Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.
The four stages of
digital disruption:
an incumbent’s view
Chris Bradley
Stage 1 2 3 4
Disruption is... Detectable Clear Inevitable New normal
Incumbents face
four stages of
disruption
Stage 1 2 3 4
Disruption is... Detectable Clear Inevitable New normal
One: Faint signals
and much noise
New business model...
One: Faint signals
and much noise
What’s required
Acuity
- Gather sharp and
privileged insight to
work through the noise
-...
One: An example
Facebook invested heavily in
mobile monetization before the
mobile trend was clear
Facebook Acquisitions >...
Stage 1 2 3 4
Disruption is... Detectable Clear Inevitable New normal
New business model
Time
Incumbent’s business model
P...
Two: Change
takes hold
What’s required
Action
- Develop a pipeline of
new initiatives with
stage-gated investment
approach...
Two: An example
Schibsted exposed its traditional
business to competition from
online classifieds
Market Cap Index; 1995 = ...
Stage 1 2 3 4
Disruption is... Detectable Clear Inevitable New normal
New business model
Time
Incumbent’s business model
P...
Three: The inevitable
transformation
What’s required
Acceleration
- Shift resources (including
management focus) from
core...
Three: An example
Netflix transformed its business
model twice
Evolution of Share Price1; US$ per share
1 Daily Mail & Gene...
Stage 1 2 3 4
Disruption is... Detectable Clear Inevitable New normal
New business model
Time
Incumbent’s business model
P...
Four: Adapting to
the new normal
What’s required
Adaptation
- Develop talent and
capabilities required to
compete in the n...
Thank you |
Please connect with the McKinsey Strategy Practice
@McKStrategy or at www.mckinsey.com/business-functions/stra...
Upcoming SlideShare
Loading in …5
×

The 4 stages of digital disruption: an incumbents's view

Incumbents needn’t be victims of digital disruption if they recognize the crucial thresholds in their life cycle, and act in time. Here are the four stages of digital disruption from the perspective of an incumbent. The reality is, most industries are still in stages one, two, and three. That’s why the early experiences of media, music, and travel companies can prove so valuable. These first industries to transition to a digital reality highlight the social and human challenges that by their nature apply to companies in most every industry and geography.

  • Be the first to comment

The 4 stages of digital disruption: an incumbents's view

  1. 1. The four stages of digital disruption: an incumbent’s view Chris Bradley
  2. 2. Stage 1 2 3 4 Disruption is... Detectable Clear Inevitable New normal Incumbents face four stages of disruption
  3. 3. Stage 1 2 3 4 Disruption is... Detectable Clear Inevitable New normal One: Faint signals and much noise New business model Time Incumbent’s business model Profit Negligible impact
  4. 4. One: Faint signals and much noise What’s required Acuity - Gather sharp and privileged insight to work through the noise - Challenge your own story - View your business through a potential disrupter’s lens Common barriers Myopia - Overconfidence - Willful ignorance (i.e., not looking for or wanting to see disruptive trends) - Entrenchment in orthodoxy
  5. 5. One: An example Facebook invested heavily in mobile monetization before the mobile trend was clear Facebook Acquisitions >$10m 2010-2014; US$m Source:TechCrunch Instagram 2010 2011 2012 2013 2014 ChaiLabs HotPotato Drop.io Snaptu face.comAtlas O nabo ParceBranch 10 10 10 65 1,000 12 LilEye labs 120 85100 100 15 WhatsApp 19,000 Mobile Other
  6. 6. Stage 1 2 3 4 Disruption is... Detectable Clear Inevitable New normal New business model Time Incumbent’s business model Profit Negligible impact Two: Change takes hold
  7. 7. Two: Change takes hold What’s required Action - Develop a pipeline of new initiatives with stage-gated investment approach - Expose the core business to competition with the new ventures - If needed, begin transformation of the core business Common barriers Pain avoidance - Reluctance to endure pain of upfront cost - Unwillingness to cannibalize the core business - Putting short-term results ahead of long-term value
  8. 8. Two: An example Schibsted exposed its traditional business to competition from online classifieds Market Cap Index; 1995 = 100 1 Daily Mail & General Trust, Fairfax Media, McClatchy Company, New York Times Source: Datastream , Axel Springer, Schibsted, BusinessInsider.com.au 0 100 200 300 400 500 600 700 800 900 1,000 Representative index of newspaper publishers1
  9. 9. Stage 1 2 3 4 Disruption is... Detectable Clear Inevitable New normal New business model Time Incumbent’s business model Profit Negligible impact Three: The inevitable transformation
  10. 10. Three: The inevitable transformation What’s required Acceleration - Shift resources (including management focus) from core business to double down on new ventures - Build a coalition of believers to change mindsets across the organization Common barriers Inertia - Old centers of power lock in increasingly scarce resources - Legacy cost base becomes an anchor - New initiatives get lip service but little actual commitment
  11. 11. Three: An example Netflix transformed its business model twice Evolution of Share Price1; US$ per share 1 Daily Mail & General Trust, Fairfax Media, McClatchy Company, New York Times Source: Datastream , Axel Springer, Schibsted, BusinessInsider.com.au Mid-2011: Disrupt offering Netflix forces subscribers to choose either streaming or ‘original’ DVD-by-mail 0 100 200 300 400 500 600 700 2012: “Valley of death” Share price falls by >80% and analysts write off Netflix as a ‘broken’ business model 2013: Produce content Netflix continues to increase original content production Disrupted business model 2007: Identify upcoming disruption Netflix adds streaming, available at no cost Jan ‘07 Jan ‘08 Jan ‘09 Jan ‘10 Jan ‘11 Jan ‘12 Jan ‘13 Jan ‘14 Jan ‘15 Jan ‘16
  12. 12. Stage 1 2 3 4 Disruption is... Detectable Clear Inevitable New normal New business model Time Incumbent’s business model Profit Negligible impact Four: Adapting to the new normal
  13. 13. Four: Adapting to the new normal What’s required Adaptation - Develop talent and capabilities required to compete in the new model - Structurally realign the cost base to match the new profit pools - Evaluate ‘best owner’ scenarios Common barriers Fit - Lack of people or capabilities to compete in the new world - Likelihood that you’re too late to the game - Unwillingness to make tough ownership decisions - Possibility that the industry is no longer profitable
  14. 14. Thank you | Please connect with the McKinsey Strategy Practice @McKStrategy or at www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights

×