Digital distruption - ‘Digital vortex’ to swallow 40% of companies in 5 years

The old powers of market incumbents - massive scale, control over distribution, brand power, millions of customer relationships - are no longer seen as the obstacles they once were to agile rivals with innovative business models.

http://www.imd.org/uupload/IMD.WebSite/DBT/Digital_Vortex_06182015.pdf

Digital disruption has the potential to overturn incumbents and reshape markets faster than perhaps any force in history the new report claims.  DBT Center, a joint initiative between Cisco and the International Institute of Management Development, conducted a blind online survey of 941 business leaders globally to understand the state of digital disruption. 

The results of our survey surfaced several troubling findings about the potential for disruption, and incumbents’ readiness to adapt. Survey respondents believe an average of roughly four of today’s top 10 incumbents (in terms of market share) in each industry will be displaced by digital disruption in the next five years. 

  

Disruptive innovators are digitizing ever more granular pieces of the value chain, in virtually all industries. As a result, value is atomizing, and many of the traditional profit pools upon which market incumbents depend have sprung leaks.27 Our research reveals that a significant number—as much as 40 percent—of incumbents may be left wounded, perhaps mortally, by digital disruption in the next five years. Business leaders also believe that a large percentage of incumbents will win. Those that can harness digital technologies and business models will prevail. 

Moore’s Law, open source software, and the advent of cloud computing provide access to applications, platforms, and skills that enable firms of all sizes from all geographies, to compete against multinational enterprises.

  

The most successful disruptors of recent years—Amazon, Apple, Facebook, Google, Netflix, and others—employ what we refer to as “combinatorial disruption,” in which multiple sources of value—cost, experience, and platform—are fused to create disruptive new business models and exponential gains.

   

Executives in our survey believe that the real advantage of smaller digital players comes not from a grand plan, but from the following capabilities: 

• Fast innovation 

• Agility 

• Culture of experimentation and risk-taking 

Digitization of products, services, and business processes allows disruptive players to deliver the same value a traditional competitor provides— and even augment it—without having to reproduce the conventional value chain. In fact, that is the objective of digital disruption: to provide superior value to the end customer—either a consumer or another business—while avoiding the capital investments, regulatory requirements, and other impediments of “encumbered incumbents.”

 

Leadership Checklist for Digital Business Transformation:

 • Which capabilities are required to increase cost value, experience value, or platform value for customers? 

• How can we combine capabilities to magnify the value our customers receive? 

• To what degree do we possess these capabilities today? 

• To what degree do competitors—both traditional foes and “overthe-top” players—possess these capabilities? 

• If the landscape shifts dramatically due to digital disruption, how quickly can we adapt? 
• Are our people, processes, and technology agile enough? 

• How do we increase the agility of our organization to ensure we can fend off (or capitalize on) new disruptions?

Digital acumen is becoming an important differentiator. See Harvard Business Review report: "Driving Digital Transformation: New Skills for Leaders, New Role for the CIO":
https://enterprisersproject.com/sites/default/files/Driving%20Digital%20Transformation%3A%20New%20Skills%20for%20Leaders%2C%20New%20Role%20for%20the%20CIO.pdf