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Digital disruption and how you can use it in your organization

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by: Hans van der Broek
Digital disruption and how you can use it in your organization

Digital disruption: why your sector can not escape it

Kodak did not keep up with the rapid digitization of photography, travel agencies contrasted it with online counterparts and the music industry ended up in another disruptive period. The consequences of digital disruption are great. Newcomers often turn the market upside down by making smart use of new digital possibilities. Be prepared! If you believe the specialists, in the long term no industry can escape it.
Kodak film roll yellow, black 400
In this article I explain the term digital disruption, I describe why it is current now, let me see what the signals are that indicate whether a market is ripe for it, and briefly give a few tips on how you can use it as an organization. We will go into this in more detail in a subsequent article.

Emergence of digital disruption

For some years, the term digital disruption has been emerging as a subject in professional literature and at conferences. This was mainly about disruptive innovation: innovations that throw the game rules of an existing market overboard and create completely new markets and value networks at the expense of the existing market. More than ever, today's digital possibilities are the driving force behind radical innovations. This led in the technical jargon to the logical composition of the terms digital and disruption.

Digital Disruption in Google Trends

Although the underlying theory is decades old, it would not be right to label digital disruption as old wine in new bags. The impact of digital disruption on a market is many times greater than with traditional disruption and the turnaround is much faster. Due to the power of the internet and the existing mobile and social media infrastructure, disruptive ideas can reach a very large target group very quickly.
Potentially a start-up with a relatively simple app can shake up a traditional market in a short time. An example of this is FitNow, that with the mobile app Lose It! better anticipate consumer needs than traditional diet and waste experts. The app keeps track of what you eat, has smart gamification elements and includes a network of connected buddies. For example, the consumer can consult a buddy at any time if the temptation to start sweating becomes just too big. And that proves to be effective. Lose it! poses a serious threat to established organizations such as Weighwatchers, who have helped millions of people lose weight since 1963. At least, if Weightwatchers does not come soon enough with an answer.

The newcomers often enter a market with disruptive business models that would have been impossible without the current digital infrastructure:

- Use instead of own: Spotify, Netflix
- Freemium: Skype
- Peer-to-peer commerce: AirBnB, 99dresses.com
- Creativity of the crowd: threadless.com
- Mass personalization: chocstar.nl, shirtbyhand.nl
- Sharing sustainability news: whatsorb.com

According to Forrester Research, digital disruption is relatively new. Only a few industries have already gone through it today. The most obvious example is the music industry, which, thanks to digital disruption, changed from a total turnover of 14 billion in 1990 to 6.8 billion (including digital) in 2010. Meanwhile, the Spotify business model is turning the music industry upside down again. Digital disruption has caused a similar effect in other media. Every branch - no matter how analogous - is sensitive to digital disruption. It is not a matter of whether it happens, but when and by whom.

The driving forces behind digital disruption

hand holding a tray
These are challenging times for industries and organizations trying to achieve digital transformation.

Because never before have so many different developments come together at the same time to pave the way for radical digital innovation.
Together they form the driving force behind digital disruption:

- Social cultural
- Everyone is online
- Buying online is not scary anymore
- Online communication has become quite normal
- Technologically

Internet is always and everywhere available: penetration of the smartphone and tablet

- The costs of data storage have fallen enormously
- High processor speeds and data analysis methods
- Software as a service (cloud technology)
- Presence of platforms such as Apple iTunes store, Facebook and the strongly developing           Amazon.com network
- Reliable digital payment systems

Products are increasingly connected to the internet (internet of things)

Which branches are ripe for disruption?

Every sector is sensitive to digital disruption, but some markets are more sensitive than others. In Australia, Deloitte identified 18 industries based on 13 factors and 26 indicators on the vulnerability to digital disruption from two perspectives:

- the size of the impact (the bang)
- the threat of change (the length of the fuse).

Short fuse, big bang industry is expected to face significant digital disruption in the short term:

- financial services, retail (retail), business services, media and telecommunications. Together     these industries make up about one third of the Australian economy.
- Long fuse, big bang - industries that can expect considerable disruption, but over a longer         period of time: such as education, healthcare, transport and government services. These           industries also make up a third of the Australian economy.
- Long fuse, smaller pop industries that can expect lower levels of digital disruption are for          example industry and mining.

