Welcome to the age of digital disruption – Recognise, Prioritise and Respond!
Digital disruption can be an intimidating term, and, perhaps more challenging, it is often a topic CIOs and senior IT leaders know they should be thinking about but aren’t sure where to start. The “wait and see” attitude is a mindset that needs to be left in the past, or organisations risk being left behind.
Companies like Uber, Google, Amazon and others have been focused on navigating the complicated landscape of digital disruption, and it’s time for all organisations to start creating strategies to stay competitive and create growth.
With this book, CIOs can learn how to identify, respond and navigate through the world of digital disruption. This will require a specific set of talent, and a very different leadership mindset combined with strategic alliances with other business units. Disruptors can be any enterprise from a small start up in the medical field to a tech giant, and CIOs need to be prepared to assist the most senior business executives to identify and compete with or join these organisations.
Although some CEOs might recognize that companies like Uber or Airbnb are disrupting the business world, many still maintain a wait-and-see attitude. This means responding once the true threat to their own business has been identified. However, in the case of digital disruption, waiting until the threat is clear is often too late. There will not be sufficient time to respond in a way that minimizes the impacts to your business.
CIOs involved in building or expanding a digital business are dealing with an increased pace of innovation that is very disruptive to their ability to scale or grow. The ability to successfully engage with this disruption can be the difference between thriving and sliding down the performance curve.
True innovators affecting change don’t just innovate — they disrupt. They shift fundamentally the dynamics of the situations in which they find themselves. When the average organisation is no longer surprised by disruption, but instead uses it as a tool of normal competition, it changes organisational dynamics, the nature of strategic planning, investment priorities and the technologies used to drive the future of business.
Recognise Digital Disruption
A key aspect of seeing digital disruption is to learn to separate actual digital disruptions from fads. A fad, such as Pokemon Go or Google Glass, will incite lots of excitement but have limited impact. A disruption will completely redefine the market’s needs and potentially cause a significant change in the industry and beyond. For example, tablet computers like the iPad caused changes in application development, impacted revenue of desktop and notebook computer manufacturers, and even changed how humans interact with technology, with FaceTime as the first mobile conferencing application. The technology also created an aftermarket accessory industry.
At some point digital disruptions will completely change markets due to their ripple effects, while a fad will not. Consider how digital TV initially impacted analog television, and how Netflix subsequently exploited digital content to completely disrupt the entertainment industry.
Befriend the CMO or VP of Supply Chain
Monitoring external industries is new territory for a CIO, but other members of the executive team will be better equipped for such an effort. Depending on the setup of the business, the CIO might look to partner with the CMO, CFO, VP of Supply Chain or the Head of R&D to have a better view of potential disruptors. In a business-to-business setup, disruption can happen in the supply chain or with the end customer, so it’s best to partner with both the CMO and VP of Supply Chain. For business-to-consumer companies, disruptions are most likely to happen in the customer segment, so the focus should be on the CMO.
Set up your Sensing Apparatus
Enterprises looking to identify disruptors before it’s too late should set up a “sensing apparatus” to monitor external indicators. These indicators include shifting customer behavior and consumer trends, as many disruptors originate in the consumer world. Pay attention to where VCs are investing and to disruptions in adjacent markets for indicators. The sensing apparatus will create large quantities of information, so look to data scientists to mine the data lake for insights.
CMOs can offer insight into customer and market behavior. They will also be able to identify potential indicators and will probably have staff with the skills to analyze the data. In return, CIOs can offer CMOs institutional knowledge about IT systems and why certain systems are set up the way they are to provide perspective on how a potential disruption challenges the status quo.
Prioritise Digital Disruption
Now that you know how to spot digital disruption, what’s the next step? Prioritise.
These three dimensions can create huge market advantages given that more content is produced faster, is available on demand, and generally provides a deeper context and extended depth of customer interaction.
CIOs, in conjunction with business peers, must assess what these advantages mean to their business. Will the disruption reach their market and their customers? With what new value? Any disruption that clearly impacts two or more of these dimensions should be a high priority. Combine judgements about these three dimensions of a disruption with data and insights gathered from the sensing apparatus to prioritise one disruption versus another. This will also help distinguish disruptions from fads.
Watch other companies
When looking to spot digital disruptors, don’t just focus on the VC community, although disruptors may emerge from there. Large companies can have a huge advantage if they can crack the digital disruptor code. For example, IBM acquired the Weather Channel for its global-scale platform and data. The digital business giants (Google, Facebook, Amazon) should also be monitored.
Be particularly wary of what data they could gain or own with respect to your market, this is also where your understanding of your enterprise’s economic architecture will help dramatically, by putting your observations into a business context that your CEO and board clearly understand.
Create a culture of innovation
Companies that are successful disruptors, such as AWS, have created a culture of innovation; that is, innovation is a normal day-to-day activity, not a special once-a-month meeting. Realistically, the digital business era has introduced a lot of uncertainty and concern, but an enterprise that has an established culture of innovation will be able to better respond to the uncertainty and risk that accompanies this era.
