This article has been updated from the original, published on July 17, 2017, to reflect new events, conditions, or research.
Technology and service providers (TSPs) are prone to think of themselves as potential digital disruptors in the business world. Yet, despite both internal and external awareness of digital disruption, business leaders at many established vendors are slow to initiate or respond to a disruption, waiting until the impacts to their current business are identified.
With digital disruption, this approach leaves the enterprise vulnerable. This type of mindset does not leave sufficient time to respond in a way that minimizes the impact to their business nor capitalize on an opportunity.
Most digital disruptions are more difficult to adapt to than earlier technology-triggered shifts due to their virtual nature
“Identifying and monitoring a potential digital disruption isn’t a part of an established vendor’s standard business practices,” says Janelle Hill, vice president and distinguished analyst at Gartner. “The more established the vendor, the more likely management sees disruption only as an external force impacting their business rather than an opportunity to gain market share. Business leaders need to upgrade their tools, techniques and criteria for recognizing and responding to external disruptions as well as initiating digital disruption.”
Most digital disruptions are more difficult to adapt to than earlier technology-triggered shifts due to their virtual nature. Past disruptions were generally triggered by physical technologies, such as PCs or ATMs. Digital disruptions mostly exist in the virtual world, which makes them difficult to recognize until after the impact is felt. And, virtual technologies are easily changed and easily scaled. This means that they can suddenly appear at full force, seemingly out of nowhere; their incubation period is often invisible.
Business leaders at TSPs can overcome the challenges of digital disruption if they are equipped with appropriate tools and techniques to recognize, assess and deal with a potential digital disruption.
Recognize digital disruption
First, learn to separate actual digital disruptions from fads. A fad, such as Pokemon Go or Google Glass, will incite lots of excitement but have limited market impact. In contrast, a disruption will completely redefine the market’s needs and potentially cause a significant change in the industry.
For example, the iPad caused changes in application development, impacted revenue of desktop and notebook computer manufacturers, and even changed how humans interact with technology, with FaceTime as perhaps the first highly successful mobile conferencing application. The technology also created an aftermarket industry for accessories.
At some point digital disruptions will completely change markets, while fads will not. Consider how digital TV completely revamped the entertainment industry and became so pervasive it replaced analog TV.
Set up your sensing apparatus
CIOs and strategic technology planners in vendor companies looking to identify disruptors before it’s too late should set up “sensing apparatus” to help business leaders monitor external indicators beyond existing competitors. These indicators include shifting customer behavior and consumer trends, as many disruptions originate in the consumer world. Pay attention to where venture capitalists are investing and to disruptions in adjacent markets. The sensing apparatus will create a lot of information to handle, so look to data scientists to mine the data lake for insights.
Befriend the CMO or VP of supply chain
Monitoring external industries is often new territory for sales, marketing and even product leaders. Depending on the business model, some senior business leaders will have a better perspective on potential disruptors.
CMOs can offer insight into current customer and market behavior
In a business-to-business model, disruption can happen in the supply chain or with the end customer, so it’s best for CIOs and strategic technology planners in such companies to partner with both the chief marketing officer (CMO) and VP of supply chain. For business-to-consumer companies, disruptions are most likely to happen in the customer segment, so the focus for partnership to set up the sensing apparatus should be on the CMO.
CMOs can offer insight into current customer and market behavior. They will be able to identify potential indicators of disruption to the current market and will likely have the staff with the skills to analyze the new data. However, they tend to focus on the existing market(s) and may not be able to recognize disruption coming from further away. By partnering, CIOs and strategic technology planners can share their institutional knowledge about core processes and why certain systems work as they do to provide the CMO with a broader perspective on how a potential disruption challenges the status quo.
Once a disruption is identified and assessed for potential impacts, business leaders must figure out their response.