Don’t get caught on the wrong side of digital disruption.
Disruption in business is not new. But, in the world of digital transformation, there are winners and there are losers – the key is being on the right side of its disruptive potential.
American academic Clayton Magleby Christensen’s theory of disruptive innovation has been called the most influential business idea of the early 21st century. His 1997 work The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail is said to have deeply influenced Steve Jobs. Its central premise is that the innovations that create a new market and value network will eventually displace established, market leading firms and products. New developments have always created innovative ways of doing things. Nowadays, it’s the digital technologies that are driving the disruption and today’s businesses have a choice - adapt and thrive or ignore and fail. Because for every digital success story, like Apple, there’s a company that didn’t see the change coming or, even worse, there’s a Kodak who did, but didn’t know how to take advantage.
Stay ahead of the future by learning the lessons of the past
Kodak was a market leader in chemical film production before digital photography destroyed its film-based business model. But, ironically, digital photography was a technology that Kodak itself invented back in 1975 when a 24-year-old Kodak engineer created the world’s first digital camera. Kodak had seen this digital transformation coming, yet it did little to prepare for it as it continued to create products aimed at prolonging the life of film and print photography. Unable to make the transition, Kodak went from undisputed industry leader to bankruptcy.
Blockbuster is another brand that had multiple chances to stay relevant, but kept refusing to change, despite having numerous opportunities to do so. With its focus firmly on its physical video stores, the company had little time or commitment for the video-on-demand business. It walked away from the chance to develop wide-scale movie streaming and it literally laughed in the face of Netflix when presented with the opportunity to buy the then fledgling company.
As a result, the Blockbuster video empire dwindled from 9,000 video-rental stores in the US to just one, which was listed on Airbnb for $4 per night in September 2021. So now you too can rest on Blockbuster’s laurels, just as it did.
All this in stark contrast to the Amazon approach.
As Brad Stone relays in his revealing Bezos biography The Everything Store: Jeff Bezos and the Age of Amazon, Amazon knew that if it was to continue to thrive as a bookseller in the digital age, it needed to own the e-book business, just as Apple had revolutionised music with the iPod. Rather than taking a half-hearted, Kodak approach, Bezos removed his project leader from the physical side of the business completely, knowing that he would never go after digital with the required tenacity if he were still invested elsewhere. Bezos famously told him “Your job is to kill your own business… I want you to proceed as if your goal is to put everyone selling physical books out of a job.”
And so, the Amazon Kindle became the most successful line of e-readers ever made.
What’s the moral of the digital disruption story?
It’s not a case of when digital will disrupt your industry, the chances are it already has. So, it’s time to stop thinking of the digital future and start catching up with the Digital Now.
Bezos knew that in order to succeed, Amazon needed to control the entire customer experience, and that this experience would be a digital one. As we collectively move toward an all-digital reality, more and more customer experiences will be delivered through online channels. But while an amazing CX nowadays invariably means a digital one, digital doesn’t always mean a good CX; it’s simply the latest iteration in the customer experience evolution. At the moment, as a recent research study has shown, only a third of people surveyed see any type of online service provider fully meeting their expectations when it come to the processes that make or break the customer experience - the payments. Optimising this experience and taking full advantage of the considerable opportunities that the Digital Now presents is the next digital transformation frontier.
Don’t have a Kodak moment
Ignore trends at your peril, particularly payment ones, and don’t make assumptions about who your customers are and what they want; they are probably more digitally demanding than you anticipate. Kodak thought that people would never part with hard prints and that it could persuade its customers to ignore digital photography. And we all know how that worked out.
Digital is no longer the exclusive preserve of the young millennial. The older demographics now represent a massive market opportunity, in particular the Boomers, those born between 1946 and 1964. The research showed that the 65+ cohort is now most likely to expect digital payments to be instant and convenient. They are also the demographic who most felt that outdated and inefficient payment processes undermined their experience as a customer. And they most strongly agreed with the statement ‘there is no excuse for online brands to have outdated, inefficient payment processes’. But perhaps this isn’t really so surprising. After all, this was the first generation to experience the radical changes brought about by computerisation. We’re talking about the people who were in their 30s when Amazon launched. They’ve gone from cheques to debit cards to online payments to contactless payments, and they know what good service looks like.
After all, at 57 Jeff Bezos is technically a Boomer by some measures (although we wouldn’t say it to his face).
Don’t do a Blockbuster
Blockbuster bombed because it didn’t take advantage of the opportunities and partnerships available to it.
A full 360° digital payments transformation is a daunting task, particularly for incumbent brands who are hampered by a legacy of costly and cumbersome technology. Switched-on businesses realise that they’ll miss out on new features if they try to retrofit current practices and processes, and that working with the right partner can help to enact this change. This gives them infinitely greater scope and flexibility to respond to new technological developments and shifts in customer behaviour.
Surrounding core systems with microservices and third-party APIs provides the scale and ease of access that established businesses need to innovate and build new digital financial services and experiences for end-users. While you’ll need to take digital change seriously, it doesn’t need to mean reinventing the wheel each time.
Take a leaf out of the Amazon (digital) book
Just as Bezos correctly predicted, it’s not about doing the minimum – while that might work for right now, it won’t help with the next step-change, or the one after.
While any industry transformation tends to be disruptive, it also creates new opportunities for incumbents and innovators alike, just remember to embrace those opportunities wholeheartedly.
Don’t find yourself on the wrong side of digital disruption – register for The Digital Now research and ebook
This invaluable eBook will help you to navigate the landscape of the Digital Now. It’ll tell you what we know now about the digitally demanding audience, who they really are, what they really want and how to attract and keep them. It will also explore the very different obstacles and opportunities that the Digital Now offers to both challenger companies and more traditional, incumbent organisations. And give you the recommendations you need to please your digitally demanding customers, today.