For as long as there has been digital disruption, there have been those who have breathed a sigh of relief that it wasn’t going to happen to them.
Newspapers started to shut down and the music business lost half its revenue over a painful decade. People in analogue industries thanked their lucky stars that digital would never disrupt them.
After all, how could digital disruption ever affect things as physical as toothbrushes, as regulated as banking, and as secretive as military camouflage?
Yet now each of these once safe industries is ripe for complete digital disruption. How is that possible? Because the definition of disruption has changed. Before digital, diligent readers of Clayton Christensen’s seminal work on disruptive innovation committed to memory the proposition that disruption requires a replacement of one product with another. Just as diesel excavators were replaced by hydraulic excavators and mainframe computers were disrupted by PCs, so were CD albums replaced by digital music tracks.
Digital disruption changes that. In digital disruption, we don’t have to replace the end product to digitally upend an industry. We can digitally alter any piece of the value chain – from a product’s creation, production, distribution, or consumption. Toothbrushes – with an added accelerometer and a Bluetooth radio – can generate data that a smart company can use to add a digital layer to the experience of oral hygiene. Imagine a Kindle-powered toothbrush and you have some sense of how a simple, analogue product can suddenly become a tool for building a digital bridge to a customer, one that could generate health-related transactions for the retailer for years to come, not to mention partnerships with insurance providers and dentists.
Banks have long hidden behind their regulated status to claim that digital just can’t touch them. Yet hundreds of thousands of Mint.com users don’t bother to check what regulators think when they sign up to aggregate and manage their financial portfolios. Banks are under assault on the B2B front as Square offers to make any yoga instructor a credit card-accepting merchant for just 2.75% per transaction, significantly less than what I had to pay years ago as a small business owner where my access to merchant privileges was controlled by my bank.
Note that none of these things replaces the current products the customer depends on. Instead, they enhance them. They actually encourage more engagement with the toothbrush or the bank account. That’s the defining characteristic of digital disruption. Instead of wiping a prior generation of products out, it actually enhances them, expanding the benefits people get from them. Today people listen to more music than they ever have and thanks to Square, there will be more merchants capable of facilitating credit transactions.
That’s why rather than cowering in the face of the coming wave of digital disruption, companies in every business should embrace it. Because digital disruption will give them more than they have today – more customers, engaged more deeply, consuming more product experiences. But only if they choose to disrupt themselves before someone else does it for and to them.
This even applies to military camouflage. If there’s a more physical industry, you’d be hard pressed to find it. Camouflage uses physical cover to hide physical objects – some of them very large like tanks and helicopters. But you don’t have to replace existing camouflage technology in order to declare military camouflage digitally disrupted. Guy Cramer, founder of HyperStealth, one of the world’s most successful (and certainly the least likely) military camouflage outfitters, began using cheap digital tools to disrupt the very closed and somewhat-bloated industry as early as a decade ago. Using off-the-shelf computer software he generated and copyrighted thousands of digital camouflage patterns, optimised for different climates and physical environments. This first disruption changed the way people created camouflage. Then he further disrupted the way people use camouflage. Rather than only pitch the large money-making contracts to outfit an entire wing of the armed forces, Cramer can turn to a standard large-format fabric-capable printer to turn his patterns into usable camouflage for a small team of, say, Navy SEALs on a deep-cover mission. By changing both the way the product is created and how it is used, Cramer has rewritten the economics of the camouflage industry.
As Cramer’s example shows, analogue businesses experience disruption not at the level of the product first, but at the level of the process for creating and delivering product value. Once digital disruptors have a hold on the process that shapes the product, they can move on digitally disrupt the product itself. In the case of camouflage, Cramer is now poised to digitally disrupt the camouflage fabric itself. By satisfying customers for so many years at a low, digitally-justified cost, Cramer has been able to invest in leaping ahead of the rest of the industry and is now showing armed forces around the world his Quantum Stealth technology, a fabric that bends light around stationary objects.
The bank, the toothbrush, and every other previously safe analogue industry will be next, as disruptors seize the customer relationship and alter the economics for delivering value. Only then will these industries be in a position to finally replace the products they were historically optimised to deliver. Your company and your industry are next.
James McQuivey is the author of Digital Disruption: Unleashing the Next Wave of Innovation. He is a vice president and principal analyst at Forrester Research and the leading analyst tracking the development of digital disruption.
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