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Strategy & Organisation, Design & Technology June 15, 2020

Win in the face of disruption through digital investment

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It’s very easy to fall for the narrative that disruption occurs overnight, an instant transformation that turns entire industries upside down. In reality, it takes time for disruptive ideas, equipment and trends to take shape and take hold. Remembering this is important, as the overnight view makes disruption seem like an unstoppable force; that legacy businesses are powerless in the face of change. This isn’t true. Disruption occurs over time. Businesses always have time to react, respond and adapt. Even with the Covid-19 pandemic, the disruptive effects were accelerations of existing trends – the shift towards e-commerce, the growth of flexible working, and the need for digitising processes to streamline business operations.

What kind of disruption do we mean?

Anything that disrupts forward-momentum and forces a response. These disruptions can come in many forms: economic, geopolitical, security, environmental, social, competitive or technological. They can be anticipated a long time in advance or come out of nowhere.

Typically, when considering disruption, our thoughts go first to digital change, new innovations that reshape industries. The belief in disruption’s instant overnight shift is particularly strong around digital innovations; the pre-Google/smartphone/social media era feels so archaic that many forget it took time for Google’s search algorithms to create a good service, for smartphones to become affordable, for the FOMO of social media to take hold. Uber is another fine example, a disruptive setup that flips the taxi model on its head, but is still rolling out across more suburban areas, taking time to expand its reach.

Virtual reality is a particularly interesting example. For decades, VR has loomed over the entertainment and experience industries, a disruptive idea that’s always on the horizon. It’s only in the past few years that VR has picked up, made possible by increased accessibility of devices and an increasing number of VR experiences, particularly in the gaming industry. The lead time of VR has been so long that augmented reality, easy to use through a smartphone, appeared in VR’s place and started transforming social media and shopping.

In both these examples of digital disruption, there is a clear period in which companies can spot a developing trend or innovation and start to plan around the effect it will have. This is why digital investment matters. Having the awareness to spot developing trends in the industry and to produce and invest in a solution is the difference between falling behind and staying at the forefront of your industry.

Is this really something we should be thinking about?

Preparing for disruption means considering where it can come from. The aforementioned digital disruption is an obvious area, but it’s important to broaden out from this point. Look to the macro-economic and political changes that can occur, such as recessions, political change and regulatory changes to international trade. For any business operating in Europe, Brexit is a clear example, still an unknown, prompting companies to avoid long-term investment.

Crises, whether it is a public health emergency, environmental or social upheaval, are major drivers of disruption. Environmentally, there is a consumer shift towards durability and sustainability, and governments are responding to the climate crisis with anti-waste laws that directly affect industries such as fashion and food. National (and international) emergencies also have to be taken into account. The economic cost of the Australian bushfires is estimated to exceed $44bn. And, clearly, the Covid-19 pandemic continues to cause untold damage to the global economy.

Finally, consumers and categories morph over time. Consider the disruption we see as a new, distinct generation enters the workforce and starts spending on consumer goods. These points also intersect — climate change and the emergence of conscious consumers have supercharged the need for businesses to adapt to a more sustainable method of operations.

How to win

In each of these cases, disruption can be planned for, either as an inevitable development or a ‘what if’. Inevitable developments, like the growth of e-commerce, rely on conditions being met, while ‘what if’ situations are low probability events that could take place. In each case, prior planning and digital investment can both lessen the damage and create a positive outcome in the wake of change.

Don’t wait for the disruption to happen, be ready for it. Prepare. Think of how the inevitable changes and potential ‘what ifs’ fit with the digital roadmap of your business. The two often link together, like the inevitable change of consumers moving towards e-commerce is also the solution to the ‘what if’ of a global pandemic closing retail stores.

There are a number of plans to make and actions to take when considering the impact of disruption. Installing business and IT strategies that are adaptable is particularly helpful. Test this adaptability to see if they survive a series of ‘what if’ scenarios. No scenario is too out there. Seeing as we live in a time of continual change, keep adapting and testing all the time. 

Identify potential disruptions: what warning signs should you be alert for? What areas of the business will be hit hardest? What strategies do you have lined up to deal with it? What possible obstacles may affect these strategies? What’s your timeframe in setting it all in motion? 

Protect a minimum of innovation spending. In financially difficult times, this is often the first thing to go, but making a short term move can lead to even more difficulties in the future. It’s also important to make sure innovations address both new and existing customer needs in a superior way. Don’t invest in new tech for new tech’s sake. Updates and upgrades must answer key consumer needs.

As a reference point, set your competitive standard on industry giants, not industry peers. When considering the impact disruption could have on your business, also think of how it can affect the industry giants. Will they struggle with something your business can definitely do, creating a space to challenge their market share?

Case: Indigo Ag

To see the effect digital investment can have around inevitable developments, look to Indigo Ag, the US-based agriculture technology company. Recognising the economic and environmental costs of current industrial agricultural practices and volatile weather conditions, Indigo used machine learning and digital technology to build a productive, profitable and sustainable solution to the challenges facing agriculture. Data is captured throughout the business and fed into the Machine Data Factory, giving the Indigo research team an overview of crop performance across the world. To support sustainable practices, Indigo also invested in Indigo Marketplace and Indigo Transport, two interlinked platforms that connect buyers with the most efficient grains, and pair the growers with logistics companies to create an economical supply chain.

Invest in innovation & reap the reward

Companies that invest in research and innovation are in the best position to thrive during uncertain times. Begin tracking the upcoming shifts and planning around unlikely events today, to give the lead time that allows your business to innovate and develop a solution that can make the company a market leader when the sector turns upside down. Anything else is a major risk.

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