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DIGITAL IS DISRUPTING/ TRANSFORMING INDUSTRIES – AND THIS IS WHY

Business strategy has always been premised on assumptions about technology, those assumptions are changing, and this will drive us to a different concept of what we mean by business strategy. – Phillip Evans

In his talk at TED Phillip Evans argues why digital is transforming business strategy and business(1). And especially which forces are at work creating what we today perceive as asymmetric competition(2) and mutating industries. (3)

Business strategy is built around Porter’s idea of value chains (4):

An organization is essentially a string of components forming a vertical value chain welded together by transaction costs.

A business’ competitive advantage is the sum or the average of its transaction costs. Companies usually wield large advantages in some components and are lagging in others.


business strategy_value chains_PDF

Companies are founded on the idea of a sustainable competitive advantage (4), seeing continued improvement in efficiency and standardization as a main ingredient in order to lower transaction costs in chosen components (5).

And this is why digital is carving out a new business landscape:
With digitization we can achieve zero marginal cost in some components – meaning that the transactional costs plummet to a level where there is less or nothing to economize on (zero marginal cost meaning that the cost of producing more than one instance is essentially zero(6)).

TECHNOLOGY WILL DISRUPT. WHY, WHAT AND HOW?

Business, technology and people hold the key to understanding the future. 

“The future is only complex if you fail to understand it from the point of view of what is driving the change.” – Helge Tennø, link

I help organizations understand how technology changes their customers and in turn their business. Through this work I have created tools to tailor and assist each company’s understanding and approach. This presentation is a compilation of some of those tools. 

The goal is to understand what is happening, design possible scenarios and find solutions to what is commonly and superficially labelled Digital Transformation. 

 

Part 1: The Complexity Gap / Asymmetric Competition

Markets are shaped by customer demand, not products. As new demands are created companies need to stay in front of customers to accommodate their needs or take lead in designing their future behaviors.

Unfortunately most companies are product oriented, leaving them baffled and sidelined at industry mutations and customer oriented services entering their markets. Understanding the customer and obsessing over them becomes the most important leadership trait in order to recognize the new logic and make sure the company has a stake in future economies.

QUESTION: What is your customer gap / where is your asymmetric competition coming from?

Part 2: Fundamental Changes In The Nature Of Consumption

The concept of The Premium Puzzle states that approximately every century customers develop new demand patterns that existing companies can’t meet. One hundred years ago customers wanted access and material wealth – this fostered the era of mass production and mass consumption. Today we are in the midst of a new migration between the mass consumption era and a new era. This time the premium puzzle isn’t access and the solution isn’t mass. Customers want individualization and increased control.
– Shoshana Zuboff, link

Companies investing in innovation to often make investments that try to prolong the current paradigm instead of take the company on a migration path to the next one. (According to C.Christensen only 20% of investments in innovation is done to find new revenue streams or business models)

QUESTION: Are you, through your innovation efforts, trying to prolong the existing paradigm or migrate to the next zone of mutation?

Continue reading the article on my blog: http://www.180360720.no/?p=5079