Game of Digital Disruption

 

It’s time to take today’s technological threats seriously and change the way you do business.

Here is a brief excerpt from an article by Mathias Herzog, Tom Puthiyamadam, and Nils Naujok for Strategy+Business magazine. To read the complete article, check out others, obtain subscription information, and learn more about its publisher, Strategy&, please click here.

Illustration by Francesco Bongiorni

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If you haven’t noticed, a high-stakes global game of digital disruption is currently under way. It is fueled by the latest wave of technology: advances in artificial intelligence, data analytics, robotics, the Internet of Things, and new software-enabled industrial platforms that incorporate all these technologies and more. Every enterprise leader recognizes that, as a result, the prevailing business models in his or her industry could drastically and fundamentally change. A wide range of industries, such as entertainment and media, military contracting, and grocery retail have already been profoundly affected. No enterprise, including yours, can afford to ignore the threat. Yet most companies are still not moving fast enough to meet this change. Some leaders are still in denial about it, some are reluctant to upend the status quo in their companies, and some are unaware of the necessary steps to take. But these excuses are not good enough.

If your company is aleady struggling, then digital disruption will accentuate your problems. You may not have needed a plan for the new digital age yet, if only because it didn’t seem relevant to your industry. But you will need it now. Otherwise, no matter how well you run your business, it will not produce results at a scale that will allow you to compete. The companies with a clearly differentiated identity — those that stand apart from the crowd — are in the best position to thrive. For every company, this is an immense opportunity to rethink every aspect of the business, and chart a bold path for success.

Disruption, by our definition, means a shift in relative profitability from one prevailing business model to another. The dominant companies, accustomed to the old approach, lose market share to a new group of companies. Not every disruption is driven by advances in technology, but this one is. And because the software fueling this transformation can be applicable across traditional industry and business function boundaries, competitors can emerge from seemingly anywhere. In sector after sector, new entrants are lowering prices, meeting consumer needs in novel ways, making better use of underutilized assets, and hiring people with broadly relevant digital skills, who have collaborative, creative, and efficient work styles.

If you’re skeptical about this, it’s probably because you’ve seen digital technology appear before, without much of an effect on your core business. Even industries that feel pressure will not be completely trransformed. No matter how many people order their paper towels and canned soup online, for example, there will continue to be some brick-and-mortar grocers.

But the wave of disruption that’s cresting now is more comprehensive and far-reaching than any previous wave. Consider what has already happened to less physically based industries, such as media and entertainment. They have had to rework their business models, seeking revenue through social media and new forms of consumer engagement. Industrial and manufacturing companies are following a similar path: embedding logistics systems with sensors, linking supply chains with shared data and robotics, opening the door to innovations in energy and materials, and changing the way that every product is made and delivered.

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Here is a direct link to the complete article.

Mathias Herzog is a leading practitioner in digital strategies for Strategy&, PwC’s strategy consulting business. Based in Seattle, he is a principal with PwC US. He primarily focuses on the technology, media, and retail sectors.

Tom Puthiyamadam is a principal with PwC US, based in New York. He leads the digital services practice for PwC and oversees its Experience Center, which helps clients create next-generation experiences for their customers, employees, and partners.

Nils Naujok is an advisor to executives in the chemicals and steel industries for Strategy&. He is a partner with PwC Strategy& Germany, based in Berlin.

Also contributing to this article were the following people at PwC US: former global head of Strategy& Leslie H. Moeller; partner Mark Haller; principals Nicholas Hodson and Paul Leinwand; directors Namit Mehta, Martina Sangin, and Lina Woods; senior manager Miriam Ready; and senior associate Simon Jensen. This article is adapted in part from The Coming Wave of Digital Disruption, by Leslie H. Moeller, Nicholas Hodson, and Martina Sangin.

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