Who Are Digital DisruptorsAccording to Gartner Research, a digital disruptor is an entity that exploits digital capabilities, channels or assets to bring about a change in the basic expectations and behaviors in a market, industry, process, or culture. Sounds like Latin? Let me explain.
Disrupt; Or Get Disrupted
Just in case you didn’t notice, technology has been on a rampage. It has changed the way we live, work, socialize, entertain, shop, travel, eat…the list goes on. For example, most of us don’t read newspapers in the morning. We scan our social media newsfeed instead. We don’t carry magazines to read on the subway. We have our smartphones. We don’t have to go to a physical store to shop. We can view products and compare features and prices from the comfort of our homes before we buy online.
A business that is better prepared to interact with its customers across social media, mobile, and other digital platform has a competitive advantage over a business that has not digitalised its marketing. Using technology, we can automate customer interactions and collect an increasing amount of data about our customer’s behaviour and buying habits.
We can then analyze this big data using more technology and draw insights from it; insights that help us design personalized experiences for our customers, create more innovations and ultimately, continue to increase our sales.
The Scope of Digital Disruption
But that’s just marketing. Digital disruptors increase efficiency and productivity by integrating technology into all areas of business including production, accounting, human resource management, and facilities and assets management. They are fully connected enterprises that can quickly launch multifunctional initiatives to keep swimming in a blue ocean that is free of sharks (aka fierce competitors).
By using technology and data properly, digital disruptors can quickly design new products and game-changing customer experiences. They can also create and exploit new business opportunities by redefining their vision and innovating their business model.
Example: From Coffee Beans to Customer ExperienceConsider Starbucks, for example. Its digital flywheel software collects data from mobile apps and in-store IoT based coffee machines. The system deploys machine learning to make sense of the collected information and enables the world’s largest coffee brand to create personalised products and design unforgettable customer experiences. The strategy has kept Starbucks Rewards Club memberships growing at 14% year on year despite the mature nature of the market. Starbucks now has more than 30,000 stores and its sales are growing at 4.5% at the end of 2019. The company hasn’t stopped innovating and has recently introduced Deep Brew, an AI engine that Starbucks’ CEO says will ‘increasingly power our personalization engine, optimize store labor allocations and drive inventory management in stores’. Starbucks has also partnered with the tech company Brightloom to create a best-in-class end-to-end digital customer experience platform for the restaurant industry. It seems the coffee giant might be in the process of reinventing itself and innovating its business model.
Types of Disruptors
Digital disruptors are all around us. Some of them have evolved from traditional organizations, such as Nike and Codelco, the latter being the world’s largest copper manufacturer that has achieved unprecedented efficiency, productivity, and quality by integrating technology into mining and manufacturing. Others were startups like Uber and Airbnb that have used the power of technology to transform old sectors and industries forever.
Long story short, digital disruptors are companies that are built around innovation. They use digital technology to change the conventional ways of doing things in industry, unsettling established players, disrupting the market, and acquiring a long term competitive advantage in the process.
Decoding the DNA of Digital Disruptors
What is in the DNA of the organizations that emerge as future leaders? Looking closely, one can identify two key dimensions all digital disruptors have in common: Digital Capability and Leadership Capability.
(1) Digital Capability
Digital Capability is about investing in smart technologies and smart channels. Social, mobile, data analytics, and embedded systems all belong in this category. It’s impossible to think about transformation without investing in digital technology and building digital capabilities.
We can loosely say that Digital Capability defines the ‘what’ of digital transformation and comprises the technology and digital assets that a company has shored up on its way to becoming a disruptor.
(2) Leadership Capability
The second dimension we find all digital disruptors displaying is their Leadership Capability. Leadership is critical because successful digital transformation takes more than just technology.
It takes strong, committed, and focused leadership to revamp existing processes and change the organization’s culture. But how do you transform the way you operate without affecting ongoing operations? You’ll need a transformation strategy to answer this question. And it’s here that leadership plays the most important role.
The Dimensions of Digital Capability
Continuing with the DNA analogy, Digital Capability, the first DNA strand that digital disruptors seem to have in common, can be said to comprise the following three ‘genes’:
- Customer Experience
- Business Operations
- Business Models
Let’s get deeper into these three dimensions.
1. Customer experience
Digital disruption is really about designing compelling customer experiences by using customer data, the right touchpoints, and suitable tech tools. The core elements of customer experience are customer data, customer touchpoints, and CX design.
A) Understand your customers through data
A conventional organization looks at its customers as personas based on segmentation data. But market segmentation doesn’t work in innovation projects; simply because there is no history (else it is not an innovation project – you would simply lookup the figures).
A digital leader looks at customers from the perspective of the “Jobs” that the customers need to get done. Digital disruptors lean on technology and tools to understand the customer problems that need solving or the jobs that need doing, and to create smart solutions. We will discuss in details the Jobs-To-Be-Done (JTBD) model of customer discovery in our upcoming book “Creating Innovation”.
B) Identify and optimize customer touchpoints
Once we think we know our customers better, we can plan investments on apps to engage them across various touchpoints in their buying journey. That’s where you see organizations like Starbucks excel by integrating technology into their business, understanding their customers better, and providing the experience that keeps customers coming back.
