Emerging Best Practices for Dealing with Digital Disruption
Digital disruption, the rapid transformation that occurs when new technologies and businesses change the value and/or competitiveness of goods and services, has hit a wave of industries already and will no doubt impact more. Businesses faced with digital disruption need to create a strategy to adapt to the digital age or face the possibility of being left in the dust.
In the 1960s, the average lifespan of an S&P 500 company was 65 years, according to Forbes. Now, the average S&P 500 company only lives to see around 15 years. This drastic decrease in a business’ longevity is just one piece of evidence of the rapid changes companies are facing. The commercialization of the internet in the 1990s and the push to mobile in the late 2000s have forced companies to rethink their business models. Now, with digital disruption impacting industries from entertainment to hospitality to banking, companies may be facing the biggest challenge yet.
A Wave of Disruption
According to the Harvard Business Review, most of the industries that have faced digital disruption or expect to do so soon are B2C industries. These include media, telecom, consumer finance services, retail, technology, nonprofits and many more. Two forces most of these industries suffer from are low entry barriers, leading to more agile competition, and large legacy business models that are difficult to change.
This doesn’t mean that B2B companies or industries like HVAC and energy can relax. In fact, according to a study reported on by Cisco, the oil and gas industry may be the biggest industry that digital disruption will threaten. Another report conducted by Forrester found evidence that B2B industries are already facing transformation. A crowded marketplace, changing behaviors from manufacturers and distributors, and disruptive monetization challenges are just a few of the issues already coming into play.
New Best Practices
Evidence of digital disruption has been reported on widely for the past few years, but many companies still remain unsure about how to deal with the transformation. To survive, many companies will have to consider changes to their business models, and, in some cases, restructure from the ground up.
Jeanne Ross, director of the MIT Center for Information Systems Research, wrote an article for TechCrunch with best practice recommendations. While companies may want to hire a chief digital officer right off the bat, Ross suggests waiting and exploring existing capabilities. Some may be ready for digital, but other processes may have to be changed. Only after companies get a plan together for digital disruption should they hire a chief digital officer to smooth the way.
In addition, Ross writes that businesses need to be ready and willing to undergo surgery. The rapid nature of digital disruption means that if a company’s organizational structure is outdated, it will most likely be left behind. If your business model isn’t ready to evolve, consumers will notice and your business will suffer.
Most importantly, businesses need a digital platform to ensure efficient transaction processing and other office activities so management can focus on innovation. The biggest companies in the world are also leveraging digital in exciting ways that appeal to consumers.
Amazon, YouTube, Uber and Spotify aren’t the end of digital disruption. We’ll continue to see more companies innovate and change entire industries before it’s through.