There is no doubt that “digital disruption” is the newest digital buzzword. Five or six years ago, we heard about “digital strategy” and then it shifted to “digital transformation,” but it seemed only a few industries were actually dipping their toes in the water. Industries like consumer goods, healthcare, media and travel made efforts to become more digital as their customer base became more tech savvy. And many of these companies realized tangible business benefits by embracing emerging technologies.

Yet, for the most part, companies were slow to act in a significant way toward the development of digital strategies. There was a bit of a waiting game as companies stayed on the sidelines and watched who in their industry would “fail fast” first. Yes, some CIOs, CMOs and other early movers experimented or piloted shifts, but the potential of digital was a novelty in the boardroom – something that perhaps felt inevitable, but still unproven.

Today, virtually all industries, including “old economy” ones such as aviation, chemicals, energy, logistics and manufacturing are being disrupted by digital. Companies can no longer sit on the sidelines, waiting for the right time to pull the trigger on a digital strategy.

The Digital Disruption

Digital disruption has become widespread, affecting every aspect of business from customer behavior and leadership behaviors to supply chains and marketing department organization. Specifically, we see massive, digital-driven breakthroughs happening across four fronts:

1. Consumers and consumer behavior

Consumers across every demographic, geography and psychographic have become more digital, which has shifted both their expectations and behaviors. In China, for example, the average mobile user is spending four hours a day on WeChat (recently ranked as the #2 most relevant brand to consumers in China in the Prophet Brand Relevance Index™). More and more offline/physical transactions are shifting online, so the available transactional and behavioral data is growing, building an ever-richer view of the customer. Yet, according to Altimeter’s 2017 State of Digital Transformation report, fewer than half of companies invest in knowing customers’ and employees’ needs and behaviors.

2. Product and service innovation

Digital technology has made it possible for companies to rewrite the rules around value creation and drive changes in industry models. Clients across categories, including our client Schneider Electric, has built deeper customer relationships with digital. Value proposition principles have been redefined. Not only is what we make new, but so is how we make it, the speed at which we make it, and who we make it. As these elements change, so does the value they can create for the enterprise.

3. Major enterprise processes and capabilities

Even for traditional “non-digital” businesses, we’re seeing processes across the enterprise — from marketing and manufacturing to human resources and the back office — become enabled, and even reimagined through technology. Automation frees up heads and hands for new tasks, but also requires new skills and culture building. How companies evolve their culture and capabilities will be the difference between fast-movers and laggards.

4. Industry ecosystems, business models and competitive structures

We are seeing digitization eradicating the friction that has traditionally slowed down (and dumbed down) value chains and ecosystems. Collaborating and seamlessly delivering value to a customer has never been as easy as it is today. Mergers, acquisitions and consolidations also have more accelerated paths to synergy because of the higher levels of digitization.

How Industries Can Evolve

Digital transformation has never been more urgent for businesses, given the disruption we describe above. There are higher expectations from customers, employees and the market. Companies today must have a broader set of solutions that will set them on the path to growth.

A true digital transformation (strategies, processes, offering, etc.) is a means to becoming what we call an Evolved Enterprise. An Evolved Enterprise possesses a wide and deep view of its customer, reframes a broader ambition and then uses digital to transform key pillars of its business – resulting in faster growth, better performance, larger impact and higher valuation.

To become an Evolved Enterprise, companies must digitally transform one (or more) of these three functional areas:

1. Strategic marketing and customer strategy

Employ digital technologies to enhance the way you build and manage your brand, develop data-driven decision-making and engage your customers.

2. Product and service innovation

Harness digital technologies to develop transformative customer experiences and new products and services (or reimagine existing ones) that will fuel new growth. 

3. The enterprise itself

Design new revenue models, create new ecosystems with partners, employ agile and effective processes, and build the culture and capabilities needed to deliver growth in this new era. Transformation on the outside requires evolution on the inside. Altimeter’s 2017 State of Digital Transformation report covers many of these talent and skillset challenges.

Final thoughts

These are exciting times. It takes courage and ambition to step into digital disruption with the aim of creating a breakthrough for the customer and your brand. But disruption is not the enemy or the threat. It’s a reality to embrace and in order to survive and thrive.

Is your industry being disrupted by digital? Is it time for your company to get off the sideline and transform digitally? Contact Prophet to learn how we can help your organization become an Evolved Enterprise.


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