Summary of Digital Disruption (James McQuivey)
What exactly is digital disruption?
Digital disruptors use technology ā especially the free tools delivered via the Internet ā to enter markets and shake up the competitive landscape. They usually gain traction by focusing more intensively on customer value than they do on product attributes, supply chains or information mastery. Free of any legacy investments or systems, digital disruptors get close to customers and figure out how to deliver greater value to them.
āCompanies used to get dominance through scale. In the first half of the twentieth century, that scale came from manufacturing, and companies like GM ruled. Later in the century, dominance came from supply chains (think Walmart) or information mastery (think Amazon). But in the twenty-first century, none of these sources of scale matter. Only customers do. This is truly the age of the customer.ā
ā Josh Bernoff, senior vice president, Forrester Research
Digital disruptors are using technology tools to deliver value to your customers faster, cheaper and with greater impact than has ever before been feasible. Whatās interesting about this emerging phenomena is most of the tools they use are free or almost free ā which means the entry barriers to becoming a digital disruptor have almost vanished entirely.
The tools required to bring a fresh idea to market, to road test and validate that idea and then to refine it before ultimately making it available to millions of customers in a friction-free marketplace are very basic. There are just four:
- You need a computer to work on.
- You need an internet connection. Today, over 77 percent of American homes have Internet access.
- You need a programming language and a software development kit (SDK) which will allow you to bring your ideas to life. Apple makes a SDK available for free, and others are freely accessible.
- You need a friction-free digital platform for distributing and ultimately making money from your innovation. The entry fee to the Apple App Store is just $99. The Apple App Store already has more than 650,000 apps available and has paid out in excess of $5 billion to developers. Or if you donāt go the Apple route, Facebookās developer platform has generated more than 9 million apps to date.
Once upon a time, the truism āIt takes money to make moneyā used to hold true, especially if you had to build a factory or establish a distribution channel to get your products to market. Today, for almost no investment whatsoever, someone can enter your market, outsource your supply and distribution chain and start to target your existing customers in the space of a few days rather than years.
āThatās the power of digital disruption, and it will happen to every industry on the planet, whether that company makes digital products or not. These disruptors will do what they do in whatever industry they find themselves planted, ultimately generating significantly more innovation power into the marketplace.ā
ā James McQuivey
Itās not unreasonable to assume that the availability of the free tools will encourage ten times as many people to bring fresh ideas to market. Equally, if the cost of bringing an idea to market falls to one-tenth its previous level, then the combined result will be one hundred times the innovation power. Put another way, in the next few years, you will face a competitive threat which is one hundred times more powerful than anything youāve ever faced before. If you continue to operate by the rules which applied last century, you will be overwhelmed. There is no other possible conclusion.
Admittedly, with all this massive digital disruption taking place at an unprecedented scale, there will be failures along the way. Not all of the ideas the digital disruptors bring to market will succeed but even if just one or two percent of those ideas gain traction, thatās still a highly disruptive number of ideas getting through. And if their success rate turns out to be closer to five percent than one or two percent, the sheer volume of successful ideas coming through becomes very significant.
āWhen I talk to executives about this, they squirm. Because no company will willingly rush into a futur...