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Take a little risk to avoid a bigger one: Managing Disruption

02nd May 2016

Author davanti

Is your business taking action to get ahead of new disruptors? Because it needs to be.

The availability of new technologies has led to a step-change in industry disruption, and New Zealand companies are now beginning to see those from other industries or even start-ups using a new approach to technology to reach customers and take the competitive advantage. You need to start taking small risks or face the bigger risk of direct disruption.

Over the past 20 years, a new breed of business has developed, using digital channels exclusively to offer simple solutions to a customer base. We all know the new poster boys of disruption:  Uber, which has grown to become a major threat to the decades-old taxi industry, or Airbnb, which now has more accommodation options in Spain than all of the country’s hotels.

Technology has proven critical for these businesses. One of the major achievements of this movement has been the simplification of business-customer interaction using digital media. We’ve all heard of Apple, Uber, Netflix, Airbnb and Amazon, the customer experience is simple, convenient and in most cases, enjoyable.

So why isn’t every interaction with a business – specifically via digital channels – as effortless or seamless?

That’s what your customers are asking. And that’s the question you need to answer before someone else does.

Disruption: Changing the business environment

With business threats now just as likely to come from start-ups and other industries as they are from your typical competitors, businesses have to contend with a new operating environment.

However, this disruption isn’t actually new. “Creative destruction” is a term that can be traced back to Joseph Schumpeter in the 1940s, describing a process whereby innovative, new entrepreneurial businesses destroy the value of existing companies and usher in periods of economic growth and renewal. Cars replaced carriages, digital cameras replaced film, movie streaming killed video rentals.

What’s new is the speed of disruption and the angles from which it is coming.

Take cloud HR system provider Zenefits, for example. While their free cloud HR software offering is what they do on the surface, they’re actually an insurance broker. Zenefits drives revenue from the insurance benefits that companies offer to their staff through the software. This is completely disruptive to HR system providers, insurance brokers and providers. Not only is it free, but it easily takes over the customer relationship.

Zenefits used digital technologies and new ways of thinking to overhaul the nature of customer interaction. We also note that Zenefit’s recent issues are notable learnings for disruptors pushing regulatory limits too far – creative destruction comes with risks.

Locally, companies aren’t waiting on the sidelines either. Spark created and funded an entire Venture incubation business to explore, develop and bring to market the “over-the-top” digital businesses that other telcos would see as dire competitive threats. They used a combination of design thinking, lean startup and agile development to bring a range of products to market in dramatically shorter time frames than we’d expect from the “Telecom” of old. They took small controlled “risks”to avoid being blindsided by others.

Disruption can be an existential organisational threat (Blockbuster decided Netflix “wasn’t on their competitive radar”), or an opportunity – you just have to make sure you get there first.

Shifting the focus to bring the competitive edge

In light of these new sources and pace of change, are you the one reinventing the way your industry interacts with your customer?  Are you confident your technology investments and approaches can keep pace with your objectives for reinvention?

Even once you create the most innovative new solution for your customers, the speed and agility of implementation can make or break your success. New ways of designing and implementing technology mean the traditional way businesses implemented enterprise systems tends to be out-of-date and poorly suited to innovative, customer-centric and agile digital aspirations.

 

Risk versus opportunity

We often hear people describe these new ways of working or deploying technology as “risky”. But in our opinion, the much bigger risk is organisational complacency and an entrenched inability to evolve. Rather than relying on outdated “best practices,” businesses today need to welcome a wider range of solutions, which in many cases means taking the plunge into new practices like “minimum viable products” and agile prototyping and investing in potentially unknown technologies like mobile or social.

Regardless of sector, the disruptive digital age is certainly here, and it’s going to continue proliferating. It’s an exciting time for New Zealand businesses and existing disruptors like Trade-Me, Harmoney and Xero, but there’s a real need for more traditional businesses to stay ahead of the game.

Download a copy of our Stay Ahead of the Game booklet to learn more.