The digital vortex is coming to a business near you

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Digital vortexThe average smartphone now has “more computing power than the computers used during the Apollo era to put the first men on the moon.“ The question facing all of us, is “How will this power be used to disrupt our current business?

We can already see some of the early impacts from the transformation taking place:

□  Most people today buy music via streaming services such as iTunes, rather than buying CDs
□  Businesses such as Amazon, Alibaba and eBay are busy disrupting the retail business model
□  Google and Facebook are starting to dominate the advertising market
□  A whole range of new business models are being developed by companies in financial technology (fintech)
□  There are countless other examples such Uber, Airbnb and the development of the “sharing economy”

And this is only the start.  Reliance chairman, Mukesh Ambani – India’s richest man – has just spent Rs 1,50,000 crore ($2.25bn) on the launch of the Jio network in India.  As he told The Times of India yesterday:

“I believe 50 years from now when you write history, one technology that would have changed human civilization is going to be the mobile internet. In 2011 it was hazy. In 2002, it was even hazier. But today, I have no doubts, the world has no doubts, that mobile internet is a life-changing, world-changing technology of this century. Yes, it will evolve into many different things. But as a core technology it is a huge opportunity. And only the people who take some risks will reap rewards.”

As the chart above highlights, from an excellent new book titled Digital Vortex from Cisco and IMD Business school:

“Digital disruption” sounds like another business buzzword – until it happens to your company. Out of nowhere, startups and other tech-savvy disruptors attack. Customers flee and revenues stall. In months instead of years, you’ve gone from market leader to also-ran.”

The key issue is the need to make the connection between our own behaviour in our personal lives, and what this means for our businesses.

There is no rule that says new companies will succeed at the expense of existing companies.  It is all a question of mindset – does everyone in your company still assume that tomorrow will always be the same as yesterday?  Or are they already developing the new business models that will be needed for future success?

As the chart also suggests, digital disruption is impacting businesses in different timescales:

□  Technology, media, retail and financial services been the first to be disrupted
□  Now it is the turn of telecoms, education, travel and manufacturing
□  Next will be healthcare, utilities, oil & gas and pharmaceuticals

The encouraging aspect of the coming transition is that we already know the broad outline of how it will develop.

In manufacturing, for example, the arrival of 3D printing is going to lead to a revolution in supply chains as production takes place close to the end-user.   Big money is already being spent on turning this concept into reality – only this week, US firm GE paid $1.4bn for 2 European start-ups in the 3D printing for aerospace market.

Of course, not everything will change overnight – some people still read newspapers today, even though most now receive news online via channels such as Facebook.  But if we take the plastics industry as an example, it is easy to see how manufacturing processes might change. 3D printing won’t just impact the supply chain:

□  Traditional manufacturing involves taking a block of polymer, or a sheet of film, and cutting it down to size
□  This process is very inefficient, as large amounts of waste are then often left on the factory floor
□  3D printing is “additive” in nature, however, as it simply adds new layers of polymer to create the required shape
□  This reduces waste and, therefore, overall demand for the polymers themselves

Car repairs are an obvious opportunity. If you have an accident, and need a replacement part, your local garage will be able to download the design and print it for you, whilst you have a cup of coffee. There’ll be no need to wait for it to come from the manufacturer.

This model is already operating in the aircraft industry, as I highlighted last year.

Nobody at this stage can know just how digitalisation will impact individual businesses around the world.  But today, we all have the chance to shape the future, rather than having it shaped for us by others.  As Unilever CEO, Paul Polman, has said:

Individuals change course, not technology. While they may adopt technology, it will still be people and leadership that  set the course of our future.

 

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