The ancient Roman poet Virgil might feel at home in the Digital Age (once the initial future shock wears off!). He famously said, “Fortune favors the bold.” These words have never been more prescient.
In a recent article, we likened the current climate of ever-present disruption, innovation, and change to a Digital Vortex, in which ideas and technologies constantly break apart and recombine — often into highly disruptive and sometimes unexpected new business models (Apple, Amazon, Tesla, and Fortune magazine’s list of unicorns have benefited from this phenomena).
In the Digital Vortex, bold innovation and gutsy, disruptive new business models are a necessity. That is, if you want your company to be a disruptor rather than disrupted.
By their very nature, startups exemplify this bold approach. They are smaller, more agile, able to experiment, innovate and execute faster, and recover from minor missteps more quickly. Above all, they are digital.
Incumbents can cite their own competitive advantages including access to capital, large customer bases, and brand recognition. However, in the Digital Age, these advantages are not as significant as they once were. In fact, they can even be a disadvantage, encumbering established companies from taking the bold risks and innovative steps necessary to remain competitive.
Today, incumbents can be constrained by, among other things, doing things the way they’ve always been done, meeting shareholder expectations, and managing cost structures. Moreover, highly digitized startups can chip away at incumbent advantages faster than ever before by employing the techniques I outlined in my blog titled, “Can Corporations Complete with Unicorns?”
Snapchat, a unicorn in the mobile video messaging space, is an example of what’s possible. The startup is said to have upwards of 200 million active monthly users, and a market value in excess of $16 billion.
In our Digital Vortex survey, many incumbents believed that disruption would come from traditional competitors within their own industries. This was especially true in industries such as utilities and pharma (see left half of chart below), which have so far been relatively unscathed by significant digital disruption. I believe that instead of resting easy, these companies should take a cautionary lesson from businesses in retail, telecom, and media. In each of these industries, seismic disruption arose from outside firms that seemingly came from nowhere.
Did Motorola, Nokia, and BlackBerry really expect trouble from, of all things, a computer maker named Apple or a search company called Google?
Incumbents must be aware of startups and industry “outsiders”
To compete in the Digital Vortex, incumbents must be bold — bold thinkers, bold innovators, and bold competitors.
To gain the kind of agility and fast innovation that startups enjoy, however, incumbents also need to drive their own digital business transformation. This means building a digital foundation with core capabilities such as predictive analytics, dynamic processes, mobility, and fast collaboration.
This technology foundation will enable rapid innovation, driving incumbents to create — and continue to create — the bold new business models that will keep them competitive for years to come, along with the agility that will enable them to respond to new threats as they arise.
When being bold, it’s not about what you don’t know, but rather challenging what you believe to be true, that’s most important.
Well said! Totally aggree with your points which you have mentioned in the blog. “To compete in the Digital Vortex, incumbents must be bold — bold thinkers, bold innovators, and bold competitors|”.
Thank you for your comment. When things are changing so fast, it really is about disrupt or be disrupted.
Still incumbents have many advantages over startups – brand name, customer base, financing, … But I agree they should move while ahead.
Thanks, Ana. That is an excellent point and I agree. The good news is that because of the advantages you mentioned, incumbents that act now and learn from the disruptors have a great opportunity to continue to leading and growing.
As customers have such significant processing power in their hands though their smart phones there needs to be to be a desire to innovate like never before. The rate of change of customer behaviour will ensure that innovators who focus on serving the mobile customer will change the way in which many businesses fundamentally function.
Great blog Jospeh, and this is well observed: ‘Today, incumbents can be constrained by, among other things, doing things the way they’ve always been done, meeting shareholder expectations, and managing cost structures’ In other words, incumbents are battling the devastating limitations of the fixed mindset; in contrast, the digital startup enjoys the twin powers of technology and a natural growth mindset. Its always been easy to be brave when you have nothing to lose … but bravery in the digital age gives startups the additional, and hitherto unprecedented opportunity to disrupt and win big, quickly. Its quite an advantage!
Thank you, Stuart. Excellent points. Your comments also bring to mind the law of large numbers, although Apple has pushed the boundaries of that thinking. In a way, we’re in a familiar business cycle that is being greatly accelerated and exacerbated by the powerful forces driving digital transformation.
I couldn’t agree more. It takes bold, innovative ideas to change the dynamics of the investment world.
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