In order to determine the impact of digital disruption for a sector, the following factors have been examined:

- The extent to which products and services are delivered physically
- The extent to which customers use digital channels
- The importance of computer use and broadband infrastructure in business operations
- How is the penetration of mobile among customers and employees and their average age
- The importance of social media and innovations such as cloud computing
- How digital innovation can be inhibited by the government, regulations or other factors

In addition, the size of the market and the competitive structure play a role. In markets where (excessive) profit is made, are more sensitive than markets where the margins are small. Especially when high margins are earned on activities that customers can do themselves. The broker and insurance intermediary have already experienced this, for the civil-law notary, physician or lawyer, that does not take long. In this digital age, customers no longer accept rates of 200 euros or more for relatively simple administrative tasks such as drafting a will or marriage certificate.

Had this research been carried out in Europe, it would probably have given a similar picture. However, it is good to zoom in a little bit more per branch. The impact within an industry certainly does not have to be the same for all sub-segments. Research conducted by GfK 2012 shows that within the retail sector some product groups are much more prone to e-commerce than other product groups.

Respond to digital disruption

Research by Forrester Research shows that those involved see digital disruption in their industry arrive in time, but do relatively little with it. For example, 86% of respondents see significant digital opportunities to change the industry and only 36% of companies have developed specific policies. From our own research (The New Digital Reality, Jungle Minds 2012) the main cause of this lies with the top management of the organizations. 40% of respondents in the survey indicated that management was not aware of the need to invest in a digital future.


Timing is an important dilemma in digital disruption. Investing too early in a digital innovation can lead to high costs, without result. This happened a lot during the internet bubble around 2001. But above all, it can cannibalize your own business. As a market leader you therefore think for a moment before you start to compete for your own profitable market share. According to research by D. Charitoe, established companies respond to disruption in their industry in five ways:

Response 1: invest more in the traditional way of working
Response 2: ignore it, see it as a different market
Response 3: counterattack: disrupt the disruption
Response 4: adopt the innovation and play both at the same time
Response 5: Embrace the new innovation and increase the scale

Which response strategy is chosen in practice depends, according to the researchers, on the ability of the organization to adapt and the motivation to do so. But it is clear that the first two strategies are not sensible in the long term. Established organizations are obliged to continuously adapt to changing market situations. Innovation guru Clayton Christensen, expresses it nicely: "If a company is going to cannibalize your business, you will almost always be better off if that company is your own." You better make yourself redundant, before someone else does that for you.

Abuse digital disruption

The way in which you as an organization can deal with a digital disruption depends strongly on the situation and industry in which you are. There is a movement that says that you have to tackle it big and complete through digital transformations. No business process is left untouched. The large consultancy and ICT companies are currently preparing to implement these major transformations at their customers.
A broad approach is not wrong. The only question is whether you can react sufficiently decisively. At Jungle Minds we are convinced that large established organizations can survive digital disruption by learning to think and do as a start-up (see eg The Lean Startup). This means always being busy devising new business models, developing better customer experiences and working agile and multidisciplinary.
It is our experience that this works best with a mix of experienced experts, young digital talent, little hierarchy and plenty of room for creativity. And above all, experiment a lot with the shortest possible time to market: think, create, improve. Because ultimately being late in digital is always more expensive than too early. In a subsequent article, my colleague Bart Vijfhuizen will go deeper into the question of how you as an established company can respond to digital disruption.


By: Robert Jan van Nouhuys from Digital Boulevard

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Hans van der Broek , founder Founder and CEO of WhatsOrb, world traveller, entrepreneur and environmental activist. Hans has countless ideas and has set up several businesses in the Netherlands and abroad. He also has an opinion on everything and unlimited thoughts about how to create a better world. He likes hiking and has climbed numerous five-thousanders (mountain summits of at least 5000m or 16,404 feet in elevation)  
Hans van der Broek , founder Founder and CEO of WhatsOrb, world traveller, entrepreneur and environmental activist. Hans has countless ideas and has set up several businesses in the Netherlands and abroad. He also has an opinion on everything and unlimited thoughts about how to create a better world. He likes hiking and has climbed numerous five-thousanders (mountain summits of at least 5000m or 16,404 feet in elevation)  
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