Digital disruption is the change that occurs when new digital technologies and business models affect the value proposition of existing goods and services. Nonetheless, the term ‘digital disruption’ is often misused to describe the use of digitization to better compete against competitors.
So what does digital disruption really mean? And how do you turn it from a threat into an opportunity? We spoke to Tom Hallaert, managing partner of Blastic, who followed an online Digital Disruption course at the University of Cambridge. We discuss his latest insights and how Blastic can help businesses with a potential digital disruption. Let's dive in!
“Nowadays digital disruption is often used as a buzzword. Having many Blastic clients being confronted with it, I considered this course as a great opportunity to get more insight on how we can support them in the future even more in this challenge.
The moment I saw the syllabus, I was eager to discover how the University of Cambridge interprets digital disruption. The course covered aspects going from the characteristics of various business models, over what you can do when you find your business in a disrupted context, to how you can adjust your business model to it."
“It says that you can turn an existing, trusted business model completely upside down in a digital way. Hotel group Marriott, for example, announced the news of a new hotel in New York City, with more than 5,000 beds, making it one of their largest hotels. It was a huge investment and a project that took a long time to accomplish. The CEO of Airbnb gave the straightforward answer: “We provide 5,000 beds in one day.”
Marriott invested in a brand-new building, while Airbnb is purely platform based. Airbnb can add hundreds of accommodations daily, without any huge investment. They ensure that you no longer have to stay at a Marriott hotel when you travel to New York, as they offer all sorts of accommodation.
As you can see, these kinds of digital platforms are a huge competition for hotel groups. That's what disruption is all about. New digital platforms can simply destroy a successful existing industry. This was one of the most important learnings."
Industries who think digital disruption won’t happen to them are living in a naïve world. Just because it isn’t happening now, doesn't mean it won't happen in the (near) future.
“The subscription economy business model, which is used by companies like Amazon, Disney and Netflix, was discussed throughout the course. It’s a model for trade of desired content, products and services in exchange for a recurring payment. In short, everything revolves around subscription formulas.
This model caused disruption within the media and entertainment industries, as it caused a change in how content is accessed by customers and monetized by advertisers.
The consequences, where nobody is talking about, were elaborated further in this course. On one hand the revenue/profit of subscription based models is dependent on the number of subscribers, and it’s questionable whether there will ever be a limit of subscriptions. On the other hand, people are nowadays subscribed to several streaming platforms, which is impacting their household budget.
Combination of these two elements makes that this model will no longer stand ground at certain point. For an industry that is depending on subscribers, this can trigger a serious crash.“
"I am convinced it’s an opportunity for every business, but it’s each companies responsibility to take digital disruption into consideration.
Companies who once saw it as a threat, instead of an opportunity, are now struggling to survive. Kodak is the best example; the digital camera business completely disrupted the industry of film photography and photo processing in the last decades. Making film was an enormously complex manufacturing process, meaning that the barriers to enter the market were high, and the competition was tight. This new digital imaging technology was far outside Kodak’s core capabilities, making it difficult to compete and to offer something distinctive. Instead of facing the digital disruption and investing in the future, the management ignored or failed to recognize the impending developments in (and implications of) digital technology.
As an established player in the market, you already have a serious advantage on potential new disruptors. You have knowledge about the business, the client base, most likely also have an R&D department who keeps up with the latest trends, …
For new disruptors the challenge to disrupt the market is much more complicated; they need to find investors, the right people, investigate the market, …"
I believe what could be a potential threat of disruption can definitely be turned into an opportunity, when facing this challenge with a positive mindset and a proper plan.
“Definitely! It was Steven Sasson, an engineer who worked for Kodak, who invented the digital camera. His management was very skeptical about the early prototype. But when the technology began to develop further and gain scale, they were acutely aware of the approaching evolution. However, the disruption brought challenges on multiple fronts which, rather than catalyzing change, contributed to a lack of determination. If Kodak had invested in the innovation and developed the digital camera themselves, it might have never disrupted their market. On the contrary; it would have been an innovative idea.
Existing industries that have the risk to be disrupted, can transform the disruption into an opportunity by being innovative. If you keep investing in innovations, I think you will have a serious head start and the disruption of your industry, product or service will be more complicated.”
“It’s essential that we consider the digital disruption strategy together as a team. The pace, scale and impact of innovation has accelerated over the years. While innovation can increase the value of existing products and services, it can also render existing business models obsolete.
To support our customers, we need to interact with them and give them the right advice, on how we can jointly face these challenges.
As this was the foundation of this course, I can for sure say it gave me several new and enlightened insights, which will be of great benefit in the future, to support our customers to an even larger extend.”
Do you still have questions about digital disruption, or can you use our help? Reach out to our team of experts who will be happy to help and advise you!