, people costs etc. thus enabling the business to keep a low cost structure and compete effectively.
2. The digital media generates extreme amounts of data and the digital organisations have data as a core to their businesses strategy. Data is aiding even the smallest of business decisions and they have been using data to change age old businesses, look at the way Google has completely redefined the advertising business via the usage of data.
3. Cost of reaching new consumers is significantly lower on digital on cost per reach basis and with the rise of social tools, digital communities…has led to the cost of reaching incremental customers even lower.
4. Virtual nature of the digital business has led to the process of making changes exceedingly easy and cheap. This has led to a culture around continuous testing, where beta products are launched in market and they evolve and grow with customer inputs over time.
5. Most of the successful digital players are organisations that have not been traditional players in the space and hence are open to new business models since they have no existing revenue streams to protect. This had given rise to new business models around offering products and services for free and yet generating cash flow from other services like advertising, trading customer data etc. Being rank outsiders, these players are more open to innovation and are not blinkered by past industry assumptions.

As the access to the digital world become more prevalent with drop in data access prices, range of devices for accessing internet widen including lower priced mobiles and speed of data access improves with the newer compression technologies like LTE these digital disruptions will continue and impact larger number of people and industries.

So what really is the benefit of understanding the factors that are driving digital disruptions?

It is this understanding of the core drivers of digital disruptions that will make it useful in predicting the potential strengths and playbook of these digital disruptors. And these core strengths will more or less be the consistent across industries.

So traditional players competing against new digital disruptors have two broad options:

A>    Competing based on finding relevant alternatives to the core strength of digital disruptors and strengthen the same. Finding means to lower cost base, launching beta products, challenging assumptions in their own industry etc.

OR

B>    Launching alternate businesses from scratch that disrupt their own industries. This will provide a good hedge and future proof their organisations.

Navonil Roy is a Malaysia-based expert on venture development, innovation, digital, consumer understanding and branding.