Kathy Gibson reports from Gartner Symposium – So far, the industries that have been most disrupted by digitalisation have been those without a physical product: music, consulting, media. We are now seeing massive new disruptions as even physical products are being digitalised and more traditional companies than ever before are impacted.
Gartner analyst Mark Raskino says this change is being driven by a number of factors:
* The great financial crisis is receding into history and business leaders are under pressure to find growth;
* Investment capital has been piling up and that money must be put to work – and returned to shareholders;
* The great BRICS growth story is slowing and strategists are seeking other vectors for growth, which digital can provide;
* The disruptive potential of multiple technologies has been backing up, unleveraged, for years – so technology is running ahead of corporates’ ability to use it; and
* One near death corporate example more than any other has caused boardrooms to rethink.
“Kodak virtually invented digital cameras and was still disrupted,” Raskino says. “Boards saying that if it could happen to Kodak, it might happen to them – and Kodak was effectively operating in a physical industry.”
The Internet has had a profound impact on the way many businesses are run, he adds. Most companies had a Web site by 1996 and some e-commerce capability by 1997.
On the supply side of our companies, it’s given us CRM and digital media; on the buy side, we’ve got supply chain management and e-procurement. Stakeholders now have investor or media resource while inside the company we started with intranets, turned them into portals and now call them collaboration.
“In fact, the Internet has had an effect on everything in the company except for the bit in the middle – our core competency,” Raskino says. “The one thing we haven’t changed is the product, although we changed everything around the product.
“Now, we are going to remaster the products. We are going to re-render our products and their value in a digital format. We can do this by re-imagining and re-rendering existing products and services using today’s technology; or by redefining what mastery of an industry looks like and which firms are new masters.”
Because the competencies required to build the products of yesterday and the products of today are different, there’s no guarantee who will end up as the master of this new world – it may be the current industry leaders and it may not.
Raskino points out that, while we can see technology redefining everyone else’s products, it’s hard to imagine it happening to our own.
“We saw it happening to music and then to books,” he says. “But the book people didn’t see it coming, despite the example from the music industry, because it was felt that books were inherently physical. Today, 40% of fiction books are downloads – and the e-reader only came out in 2007.”
Other physical products that are being replaced by new, digital products include cameras, which are not only being digitalised but placed into other form factors.
Even cars are moving to digitalisation, with new electronic features becoming as important as engine performance. 3D is enabling jewellery that can be shaped uniquely, in shapes that cannot be produced in any other way.
Even a lawnmower can be digitised, Raskino says, pointing to a robotic mower that is especially designed to care for golf courses. There examples of rapid digitisation of physical products includes education, fighting machines and even money or water, which can now be analysed as it’s used. “Even pizza is being digitalised, with the delivery portion of the purchase now being serviced by drones,” Raskino says.
“Even cigarettes are going electronic, which shows that any product can be re-imagined by electro-digitalising it.”
The tobacco companies have learnt from the example of the book printers and have bought into the e-cigarette movement – and it’s anticipated they will generate more revenue from e-cigarettes than by tobacco-burning cigarettes within just 10 years.
In the new world of digitalisation, a company’s traditional competitors won’t be where the threats will come from. “The attack will come from the side and from underneath,” says Raskino. “But your company will come under threat, because companies like yours are already under threat.”
The digital giants like Google Amazon and Apple are threatening every industry.
“They are good at it, they believe in the future of information, and they believe that your product must be digitalised,” Raskino says. “It wasn’t Ford or BMW that invented the self-driving car – it was Google. The big digital new-age companies could dictate the future of the industries they are interested in. But the disruption could also come from start-ups.
“Attackers will use digital forces to enter your industry by dissolving traditional industry boundaries. As a result, some new-age companies won’t even know what industry they play in.”
The new world of digitalisation is a cut-throat business, Raskino says. “Winner takes all – whoever controls the platform will win the game.”
He suggest companies start to reinvent their own businesses and remaster their own products, and offers some recommendations:
* Your need to get the strategic digital business innovation conversation going at board level;
* Digital must be an important part of the business strategy;
* Ensure core product innovation is included in the digital strategy – not just how it is sold;
* Fund digital business seriously; and
* Talk to your competitors – that’s not where the treat is going to come from.