Respond to digital disruption
One decision every enterprise will need to make when it comes to digital disruption is how to respond to it. Many organisations lack the skills, resources and risk appetite to realistically play the role of disruptor. However, these enterprises can — and should — decide to play the role of” complementing disruptor” by joining the ecosystem around the disruptor. This means looking for ways to add value to the disruption.
If, however, the CEO comes to the conclusion that the company should not complement the disruptor, but should become the disruptor itself, the company must ensure that it has a system of continuous innovation. This entails challenging assumptions and breaking out of familiar patterns or “because that’s how we always do them” mentality.
The one decision enterprises shouldn’t make is to do nothing. This merely delays the inevitable disruption.
Clarify the risks of underestimating blockchain to the board
Explaining blockchain to the board is challenging. It’s a complicated technology that has been overhyped. CIOs need to explain that companies that do nothing about blockchain run the risk of being left behind, but there are also risks to undertaking a blockchain project. Focus on three areas related to risk: The specifics of the business context (such as customer adoption paradigms), risk management (for example, information management) and legal issues (e.g., smart contracts). Industry boundaries will become more fluid as business ecosystems develop and artificial intelligence increasingly influences decision making. As the programmable economy takes shape, it’s difficult to see what business enterprises will look like in five years, as blockchain business models disrupt even today’s more advanced platform businesses such as Uber.
Governance, auditability, and control of the networks and blockchain components supporting them is challenging for risk management. Assuming that permissioned operating models will solve a lot of the risk is not necessarily a given due to centralization and reliance on single- supplier stacks. Legally, blockchain enables jurisdictions to be crossed and intermingled, complicating operating frameworks and enforcement.
At some online publications, financial summaries and sports recaps are written by artificial intelligence (AI) solutions, not humans. In some organisations, AI decides which sales opportunities are worthy of a salesperson’s time.
AI is changing the way in which organisations innovate and communicate their processes, products and services. AI continues to drive change in how businesses and governments interact with customers and constituents.
Neural networks require monitoring and maintenance. The idea that AI technologies can be delivered as finished products without further human investment is a recipe for failure. While older rule-based systems could be set up, configured and then ignored for a few years, neural networks need to be retrained whenever new data is available, which is essentially constant. In fact, neural networks only maintain value to the enterprise in an endless retraining and reinforcement loop. CIOs will need to make the business case to ensure the project is provided with necessary resources.
This will require new skills and a new way of thinking about problems. Those with backgrounds in design, data science and logic might be better prepared than programmers who tend to think in more structured approaches. Additionally, neural network responsibilities will be spread across departments and within many applications. CIOs must ensure that IT owns the strategy and the governance of selected platforms.
Many AI startups are owned by former employees of large vendors who leave and form a company focused on AI in a specific industry, or academics who have discovered their discipline is suddenly lucrative and exciting. This means there are many packaged AI solutions that should be considered before an organisation considers building a custom AI solution in-house. The packaged options require fewer resources and can be deployed faster.
Any industry with very large amounts of data — so much that humans can’t possibly analyze or understand it on their own — can utilize AI. Some industries, such as healthcare, are ripe for disruption. As the amount of available data increases, there will be few jobs requiring decisions in real time where humans will be able to match smart machines. However, there are limits to the powers of AI, and CIOs must ensure
they combine human thinking and machine analysis. For example, if adequate data isn’t available, or if the data is of poor quality in content or structure, smart machines won’t be able to make a reliable decision.
Conversational AI platforms for digital success
Conversational AI platforms (CAPs) are one of the most talked-about technologies within the AI world. The trend for consumers started with Apple’s SIri, but now companies such as Google, Amazon, Microsoft and IBM are visible players, with other companies focusing on business customers or bots/VPAs.
And it’s a good time for companies to start experimenting and implementing these systems. “CAP technology appears to be at a point at which consumer knowledge and demand are meeting with technical strength and (enough) maturity for implementation and real user benefits,” he says.
It would be easy to dismiss a need to focus on CAPs as some of the technology for speech-to-text has been around for a while, but this technology will soon become an expectation of user experience. Now is the time to become familiar with the technology and how customers will expect to interact with it in the future.
CIO’s have a role to play in the world of digital disruption. First, they are tasked with understanding the business’ digital ambition behind the digital business strategy. They also should challenge their own mindset and business approach to adapt to a changing world. Finally, the CIO will need to arrange a team that is able to build innovative ideas and connect with perhaps non-traditional partners in the business and beyond to ensure that no opportunity goes unseen.
A stream of innovation in technology and digital business models continues to disrupt markets and challenge established incumbents, as digital business continues to grow, CIO’s will need to increase their ability to recognise, prioritise and respond to digital disruption.