Disrupted out of nowhere
Vice President, Enterprise Segment, APJ
Alibaba is not a bank, but competes with banks. Same goes for Crowdfunding websites like Kickstarter that help individuals raise investment for their projects. Tesla is an automotive player, yet it’s competing in the energy industry with its rechargeable lithium-ion battery.
Companies like these are not just digital disruptors; they are “outsiders” that found room to compete in an industry that it’s not their own, all thanks to the power of technology and the amplifying effect of the mobile device phenomenon. Such boundaries will continue to fade away as more companies reinvent their businesses or new competitors – digital competitors! - come into play with added value to today’s mobile customer. That means real time, low-cost and, most importantly, personalized experiences. A recent study from Gartner says that by 2016, 89% of companies expect to compete mostly on the basis of customer experience, versus 36% four years ago.
With technology in the forefront of the market transitions and disruption across industries, at Cisco all of our customer conversations are really about digital transformation. Recently, I had the opportunity to present on this topic to customers and discuss some interesting conclusions provided by the Digital Vortex Survey from the Global Center for Digital Business Transformation, an IMD and Cisco initiative.
Other than telling us that 40% of the top incumbents across industries will be displaced in the next 5 years, the Digital Vortex also provides us with other interesting findings, precisely on how CIOs perceive the origin of disruption.
Is disruption coming from inside or outside your industry?
The answer really depends on which industries we’re talking about. Executives from several industries with long history of producing innovative start-ups – such as media and entertainment, telecommunications and retail - believe that start-ups will continue to drive disruption and mostly from inside. While there’s room for new players, these industries already lead the way from a digital transformation standpoint. Think of social media companies, Netfix, Amazon or Spotify. With their digital capabilities in place, it seems they won’t slow down anytime soon.
Figure 1: Who is most likely to disrupt your industry?
In less disrupted industries like healthcare, utilities or oil & gas, the perception is different and CIOs are expecting outsiders to take their world by storm – but not soon. Of all industries surveyed, these see themselves as less vulnerable to digital disruption (Figure 2). However, and taking the energetic industry as an example, where companies like Tesla are getting the market excited about innovative, cost-effective and inspiring technologies, is it really going to take that long for disruption to happen?
Figure 2: In your Industry, how many companies will lose their place in the top 10 due to digital disruption over the next 5 y?
Cisco predicts that by 2020 there will 50 billion connected objects to people, processes and things, 40 billion more than in 2013. At this pace, the digital business is every industry’s business, no matter how more or less vulnerable they think they are today. All of them are on a journey to digitize and that means reinventing their business and rethinking the digital capabilities they will need to support it, from the backend infrastructure to the customer-facing end.
Many variables will contribute to their success in the digital economy, but the way we see it is that a customer-centric approach will be decisive. And for that, businesses will need data analytics for customer insights and a simplified and automated IT operations for the best customer experience possible - personalized, cheaper, anytime, anywhere. The customer satisfaction is still the best strategy of all and that will never be disrupted.