Navigating digital disruption

A recent Boston Consulting Group (BCG) article suggests that we face the third wave of digital disruption and directors need to understand the enormous challenges this presents.

The article, Navigating a World of Digital Disruption by Philip Evans and Patrick Forth, describes the first wave of disruption as the arrival of the internet – the dot-com era, which saw some businesses keep up and others failing to do so.  The second, faster and more disruptive wave that directors have seen recently is Web 2.0, which saw small businesses came to the fore, through self-organisation and collaboration, and which resulted in attacks on large business models. Small is beautiful, the authors say, and they grow to become large businesses such as Facebook and Google.

However, the authors describe the next “really big” wave of digital disruption as “hyperscaling” and explain that we have been moving towards this trend quite rapidly. To illustrate the point, they explain that there are now over seven billion active mobile phones, and over 2.3 billion mobile broadband subscriptions. Add to that almost 10 billion internet-connected sensors and an estimate of between one and 10 trillion sensors of other types.

The result is data, and lots and lots of it – 99 per cent is digital, and half has an IP address. “This means that half of the world’s data can now be put together, at near-zero cost, to reveal patterns previously invisible. Half of the world’s data is already, technically, a single, universally accessible document,” the article states.

The authors describe this as a digital map of the world, which has a scale of 1:1. The authors explain how it will transform businesses, how they will need to respond, and hence what directors should be now seeing in strategic plans:

1. Big data – new data is becoming available and the scale of analysis is growing. Firms need to keep up. New techniques will allow rapid experimentation yielding yet more new and better data. Firms need to consolidate all their own data and source external data with new partners and consultants.

2. Deconstruction – organise the business along competitive economics. Never compromise the competitiveness of one operation to protect another. Alliances along the value chain will be crucial.

3. Polarisation of economies of mass – “up-source” tasks to connected communities such as product support with the user groups and “down source” other activities to shared infrastructure.

4. Holistic, stacked architectures – doing the three above reveals the need to form groups and alliances where all participants can benefit from shared resources or “stacks”. It will be increasingly difficult to own or control a whole sector within an industry.

The full study can be found here.