Originally posted Jan., 2013. Version 3.0 update posted August, 2014.
Every industry is being impacted by digital; social media, mobile apps., data analytics, more agile technology, cloud….and the new customer expectations that this engenders. It's broadly accepted that this is challenging familiar business models and creating new levels of competition that can unseat well established companies. Whilst these companies are reacting, investing heavily in digital, is this enough? This document provides a brief summary of the Digital Inflection point; that whilst a response to digital may add value, it might not necessarily prepare a company for the combination of existing, or future, elements that have a disruptive impact on the industry as a whole. It briefly describes how successful companies have responded to this by smartly balancing digital and transformational efforts to realise a Digital Advantage. It was presented at a recent symposium so is an abridged version. To find out more please do get in touch.
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Why aren't companies responding to digital? Seeing the Light vs. Feeling the Heat.
1. Transform
to
the
power
of
digital
SEEING THE LIGHT VS. FEELING THE HEAT
HOW DIGITAL WILL DRIVE INDUSTRY DISRUPTION
(AND HOW TO RESPOND TO YOUR ADVANTAGE)
Ben Gilchriest
Version 1.0; January, 2013
Version 2.0; December, 2013
Updated, August, 2014
2. Whilst companies often react to digital this response may be too muted to be
fully prepared for a combination of digital disruptions
Potential impact of
digital recognized
Even though the company might be watching for the
disruption and responding to it, generally doesn’t sufficiently
react until it “feels the heat” of that disruption through
reduced financial performance.
Whole of business
response started
Limited digital
initiatives started.
Notes; * Metric varies by industry; ** Inflection Point; characterized by ongoing period of rising revenue & profit followed by a sharp downward trend as several elements of digital coalesce. Often
the impact of digital is already foreseen and companies are often doing something, however, in the absence of a compelling reason to change do not make fundamental changes to their business
model. A “burning desire” to change is key to a response in this stage. The Inflection Point trigger varies by industry though is typically a result of one or more of the following; a new entrant
disrupting an intermediary business model, a long term digital competitor reaching a tipping point in scale, or a shift in consumer expectations,.
Financials *
FEELING THE HEAT SEEING THE LIGHT
Company “sees the light” of digital and drives a vision to
achieve it before the disruption hits the industry (or
respond to a disruption more holistically than
competitors).
Potential impact of
digital recognized
Whole of business
response started
Driven by a burning desire
Driven by a
burning platform
Digital Transformation
Intensity
Financials *
Digital Transformation
Intensity
Defining a clear case for change and unified vision is critical in driving a
burning desire and to navigate through the inflection point.
Inflection Point ** Inflection Point **
Typical Responses to Digital Disruption
3. Industries that wait to “feel the heat” often suffer catastrophic impacts
The Digital Inflection Point – Examples (ANZ region)
3
• Inflection Points are driven my multiple factors converging at a single point in time.
• Whilst many factors are visible, often one factor is unpredictable or unexpected and is the principle driver of the shift.
• For example;
• Print media;
Key financial indicator = advertising revenues.
Drivers of Inflection Point
§ Proliferation of online sites;
§ Rise of social media (the bloggers);
§ Moving slowly to protect content and responding to changing customer demands;
§ Very low click-through rates in on-line etc.
• Retail sector;
Key financial indicator = margins.
Drivers of Inflection Point
§ GFC pushing USA / UK players to look to overseas markets for growth;
§ High strength of AUD vs. USD;
§ Increasingly reduced cost of supply chains, increasing push of these to SE Asia;
§ Explosion of social media usage in Australia with a rapid discovery of alternates to Australian companies.
§ Significant rise in local, niche online players.
The timing of the Inflection Point is almost impossible to predict.