Yes, Digital is Really Disruptive. Here are 5 reasons why.

In 1966, Robert F. Kennedy gave a speech in which he referenced a well-known Chinese expression that translates as, “May you live in interesting times.” Kennedy went on to say, “Like it or not, we live in interesting times. They are times of danger and uncertainty, but they are also the most creative of any time in the history of mankind.”

Those words continue to hold true today as we find ourselves immersed in the fourth industrial revolution. As leaders, our roles have never been more interesting. Even our notion of leadership is being challenged at a whole new level and interrogated in a whole new language with the ripple effects being felt all the way to the boardroom.

The NACD’s recent annual survey found that after “changes to regulatory climate” and “threat of economic slowdown,” the top trends that directors foresee as having the greatest effect on their company over the next 12 months are all related to innovation and disruption, namely:

• Cybersecurity threats (42%)
• Business-model disruption (40%)
• Pace of technology disruption (39%)

In fact, 82% of directors surveyed report that disruptive risks are much or moderately more important than they were just five years ago.

However, as C-suite leaders and boards increasingly turn their attention towards disruption, the obvious question is: what makes it different this time around? After all, the decade in which RFK made his comments culminated in us putting a man on the moon. Surely what’s happening right now can’t compare to rocket science, right?

Shifting Tectonic Plates

Turns out, there is a marked difference between this era of change and what we’ve encountered before. Why? Because what’s happening now is being brought about by the shifting of two tectonic plates—Digital Technology and Global Demographics—and it’s the combination and interplay between these two that is unique. Together, they are compounding and amplifying the effects of each other, resulting in change at an unprecedented magnitude and pace.

To demonstrate, I used to cite statistics about what happens during a “day on the internet.” As things accelerated, I found myself talking about how much transpired in the space of an hour. Nowadays, what happens in one minute is enough to boggle the mind. In just 60 seconds, almost one million people log onto Facebook, over 1.4 million swipes occur on Tinder, 18 million texts are sent, and 694,000 hours of content is streamed on Netflix alone.

Beyond sheer magnitude and speed, the following five characteristics contribute to making this era unique:

1. Digital Disruption knows no boundaries.

Unlike past changes, which historically were more confined to particular verticals or regions, digital “upstarts” show no respect for industry boundaries. Take Amazon. It wasn’t that long ago that the company was simply selling books on the internet. Today, they encompass over 45 unique businesses that span industries (groceries, entertainment, and computing services, to name a few) with no signs of stopping.

What might happen to your organization if Jeff Bezos decides to take aim at your industry next? We’ve already seen how the mere prospect of Amazon’s future actions is enough to send stock prices into a tailspin.

The reach of digital disruption goes far beyond first-order effects, both in good and bad ways. On the one hand, the emergence of smartphones spawned the phone accessories business, which is now valued at $70B. On the other hand, look at the widespread effects caused by the “death of retail” and the decline in consumer visits to shopping malls. What happens to all the workers employed in the food courts? Or the small business owner whose gas station across from the mall no longer sees sufficient traffic to sustain his livelihood?

The rise of technology platforms and marketplaces, and the creation of these new “ecosystems,” has resulted in disruption far beyond traditional industry boundaries. As much as you can’t hold back the tides of change, there’s also no way to know how high the water levels will rise.

2. It’s not actually about the technology.

While it’s easy to think “tech” when discussing digital, the real paradigm shift has nothing to do with the technology. Rather, it’s about the new business models being enabled and the rise of the “subscription economy.”

For example, Uber has obviously been a major disruptor in the transportation industry. While they too are now crossing boundaries into other areas such as food delivery, Uber’s most fundamental impact was hooking people on the idea that we can have a ride without owning a car—a business model (and mentality) shift we’re now seeing in all sectors.

In other words, people want the milk, not the cow. Yet many businesses are still structured to produce and price in the traditional manner - assuming a model of ownership - when what’s increasingly valued is access. The move towards buying and selling “everything-as-a-service” is causing monumental changes in consumer expectations while upending business models in the least obvious of places.

A man’s morning shave once meant owning the right razor and cream - products you picked up on a trip to the store. Thanks to Dollar Shave Club, that morning shave has been transformed into “shaving-as-a-service.” Their subscription service ensures people receive the right supplies at the right frequency, delivered directly to their door. Some dismissed this strategy as gimmicky—until Unilever paid $1B in cash to acquire them in 2016. 

Disrupting traditional businesses with this “pay by the drink” model has become practically de rigueur, as demonstrated by over 100 “subscription offerings” on the mysubscriptionaddiction.com website alone. Even commercial real estate, which was once the bastion of those with big budgets and bigger balance sheets, is now so disaggregated that consumers can rent desks by the hour almost anywhere in the world, courtesy of disruptors like WeWork. 

