Digital disruption has fundamentally changed the dynamics of business, increasing the risk to current business models and forcing companies to diversify, reinvent or face extinction.

In the book iDisrupted, the authors point out that 48 of the top 100 companies in 1912 had disappeared by 1995. And it’s claimed that in 25 years’ time, half of the world’s top companies will no longer exist – a consequence of failing to address disruption in their markets and embrace the opportunities that digital transformation brings.

It’s not difficult to see how these predictions could come true. Over the past 20 years we’ve watched as Napster, Amazon and iTunes have decimated high street music retailers; digital photography has made film almost redundant; and video on demand, delivered through the pay TV platforms and more recently from Amazon and Netflix have killed off Blockbuster and your local video rental store.

In almost every industry, established businesses see their margins decreasing against new competitors that aren’t interested in making a profit (yet) or not yet required to.

Preparation is key

Recent history is full of examples of how technology disruption has transformed the landscape, and continues to do so.

Take Encyclopedia Britannica, which ceased publication after 244 years in 2012. Each set of hardbound volumes cost over $1000 and contained 120,000 articles. But it took over a year to update. It simply couldn’t compete with Wikipedia’s model, which is updated every day by anyone, free of charge, and available on any device

Even when you’re the new kid on the block, you won’t be for long. Mobile telecoms is a disrupter itself, having eroded the revenues from landline calls (and in many cases, removed the need to have a fixed line at home at all).

Yet mobile faced its own disruption with the growth of 3G and 4G, and the corresponding rise of all you can eat data. Customer loyalty started to pivot away from the mobile brands to ‘over the top’ services (OTT), making it largely irrelevant who provides the access – you can take your OTT services with you irrespective of your provider. Think WhatsApp instead of texts, for example, or Skype, Hangouts and Facetime as alternatives to voice calls. This is eroding the big mobile revenues and margins of fairly recent history.

Middleman beware

Disintermediation is the name given to this process of cutting out the middleman. As a consequence, customer relationships are changing – aggregators and OTT services now own the customer experience. This is threatening the relevance of traditional brands to their customers, who could potentially lose their existing insight and influence over customers’ spending decisions.

Here’s what disintermediation looks like in practice:

• eBay has no products or inventory of its own. Instead, it provides a simple to use platform that facilitates basic and secure transactions between buyers and sellers anywhere in the world.
• Airbnb doesn’t own any properties, yet through its platform, London bookings increased by 130% to 4.62 million nights last year – more than doubling its share of the market.
• Uber doesn’t own any taxis; it connects customers to drivers and takes a cut of the fare. There are now more Uber cars active in New York at any given time than Yellow Cabs. Whilst controversial, Uber’s model has started to change how drivers and customers think about taxi travel, as both groups are genuinely concerned about their ratings and quality of service.
• Just Eat and Deliveroo are disrupting the takeaway and delivery food market. Whereas previously customers would pick up a leaflet from their doormat and call the restaurant directly to place an order, there is now vast choice available via these aggregated experiences. The customer experience is owned by Just Eat and Deliveroo, who have access to vast insight and can start to personalise the experience, potentially shifting customers away from restaurants they may have traditionally used. It remains a hard-fought market; Deliveroo has disrupted Just Eat by opening up access to premium restaurant brands (which typically would never have provided a home delivery service), while Uber is starting to utilise spare capacity in its driver network to challenge in this space via UberEats.
• Apple Pay and Android Pay are still quite slow in uptake, but where these services are used as an alternative to contactless card payments, they now own the customer experience. As the proposition develops and behaviour starts to change, customer loyalty will pivot towards the Apple and Android Pay experience, at which point it becomes largely irrelevant who provides the payment rails in the background. In other words, payments are heading in the same direction as mobile providers, as customers happily switch in search of the best value and/or experience.

Your guide in a changing landscape

I’m fascinated by this cycle of disruption.

I’ve spent the last 16 years leading large scale change and transformation across Internet, Mobile Telecoms, Media and Financial Services for some of the biggest brands in the UK, such as AOL, T-Mobile, Vodafone, O2, Sky and Barclays. Irrespective of industry, these brands are facing disruptive challenges and the drivers for transforming around digital are consistent.

As such, it’s critical that organisations develop the ability to re-invent themselves, to create a sustainable advantage over others through agility. New competitors will attack your revenues and market share from totally new angles. You must hit back hard; reinvent your industry,  substitute products and services, create new digital businesses, transform your delivery model, rethink your value propositions. Disruption isn’t about growth – it’s about competitive response.

Having been an Equal Experts client myself for a number of years, I’ve joined the business as Transformation Director because I’ve yet to come across an organisation more uniquely placed to help organisations understand their challenges, plan how to proactively disrupt and deliver business value rapidly and frequently. I look forward to exploring the topic in more detail – both here, and with our clients.