Consumers and citizens today have unpresented levels of choice when it comes to product purchases and service consumption. Social, mobile, analytics and cloud technologies have been combined to allow anyone from anywhere, to buy from anyone from anywhere. Mobile has created an always-on world of 24/7 business where business really does happen anywhere. Technology has destroyed the barriers to entry in many industries. Retail, Financial Services, Leisure, Transportation and even the Public Sector are severely disrupted.
The world is different. The pace of change is electrifying. New competitors, new propositions. More disruption. There is barely a day that goes by without some new-technology-enabled-change affecting the businesses in which we work. In almost all sectors there are only three types of organisations that exist today: those who have been disrupted; those who are disrupting others; those who are about to be disrupted (but probably don’t know it).
Whichever way you look at it most large organisations are fighting for survival
Disruptors are built from the ground up to exploit the opportunities that exist to disrupt incumbents. They play at the intersection between digital technology and a laser focus on customers. They are nimble, agile and relevant. They see opportunity. Some traditional players have been early responders. They have embraced digital in its entirety. They are joining the disruptors. Contrast this to most large organisations. They have not been designed. They have evolved. They add layers. They add complexity and in doing so they constrain the very agility that their protagonists are using against them. They are designed using old hierarchical structures for command and control, a world of fixed inputs and outputs. They are built to scale, but scale on fixed products, services and business models. They aren’t nimble or agile, and are increasingly irrelevant. They see digital as a threat. No wonder that in the last 15 years 52% of fortune 500 companies have disappeared.
Alarmingly, many that do react to this threat react to the threat in the wrong way, or at least in an incomplete way. They look at the digital façade – the web, the mobile, the social – and try to take their existing business “digital”. But digital, like beauty, is more than skin deep. People often cite Blockbuster as an organisation that failed to react. But they did react – though not completely. They spent a small fortune on digital technology, only to hang on to elements of their old business model, which forced them to abandon digital, and ultimately fail. At the core of the problem and the ineffective approach to digital is the way they think about their business.
Einstein said “Without changing our patterns of thought, we will not be able to solve the problems we created with our current patterns of thought”. In our experience, most large enterprises think that their businesses are in general, OK. They do things in the right way, and they feel they have a pretty good handle on how all that leads to money. And digital does nothing to change that way of thinking. They view digital transformation as something that comes from the realm of IT and is therefore not ‘core’ to their future.
There is a real danger that organisations respond to disruption by making changes that are neither broad or deep enough, are or at their core, poorly conceived. One of the major issues is in reducing digital transformation to a question of technologies and their usage. If this is the strategy employed, then it is also accompanied by a belief that the same processes, management styles, organisation structures and systems of measurement are acceptable, and in fact desirable. And by extension that if the right technologies are deployed, and customers and employees use them as intended, at some point in the future, magic will happen. But it is the blending of the right business changes with the right technology that can help deliver a step change in performance, or in some cases support organisational survival.
In the next article we will look at how disruptors think differently and how organisations can look below the façade to survive and thrive in the digital era.