In this series, SCALES – an NNIT Group company – will go into depth on several subjects relevant to digital transformation and cloud-based, intelligent business applications.
Do you remember when everybody talked about mobile first, big data and social media? It seems like yesterday, doesn't it? Well, it was – but since then, we have already moved on.
Today, business in the western world is in the middle of the 4th industrial revolution; where concepts such as social media, mobile, cloud and big data have already become the new normal. In the 4th industrial revolution, we talk about deep Machine Learning, Artificial Intelligence, blockchain technologies, the Internet of Things and advanced robotics.
Technological development is advancing at an unprecedented speed, which is increasing exponentially. Every day, processor power and capacity is flying into the cloud at a speed that has long since overtaken the predictions of American businessman and co-founder of Intel Corporation Gordon Moore, who formulated the famous Moore's law. Each and every day, technology provides new opportunities to innovate, to conquer new markets, and to build a business up from zero to big success in the space of a few years.
Competition across industries
One of the consequences of this high-speed development is the now somewhat cliché expression – disruption. The pace of technological change provides opportunities for disruption to some, and poses risks to others. Speed to market is a key differentiator in the digital world – thus, businesses need to adjust to new rules of the game and compete on the new terms.
Disruption is indeed the buzzword of today – the Danish government has even set up a Disruption Council. Everybody wants to disrupt, and nobody wants to be disrupted, and as with all buzzwords done to death, the risk is that it ultimately becomes empty and uninteresting. However, this does not mean that it will become irrelevant. No matter what you choose to call it; when new smaller players turn the rules upside down and grab market share from the established industry, it is not the time to stick your head in the sand.
What is disruption?
Let's get the definition straight.
"A company that, through innovation of new products and services, undermines or breaks down the typical business model of an existing branch."
Clayton M. Christensen, Harvard University
Read more about how you can become ready for the reality of disruption here
If you are the disrupting company, you can gain significant market shares quickly. Conversely, as an existing industry player, you can lose market shares – or ultimately become obsolete – if you do not recognize the possible threat posed by disruption and led by the sweeping digital transformation.
In this series of articles, we do not take a position in the ongoing debate on the legality of new disruptive practices in Denmark and abroad – we do, however, encourage all industries to be alert.
As American businessman, film producer and financier Ryan Kavanaugh puts it: "The key is to embrace disruption and change early. Don't react to it decades later. You can't fight innovation."
There are plenty of examples of those who fell asleep at the wheel: Blockbuster, Kodak, the music industry, the taxi industry, and the hotel industry to name just a few.
They have all seen new players move across their industries with new business models that pose a threat to established companies. Previously, the taxi drivers only had the other taxi drivers to worry about. They merely needed to focus on being a little more available and a little less expensive than other competing taxi drivers. Then a software company "disturbed" the rules of the taxi industry. Uber owns no cars and employs no drivers. Despite this, they pose a serious threat to an industry whose biggest commodity is just that; cars and drivers.
Blockbuster did not take the threat seriously, and if the taxi industry does the same, it will go the same way as the now extinct video chain. The music industry has begun to discover a sustainable business model, and the hotel business will also probably survive.
Those who manage to withstand this kind of disruption or perhaps are disrupters themselves have three things in common: an understanding of digital development, the will to change, and a vision for digital innovation. This requires a culture and set-up that can release resources to deal with threats and opportunities in real time.
In this respect, it is positive to see that many of the respondents in the NNIT Expectation Barometer have set up a digital division in their business to focus on innovation and digital development.
However, this cannot be done only within the digital innovation department. In these years, we are seeing high degree of digital transformation in businesses, which extends much further than digitalizing existing services and processes. Digital transformation has a strategic focus on innovation as well as creating new business models that challenge the historical division of industries. In short, digital transformation has a finger in all areas of the business – therefore, every executive must recognize the need hereof.
Having said this, successful digital transformation does also require the deep involvement of the IT department. They need to be the ones responsible for implementing and driving an agile IT platform necessary for enabling digital transformation, as well as challenge and support the business regarding digital transformation.
Previously, one of the more significant IT challenges in business involved data: storage was expensive, it was hard to access, and was difficult to use when required on the spot. Today, however, the biggest data challenge is surely the overwhelming deluge of data, and how the company can exploit this.
Customers have a clear expectation that this large amount of data is used to optimize and personalize products and services. Because of this, one of the most important questions for companies today must be: "How do we get from raw data to information and insight? And how do we get an agile IT setup that enables us to react to the market in real time?"