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.
Ride the Storm: Navigating Through Unstable Periods / Katerina Rudko (Belka G...
The 4 stages of digital disruption: an incumbents's view
1. The four stages of
digital disruption:
an incumbent’s view
Chris Bradley
2. Stage 1 2 3 4
Disruption is... Detectable Clear Inevitable New normal
Incumbents face
four stages of
disruption
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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. Thank you |
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