Disruptor and Disrupted: Strategy in the Digital Vortex (Global Centre for Digital Business Transformation – Cisco / IMD)

A great report on what it takes for organisations to be successful in the digital age, this should be read by anyone working in the digital space. Keys to success are hyperawareness (obsessive awareness of the internal / external risks and opportunities), informed decision making (using data / metrics) and fast execution (start up style).

“The pace of technological change, business model innovation, and the blending of industries accelerate as companies are drawn into the Digital Vortex. At the DBT Center, we are often asked which “big bets” companies should place to thrive in this uncertain and highly competitive envi- ronment. The answer, difficult though it may be, is that no single strategy will guarantee success. Why? Because individual moves tend to focus too much on tweaking the company’s existing value chain in order to compete with traditional foes (all of which have similar value chains), rather than transforming how the company delivers cost value, experience value, and platform value to customers.

Meanwhile, digital disruptors focus on precisely that: supplying the cost value, experience value, and platform value customers want. Increasingly, a company’s most formidable competitor will be a start-up or a firm from another industry that uses digital technologies and business models to create “combinatorial disruption”— where cost value, experience value, and platform value are created concurrently. In such circumstances, “big bets” look like forceful punches from slow- footed boxers that miss their opponents— lots of energy, no impact.

To win in the Digital Vortex, companies must be dynamic enough to understand the risks disruptors pose to their business, and to maximize their revenues in the face of tough competition. At the same time, the percentage of revenue from new businesses needs to increase, as margins from core businesses will frequently decline. This puts pressure on companies to improve the “hit rate” of marketable innovation, an area in which nearly all incumbents struggle. As we saw in “Digital Vortex,” incumbents are less able to innovate and adapt at speed than the start-ups that are disrupting their core businesses, putting them at a stark disadvantage.

Through the DBT Center’s research and our experience advising companies on how to transform, we have come to understand that companies need to develop a “metacapability” we call “digital business agility.” We define digital business agility simply as the capacity of an organization to use digital means to change. Companies that possess digital business agility respond quickly and effectively to emerging threats to their business, and seize new market opportunities before their rivals even notice them. They use combinatorial disruption to differentiate their core businesses, making it hard for value vampires or other disruptors to replicate or supersede the value they provide. When disruptors do strike, digital business agility allows companies to harvest maximum value from declining businesses. Most important, they can identify and exploit value vacancies, which all companies will need to maintain growth as some businesses hit disruptor-induced revenue stalls.

Digital business agility has three main pillars: hyperawareness, informed decision-making, and fast execution. These pillars are not technologies, but rather technology enabled capabilities. Moreover, while they can be understood as discrete, they actually build upon one another. ”

Disruptor-and-Disrupted_Cisco_Dec15

(credit  Cisco / IMD)