Digital Disruption

We all heard it in 2016, didn’t we? ‘Digital Disruption’. It buzzed around like ‘Big Data’, ‘Gamification’ and ‘Social Selling’ did in previous years. Terms which, in fairness, many businesses seem to have ignored quite happily for some time…

But is digital disruption something we should pay attention to? And what is it, really?

Put simply, digital disruption refers to the way today’s technology makes it easier for someone else to come in and steal part of our business pie.

An old favourite strategic lens, Porter's Five Forces model, suggests that competitiveness in the market is influenced by these fundamental forces:

  • industry rivalry among current competitors
  • threats of new entrants
  • threats of substitutes
  • bargaining power of buyers
  • bargaining power of suppliers

By giving them greater access to information about our - and our competitors' - products, services and pricing, the internet has been increasing the bargaining power of customers (buyers) for a while now. What's changed in recent times is the sheer scale and ease with which cloud computing - long-promised but now delivering - can rapidly support 1) new entrants, and 2) substitutes.

Threats of new competitors and substitutes

Historically, getting a new business up and running involved high up-front costs and a lot of investment.

Because of that, many businesses could bank on only having a few new competitors setting up in their field at any one time. In the past, you could also expect rolling out to an additional country or new market to also be capital and labour-intensive. And moving with the times for traditional bricks-and-mortar businesses meant investing heavily in connecting up disparate technology systems to make sure they can give the kind of service their customers consider ‘normal’. 

Faster and cheaper global reach

But today, new competitors can stand up a full technological stack through the cloud with a simple monthly subscription. Newcomers or substitutes move from concept to commercialisation quickly, and without the pressing need for up-front investment that existed in the past. Rather than spending time and money equipping themselves to reach customers digitally, cloud platforms do this right from the start.

There's no more obvious example of this than Uber. The company quickly stood up an intermediary market connecting buyers and sellers directly, and bypassed the typical barriers to entry faced by new taxi companies (assets, regulatory and the like).

Market shaping - smaller pieces of the pie

The ability to rapidly stand up a business on global cloud technology also avoids the need to compete in an industry on existing terms. Rather than investing in the same stock, physical plants and business models common to the field, new entrants carve out new markets instead. Current technology lets them connect suppliers and customers in new ways – giving them smaller, but perfectly formed, pieces of the pie.

Uber uses cloud technology to connect drivers and those who need to get from here to there, creating a new marketplace. AirBnB connects people who need somewhere to stay on holiday with those who have an extra room, taking market share from the hotel industry while avoiding the financial overheads of land and buildings. One thing financial apps such as Venmo can do is enable groups of friends to share their restaurant bill, taking a small slice of the transaction as commission. This last bite of the banking pie has shaken up traditional operators who are now scrambling to catch up.

On an everyday basis, readily-available videoconferencing technology such as Skype for Business has enabled collaboration across great distances, enabling companies to reduce travel budgets and motivating airlines to argue the importance of ‘being there’ in person.  

The way these interlopers bypassed the need to compete on the industry's current terms and use cloud computing to go after smaller pieces of the pie, is the very definition of digitally disrupting the incumbents' market.

Microsoft platform approach

Digital disruption turns the traditional Five Forces model inside out. Instead of looking for how these forces disrupt ‘our industry’, the capabilities now available through cloud platforms enable us - and others - to reshape the industry and markets in which we compete. And that means the industry itself may alter in unexpected ways and at great pace.

That’s the reason Microsoft put so much development into the strategic value of the new Dynamics 365 platform approach.

Dynamics 365 - especially when combined with Microsoft's wider Azure intelligent cloud computing services and Office 365 - provides an unprecedented level of connection between business systems, everyday productivity tools, and end-customer-facing tools with a global reach. Microsoft is investing massively in a pre-integrated tool set that allows companies to go to digital markets with innovative business models at higher speed, with a greater reach, and at a lower cost than in the past.

Here are a couple of great places to further explore the topic of Digital Disruption:

  1. Microsoft's Digital Transformation hub: https://explore.dynamics.com/
  2. Harvard Business Review's digital business model hub https://hbr.org/insight-center/how-digital-business-models-are-changing  

And, considering the capabilities the cloud and Dynamics 365 now gives you, here's one thought-starter to consider:

What's the smallest-sliced product or service my business could sell?

Jonathan Rickard, Dynamics Product Manager

jonathan.rickard@fusion5.co.nz

 

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