Digitalization and strategy approach: Disrupt your own business

Jan 26, 2017

Disruption is a relatively new buzz word that you hear often especially in strategy workshops. Incumbent companies are concerned about the disruptors, often start-ups, that will change the game in the industry and market. Regardless of the industry, the change will be a reality in the very near future and it will happen fast.

Digitalization is the main driver for transformation and the competition will be between business models, not between products or services in the upcoming years.

But, why it always has to be so that it is someone else who is going to change the game? Why are we so concerned about the start-ups, those evil disruptors, that will inject and kill us bit by bit, or just cause chaos among established processes? What if we, an incumbent, will be the evil disruptor before cool start-ups eat us alive? What does it mean from a strategy point of view? Can we really disrupt our own business?

The answer is YES, if you still want to be in the business and stay relevant. However, disruption (e.g. offensive strategy) is just one of the strategies that companies can response to digital competition, but in many industries and businesses, it will be the only applicable strategy. Implementing defensive strategy is short-sighted and may be too late for many incumbent companies.

Transformation to disruption

Implementing offensive strategy means a huge transformation process for many incumbent companies. Transformation is a journey and will not happen overnight. However, high level of agility is needed especially if you are in media, entertainment, technology, retail, financial services or in the telecommunications business because digitalization is already here to stay.

Finding the right path for transformation requires insight about where your market is heading, formulation of strategic foresight. Once you know the direction you want to head, start executing.

Here’s a good check list for legacy companies responding digital competition and industry disruptors by IMD professor Michael Wade:

  1. Assess your digital opportunities and threats (why?)
  2. Choose how to differentiate: combine of choosing cost value, platform value and experience value (what?)
  3. Choose your appropriate response strategy: offensive or defensive strategy (what?)
  4. Build digital business agility (how?)
  5. Define the roadmap for digitalization across your organizational value chain (How?)

Disrupting your own business requires loads of courage. To start something new you have to stop doing something that used to work before. New business models utilizing digitalization will need new competencies, processes, tools, agility and especially leadership.

For planning the new bold and brave future, there are many frameworks and tools available. One of the good ones is the three horizons framework, here adapted by Panu Kause. And of course, McKinsey’s other models and tips for incumbent companies facing disruption by Chris Bradley and Clayton O’Toole.

Start disrupting your own business now!

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