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There is a reason that “innovation” is a hot topic right now, and is has nothing to do with the Prime Minister’s Innovation Statement. For decades, Australian markets have been effective duopolies – with one or two businesses dominating each segment. Look at retail. Mining. Financial services. Media.

The list goes on.

The early promise of the internet was to “level the playing field” for small businesses – making it possible for small businesses anywhere to compete on a global scale. This has, in some cases, become true. But in many instances it has resulted in much greater consolidation, with well-funded companies expanding not up the value chain, but across. Think Google. Amazon. Facebook. Walmart. GE.

This list goes on too.

And this kind of disruption is occurring in every vertical.

Disruption

Rethinking digital disruption

The major difference in these two scenarios – is that the companies in the second group are either “born digital” or have “become digital”. Companies who are born digital have iteration in their DNA. They are flexible and fast moving. They see “digital disruption” not as a problem, but as an opportunity. In fact, when I present to companies, I often explain that:

Digital disruption is competitive innovation that uses digital platforms, technology and business models to create new value.

That is, it’s nothing to be afraid of. It’s the business-as-usual (BAU) of staying relevant to your customers.

So where to from here?

Remaking business for a digital future

I have been reading John Battelle’s writing and following his thinking for years. He is one of the most interesting and respected writers working at the intersection of business and technology. He regularly engages companies across the world to understand the trends and movements that are sweeping across continents – and has a few ideas for what this means. You can read his article on nine trends here. What does this mean for Boards and Executives? Here is my take:

1. Technology has become a horizontal layer across society: The level playing field has arrived but it’s not what we expected. Yes, there are new competitors, but there are new expectations. We need to be able to address what it means to have a “social license to operate” in a digital world. This means getting your board on board with digital.

2. Technology is only part of the transformation: Yes, technology is driving a lot of change. But our customer bases, our audiences, are already there. They use Google and Facebook everyday. They use Uber. The “born digital” companies have business models that operate in this field. More traditional companies are having to respond – and that means change. And this kind of change can’t be outsourced. It has to be lived through. Start preparing and planning for the change that is already happening.

3. Next gen leaders are entrepreneurs not employees: We have been seeing this trend for a while. The barriers to entry are lower, global markets are accessible and technology costs are dropping. Can your company attract and compete with the thrill of running your own startup? Boards need to rethink the employee contract.

4. Leadership talent is hard to find: Reinforcing the “social license to operate” challenge – traditional companies will struggle to attract the best talent. The next generation of leaders talk about purpose and impact. They have done so for at least a decade – but now as the Boomer Generation begins to retire, we will see a massive talent gap emerge. This places culture and community engagement firmly on the Board agenda.

5. Consumers don’t just buy on price: With consumers making 60% of their buying decision before reaching out to a brand, it is clear that brand experience, peer recommendation and trust are no longer under the control of the marketing department. Having a great product is a seat at the table. Being a good corporate citizen – connecting purpose and impact is also part of your new – as yet unwritten – commercial contract.

6. We can’t compete on economies of scale: Every aspect of our value chain is being commoditised. Where once we could compete on price because we had a great supply chain out of China, these networks are open to everyone. Where once big companies could outsource services to regions with a lower cost base, anyone can do this via crowdsourced service marketplaces. The economies of scale are available to all. That means we need to get better at product innovation. Customer experience. Branding. We need to improve our innovation fitness.

7. Cities will dominate the future of business: While it is possible to build your new startup in the middle of the Australian desert and still reach a global audience, there is no doubt that physical mass generates its own gravity. Cities play an increasingly important role in creating the infrastructure, economic, social and artistic conditions in which creativity and innovation can flourish. Boards need to consider investments in location and community – not only for head office but to create the right culture.

8. The giants are starting to dance: We see this with the emergence of stunning new initiatives. In the work I do with large enterprises, it is clear that business leaders are beginning to shake foundations. Often gently. But consistently and with purpose. Some organisations are further down the track. About five years ago I presented to the GE Leadership Summit on digital strategy and communities, and we can now see the way that they have built irresistible global momentum around their transformation program. Boards need to be moving and shaping last year. Not thinking about it for 2017.

9. Don’t throw out the baby with the bathwater: Large enterprises have plenty to teach the “born digital” generation of companies. They know how to scale, bring new products to market, work with government and create sustaining value for entire countries. While yes, Boards need to move with the times, there is a great reservoir of knowledge that holds immense value. Find ways to partner with newer companies. Look for value and connection – and audience and purpose.