Recognize and Respond to Digital Disruption How CIOs can Lead the Charge on Dealing with Digital Disruption
Although some CEOs might recognize that companies like Uber or Airbnb are disrupting the business world, many still maintain a wait-and-see attitude. Traditionally, 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 too late. There will not be sufficient time to respond in a way that minimizes the impacts to your business.
Digital disruptions typically exist outside of the enterprise’s normal range of vision. Although CIOs and their business executives acknowledge the potential for a digital disruption, they lack tools, techniques and criteria for identifying and assessing potential disruptions.
Digital disruptions are more difficult to adapt to than earlier technology-triggered shifts due to their virtual nature. Past disruptions were generally triggered by physical technologies such as PCs or ATMs. With the exception of robots and robotics, most digital disruptions are initiated in the virtual world, which makes them difficult to recognize until after impact is felt. For example, the self-driving car is full of advanced AI technologies and analytics – software – that change the fundamental assumptions about driving and drivers. Furthermore, these virtual technologies can be fluidly changed and easily scaled due to their ability to learn and adapt. This means that when a digital disruption such as a commercial self-driving vehicle appears in your a market, the investment just to catch up will be large and rapid.
CIOs can lead the organization to overcome the challenges of digital disruption and equip peers to recognize and deal with digital disruption.
Recognize digital disruption
First, 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. For example, tablet computers such as 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 rippling effects, while a fad will not. Digital disruptors are those companies that intentionally invest heavily in disruptive innovation. Consider how digital TV initially impacted analog TV and how Netflex subsequently exploited digital content to completely disrupt the entertainment industry.
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 a lot of information to handle, so look to data scientists to mine the data lake for insights.
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 set up, disruptions 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.
CMOs can offer insight into customer and market behavior. They will also be able to identify potential indicators and will probably have the 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. Once a disruption is identified and prioritized, the organization must figure out its response.