3. They think different, and then they attack.

Aside from turning business models on their head, digital disruptors are also enabled by major advances in technology and services which have lowered barriers to entry. No longer do you need massive capital to get up and running. Launching your own online business is made almost instantly possible, thanks to public cloud offerings from AWS, Microsoft’s Azure, and Google Cloud.

In fact, today’s start-ups have a remarkably unfair advantage over incumbents who are often weighed down by legacy assets and crippled by legacy mindsets. What also sets these digitally-native disruptors apart is their ability to challenge even the most fundamental of working assumptions and orthodoxies. One such legendary example is the story of Marissa Mayer asking Sergey Brin to set aside budget for customer support, to which Sergey responded, “Why would we do that?”

These modern-day disruptors also have an impressive knack for attacking their competition on a vector where there’s no incentive to attack back. The classic example is Blockbuster facing the prospect of cannibalizing a large part of its revenue in order to respond to Netflix’s “no late fees.” Many other industries face this type of growing threat from trends like “freemium models” and the open source movement, both of which are disrupting major sectors such as software development and education.

4. It’s highly contextual.

Another factor that makes digital different (and challenging) is that it’s not a one-size-fits-all phenomenon. Just when you’d nailed your strategy for mobile, social, cloud, and big data (I know, that’s so 2014), you were told that mobile was out and wearables and implantables were in. And now the buzzwords of the day are a whole new crop, including AR, VR, IoT, AI, ML, Cogno, and Nano.

The key point is: digital disruption doesn’t affect every industry in the same way, nor will it change them at the same pace. Working in the airline industry where AI is revolutionizing maintenance response is very different than being employed by a media company contending with online distribution and crowd-sourced content. And neither is anything like operating in a highly-regulated industry such as wealth management, trying to fend off the rise of robo-advisors.

Technology is advancing on every front, but what matters most is that you know which flanks to protect. This stuff is highly contextual. Therefore, the first order of business is to understand which technology trends will likely affect you the most and how quickly.

5. The age wave is breaking over us.

As much as the tsunami of digital is heading our way, so too is the “age wave.” This massive shift in global demographics is giving rise to new opportunities, and it certainly won’t be “business as usual.”

Millennials—that mysterious force whom we needed to reckon with for so long—are now yesterday’s news. Today, it’s all about the Gen Z group (ages 3 to 24). Along with millennials (Gen Y), these two generations make up 60% of the world’s population. In fact, it’s estimated that these two cohorts will constitute almost 70% of the workforce in the next five years, given the retirement of over 10,000 Boomers each day.

Gen Zers are an entirely new breed. These digital natives (even the toddlers) are so proficient at using technology and apps that they’ll have zero tolerance for any product or service that’s not immediately intuitive. Today, they don’t understand how to interact with anything other than a touch screen. And yet, by the time they go to school, we’ll be living in a “post-app world,” and touch screens will have been replaced by voice-based and sensory interfaces.

Gen Z will never know the internet as anything other than high-speed, and those with phones check them 150 times per day, on average. This generation is driving unprecedented adoption rates of technology, and they’re only getting started.

Instead of “needing a job,” Gen Zers will see careers as a string of gigs, and they’ll care about your company having a purpose far beyond just making a profit. They’ve changed consumer expectations in ways that will never be undone. And, as much as they’re the customer we’re trying to understand, they’re also the talent we’re going to be trying desperately to hire.

Conclusion

With all that said, putting a man on the moon might seem trivial compared to the challenges of today, eh? As much as there will be unimaginable upsides to all of this disruption, there will also be a host of new risks and socially challenging questions with which we must contend.

Already, we’re seeing growing concerns around whether companies are paying enough attention to what they do with people’s data, the by-product of every digital activity. Others are questioning the unexamined biases that are making their way into artificial intelligence systems. For example, Gartner estimates that, in the next two years, 85% of AI projects will produce erroneous results due to biases in data, algorithms, and the teams producing them.

Beyond that, no company or country has yet formulated solid strategies for dealing with the potentially significant numbers of workers who’ll be displaced by automation or made redundant by bots.

While there’s little we can do to stop tectonic plates from shifting, it’s helpful to know the direction in which they’re moving. Given the speed and scale of what’s occurring, leaders and boards must address these issues—and soon. It’s no longer a matter of choice but rather a responsibility.

As one CEO recently said to me, “We’re all finding ourselves on the beach in Normandy. No question, we’re going to get shot at. The only question is whether or not we charge.”

?Dr. Anita Sands is an independent board director, adviser, and public speaker. She regularly writes & comments on board-related issues, technology disruption, and gender equality. All comments personal.

https://www.dhirubhai.net/in/dranitasands/