C) Customer Experience (CX) design
CX design is the data-driven process DX teams follow to optimize customer experiences at all touchpoints in their buying journey. Agile and disruptive organizations like Google and Facebook use real-time customer data to serve relevant content and keep their users engaged. Digital disruptors such as Starbucks and Nike collect and analyse tons of data to create digitally-driven experiences that delight the customers at each touchpoint before, during, and after the purchase.
2. Business operations
The three core elements of business operations include:
- Process digitalization,
- Staff enablement, and
- Performance measurement
A) Process digitalization
Process digitization must precede digitalization. Digitization means the conversion of data and processes from physical to digital. But digitalization encompasses the collection and analysis of data to forecast trends and make better business decisions. Digital disruptors have fully digitalized processes that produce the momentum for innovation.
B) Staff enablement
Digital disruptors build customer satisfaction into their corporate culture. And the also understand that employee satisfaction precedes customer satisfaction. Amazon, Apple, Costco, Airbnb, and other companies are known for their exceptional customer service. Such high standards for customer service are impossible to achieve without enabling and empowering employees with the data and expertise they need to solve customer problems whenever, wherever.
C) Performance management
Performance management is essential to ensure that your investment in digital is delivering optimum returns. Before measuring performance, an organization needs to organize service delivery and have clearly documented work processes and service delivery agreements. Leaders must be a part of the performance measurement team and should help align performance with the goals of the innovation.
3. Business Models
This brings us to the third dimension of Digital Capability, which was the first common attribute of digital disruptors that we identified above. We are dedicating several chapters to Business Models in our upcoming book, simply because it’s such an important topic. No company can dream of becoming a digital leader or disruptor unless it innovates its business model. Business Model innovators are a lot more successful than product or process innovators: on average Business Model Innovators earn 4x more than product or process innovators.
The core elements of a business model include business intention and objective, value proposition and value creation; and business model environment.
A) Business Intention and Objective
This is where we advise you to start since you can link your Business Model to the overarching purpose and intention. Digital disruptors have clear business intentions and objectives that are based on the available opportunity space, their vision, and the strengths of the parent organization.
B) Value Proposition and Value Creation
At the center of the Business Model, you find the Value Proposition. The Value Proposition is not just the product or service you offer, it is rather the proposal of the firm which overall value the company creates for its customers.
C) Business Model Environment
You never create Value Propositions or Business Models in a vacuum. You design, test, build, and manage them in a context. The Business Model Environment is organised into four areas: Key Trends, Market Forces, Macro-Economic Forces and Industry Forces.
The Components of Leadership Capability
An organization’s leadership capability to transform and emerge as a future leader is what turns the digital investment into a digital advantage. Required elements of leadership capability are:
- Governance, and
- Technology Leadership
Becoming a disruptor requires identifying the direction in which you want to innovate. Will it be an incremental improvement (Horizon 1), a step-change transformation (Horizon 2), or a radical green-field innovation (Horizon 3)?
Digital disruptors have clarity about their intentions, motivations, vision, and objectives. They are fully aware of the opportunity space and the fit between the identified space and the overarching context of their parent organizations.
A successful innovation or disruption is the one that customers love to adopt and use. But to engage your customers, you first need to engage your employees. A clear vision and focus at the top, open communication channels, recognition and rewards, growth opportunities, engaging leadership, and a good work-life balance are the key factors that foster employee engagement.
Disruptors and innovators look at governance as a discipline that helps them determine and control the direction and the progress towards the goals of the transformation. The highest aspiration of governance is to create a self-sustaining ecosystem where corrective action is automatically taken to unblock anything that threatens to slow down delivery or delay decision making.
4. Technology Leadership
Digital disruptors excel at technological leadership; which means they can create, use and manage the appropriate technological processes and resources to facilitate learning and improve performance across the innovation organization. The ingredients of technological leadership include technical knowledge, communication skills, leadership skills, a learning environment, and learning assessments.
Are You A Digital Disruptor?
This brings us to the end of our exploratory voyage into the DNA of digital disruptors. I hope the article has given you deeper insights into the attributes that make digital disruptors what they are. Perhaps, you can now assess where your organization stands on the disruptive scale. Here’s a comprehensive look at the key qualities of digital disruptors that we have discussed.
The Way Forward
Today, we are inspired by the success stories of digital disruptors like Uber, Airbnb, Amazon, and Netflix. These are all basically software companies that reinvented their business and entered an opportunity space, eventually driving out entrenched competition.
- Uber caused countless radio cab companies to close down
- Airbnb made many realtors pull down their shutters
- Amazon contributed to the closure of many brick-and-mortar stores
- The rise of Netflix sent packing companies like Blockbuster Video and others
Technology, as Einstein said, is like an axe in the hands of a pathological criminal. And the criminal has just started on a spree of disruption. Rest assured that with the acceleration in the pace of technology, we’ll continue to see more and more disruptions with each passing day.
Technologies like machine learning and robotics, and the companies exploiting them, will continue to transform processes, industries, businesses, and cultures. For a business like yours, there are only two options. The first is to innovate and disrupt the market. The other option, which is not really an option, is to wait to get disrupted and become a follower, or worse.
Get the DNA of a Digital Disruptor
Digital Leadership specialises in transforming traditional organizations into digital disruptors. We have supercharged many companies by innovating their business model and integrating technology into critical business functions. Compared to the industry average, our digital innovation projects achieve a much higher success rate, are way faster and cost much less. So, are you ready to disrupt, innovate, survive?