No-one would argue that technology is the major disruptor to established business models. Riches await those who can successfully disrupt industries that are set in their ways. Ruin awaits many businesses that don’t see change coming or who can’t react.
But how do you scan for digital disruption? Where do you look? What are you looking for?
I’ve had to do this several times for clients and have been refining my framework each time. The framework will probably feed into PwC’s Digital Change approach over the next year, but I thought I’d put it out there for comment first.
7 ways that technology disrupts : a recent blog post
Bear these all in mind when scanning for disruption.
Starting with your business, think about what you do to bring your products to your customers.
Internal Differentiating Processes: What do you do internally that gives you competitive advantage?
Internal Commoditised Processes: What do you have to do that offers no competitive advantage, and ideally you would do away with altogether or alternatively do a lot cheaper and quicker?
Product Distribution: How do you get products and services to your customers?
Inbound Distribution: How do you get materials and services from your suppliers?
Then go outwards. Think about your customers. Who are their customers and why do they buy? Do the same with your suppliers and then think about who supplies them and how.
What is going on in each stage of your value chain
- in your home market
- in more advanced markets globally (typically the US and Europe)
- in rapidly developing markets (many Asian and African countries are skipping several technology and going straight to simpler and cheaper ways of doing things)
You need to look carefully at the extremes of your value chain and not be blinkered into looking at what your domestic and international peers are doing.
Are there any technology driven changes in the way that the customers of you and your peers are behaving? Think about their customers. Are suppliers’ suppliers using different methods to get their products to market?
Now look beyond your immediate industry or market to industries that have similar buying patterns and product characteristics to your own.
Focus on where the activities within your value chain have similarities – from inbound distribution to product distribution.
For example, a health insurer would look at home insurance and banking. A road logistics business would look at rail, air and sea logistics. They would also look at the military and other organisations that have to move large volumes of people or goods internally.
Are there any radical examples of ways in which customers are being presented with product choices, or the ways in which they are consuming products?
Consider your home market and then look internationally.
Then focus on world’s most innovative regions such as California and Israel that consistently produce radical technology that is then adopted elsewhere.
The focus here is on the types of activities that you do within your business.
It might be the fundamental way in which products are presented to customers. What if you applied the pricing mechanisms used by low cost airlines to your market?
Or it might be the medium by which products can be distributed.
Are there any examples of businesses doing something similar to what in your industry is ‘differentiating’? That could soon transfer to your industry and erode your competitive advantage.
Are there any examples of businesses that have come up with innovative low cost ways of doing tasks that if applied to your commoditised processes would make a step change in your cost base or make you stand out in the eyes of your customers?
This is the most difficult part of the disruption scan and requires some lateral thinking.
Happy scanning and please comment on how this framework could be improved.