In my previous article, I talked about the emergence of digital disruptors and the challenge they pose to the incumbent players. I defined what a digital disruptor is and what key questions the leadership must debate internally.
There can be different types of digital disruptor, each requiring a different approach to deal with. In this article, I would like to talk about six types of digital disruptor- the new entrants, the lateral entrants, the market place creators, the supply intermediaries, the digital institutions and the digital advocates. Each type presents a unique challenge and requires a unique approach to deal with.
1. The new entrants
The new entrants offer similar kind of products and services as incumbents but they do not carry the legacy of old. They bring a new mindset, invest in the latest technology and operate with contemporary management practices. E.g. a new bank will invest more in digital assets than the physical assets or a new airline will invest more in lean management than doing everything in house. The new entrants will invest more in technology, both ICT and operations, and create new bases for competition. The incumbent will probably find it difficult to compete on these new bases and more often than not defend their existing bases of competition.
2. The lateral entrants
The divide between related industries is vanishing. Media houses get competition not just from other media companies but even from other sources like the social media platforms like facebook, whatsapp and linkedin. Users spend time and read news, look for entertainment and interact with others from their mobile phones, which is competing with electronic media and movie creators. For a generic need of entertainment or socialising or information, there is a plethora of options, considered earlier as separate industries.
Many digital market places are at the cusp of multiple industries and creating a new space across these industries, though around a common theme. E.g. travel portals are impacting not just the airlines industry but even the hotel and taxi industries.
3. The digital market place creators
Digital market place is the most prominent and the visible form of digital disruption. The market place creators are aggregators and place themselves between the product and services providers and the customers. They create a value for the customers in terms of novelty, convenience and economy. Incumbents generally align with the market places as it is a potential avenue for sales but may lose some power of their brand and its ability to charge premium. They need to continuously invest in innovation and unique customer value in order to retain the pull.
4. The Supply intermediaries
Though very rare today, these digital disruptors can challenge the existing power distribution in the value chain. When the power of the suppliers of input materials, especially the commodities, can be enhanced by their coming together on a platform, the input prices may go up, thus creating profit pressures on the product and service providers.
5. The Digital Institutions
The financial institutions like the regulatory bodies, the tax departments, the banks etc are completely digitized and over time businesses will have to be seamlessly connected with these institutions. This shall mean need for higher transparency, financial discipline and compliance. What may be falling through the cracks today will be visible when greater integration with digitally led institutions is achieved.
6. The Digital Advocates
Various types of activist and advocacy groups and forums like the aware consumers, employees, labour unions, ecological and social groups shall gain an extra edge as they adopt digital means and become a unified force. Though even today many of these groups are active on the internet, they are widely distributed. When such initiatives gain size, integration and regulatory backing, managing them will require extra attention and efforts by the business enterprises.
Business enterprises need to approach each one of these differently based on what works best- competing or aligning with them. Ignoring them may not be an option.
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