How Companies Can Determine If They Are On The Verge Of Disruption
For incumbents of all kinds, uncertainty is the new norm. But even though many are aware of the need for digital transformation, the major risk is responding with too little change, too late. In fact, three-quarters of incumbents respond too late to digital disruptions, according to a recent Capgemini report.
What, then, are the early warning signs of an industry on the verge of disruption? And how can executives assess their level of risk? While the lines may never be clear-cut, former Harvard Business School professor Shoshana Zuboff has outlined some of the indicators of an industry boundary that is vulnerable to disruption. To paraphrase Zuboff’s examples:
Your products and services are widely desired, but largely unaffordable
Digitally enabled competitors will find a way to reduce transaction costs and deliver a more affordable, accessible alternative. Unaffordable products, once connected, can instead be offered as services with a range of alternative experiences and pricing models.
Customer trust and satisfaction are in steep decline
This is true for many of the world’s largest industries, including financial services, healthcare, education, and energy utilities – all of which are ripe for fundamental transformation.
A highly concentrated business model with high fixed costs
Collaborators, business support systems, and even production facilities are now increasingly available on-demand, making it possible to distribute and delegate many current fixed costs into scalable, flexible networks. The cost structures of many digital competitors allow them to be far more agile and risk-prone, which puts extreme pressure on incumbents to adopt new business models to compete.
A high degree of hidden assets outside organizational boundaries
Now more than ever, the most interesting opportunities lie at the edges of the organization or in adjacent industries, where under-recognized and underutilized capabilities may be abundant.
A lack of assets needed to meet changing customer needs
Many of these are likely to be digital capabilities, such as computing power, data analytics, and technical talent, as well as providing access through the digital devices, services, and channels increasingly preferred by new generations of users.
A lack of awareness and/or capabilities necessary to learn customers’ true needs
Market experimentation is the lifeblood of a digitally-enabled business. While digital startups constantly iterate and evolve, many incumbents cannot launch quickly and respond to market signals, instead of falling victim to their internal planning cycles.
These vulnerabilities clearly are not unique. Nor can they be resolved through the same processes of innovation that created them. What is needed instead is a fundamentally new set of business practices that better support the complex demands of 21st-century individuals, end-users, and customers. This article is not an answer to this need but a small step towards accelerating the necessary process of transformation. As hierarchies of command-and-control gradually give way to more adaptive, networked organizing principles, the good news is that the options for digital transformation are now more open and accessible than ever before. It’s up to every organization to borrow from the playbooks of others to write their own.