Scotland’s economy could be massively boosted through the growth of many more local ‘digital disruptors’, businesses that utilize technology to achieve a position of market dominance in a particular sector.
In a short space of time startups like Uber Taxis and Airbnb have achieved mind boggling levels of revenues and market value doing exactly this.
Scotland has had some degree of success this way, notably Skyscanner. However in his Holyrood interview their former COO comments: “I think we can do better than that.”
He’s right. Scotland has a history as the most inventive nation in the world, and disruptive business models are achieved fundamentally through a process of invention – It’s the ingenuity to envisage new ways in which technology can be leveraged not the technology itself that’s critical.
The Oxford College of Marketing describes digital disruption as:
“Digital disruption is a transformation that is caused by emerging digital technologies and business models. These innovative new technologies and models can impact the value of existing products and services offered in the industry. This is why the term ‘disruption’ is used, as the emergence of these new digital products/services/businesses disrupts the current market and causes the need for re-evaluation.”
They cite examples like Kodak and how the consequence of failing to adapt to changing technology trends results in paying the ultimate price, absolute annihilation of the company. It’s a risk for even the strongest of organizations – Kodak entirely dominated the camera market up until the inflection point of new technologies and they refused to acknowledge this trend and consequently went bankrupt.
Another keynote example is Blockbuster Video and Netflix, highlighting that this is not a function of better business strategy within an existing market, but one of an entirely technology-enabled paradigm shift. Netflix didn’t do video rental better, they simply obviated the need to rent videos. Again Blockbuster refused to believe the threat was real and in turn were also driven into bankruptcy.
Taming the Digital Dragon
Scotland has a thriving tech startup community offering a cohort of ventures with this global scale potential, but equally importantly given it’s much smaller size and funding pool compared to Silicon Valley, a critical dynamic is supporting it’s many existing, traditional businesses to adopt these capabilities, to become what Gartner describes as ‘Digital Dragons’.
In their 2014 CIO Agenda report Gartner describes how ‘Taming the Digital Dragon’ (12 page PDF) is key to digital transformation strategies, with the hybrid cloud platform model as the enabling technology blueprint and business model. It’s also shared through this online presentation.
This has since been followed up with their 2017 briefing, where they state:
“There’s no pre-cut pattern for 21st-century business,” says Bard Papagaaij, research vice president at Gartner. “Safe pathways to success will be unknown and difficult to predict or even reliably test. CIOs must be armed with powerful adaptive capabilities and harness disruptive technologies and concepts to outmaneuver rivals.”
However despite this obvious threat, not all organizations are catching on. HBR reports in 2017 that:
“the average investment in emerging technologies (as a percent of total technology spending) grew just 1% over the 10-year period. In our most recent survey, executives say they look to digital initiatives primarily to increase revenue and reduce costs. These are worthy goals, of course, but it also means there’s less priority being placed on innovating and implementing the latest technologies into their products.”
Even more alarmingly when identifying IT’s Future Value Proposition McKinsey reveals that:
“Just 12 percent of all respondents say their IT organizations are very effective at leading digital transformations across their business, and only 8 percent say IT is very effective at the design of e-commerce and online experience.”
This would suggest that we’re likely to see more big name casualties join Blockbusters and Toys R Us as firms failing to adapt to the digital age, and the opportunity for aggressive disruption is still ripe.
Leading digital transformation – The strategy focused IT organisation
Gartner principally characterizes this heightened capability in terms of competitive threat and advantage: “All industries in all geographies are being radically reshaped by digital disruption — a “digital dragon” that is potentially very powerful if tamed but a destructive force if not. It’s a CIO’s dream come true, and also a career-changing leadership challenge.”
They describe it as a dragon because it so effectively destroys the competition in its field, through a massive scale of technology leverage such as Netflix, Airbnb and Uber, with brands like Kodak or the Blockbuster video rental chain examples of those being destroyed by failing to adapt to this digital disruption.
To replicate this level of IT-driven success experts recommend CIO’s embrace the threat as a career opportunity, such as Harvard urging CIOs to take a leadership role, and also to become ‘digital mentors.’
McKinsey says the CDO takes on the role of the ‘Transformer in Chief‘.
Research and insights from Deloitte and Gartner show that the demand for implementation of new digital capabilities will ultimately mean a large and sustained market for digital transformation skills, with considerable recognition and reward for those CIOs synonymous with advanced, successful digital programs.
A key facet is achieving ‘Dragon Class’ to encourage a culture of innovation. As Which 50 writes enterprises need to better flex their risk appetite, being ready to embrace uncertainty and exploit disruptive changes, a view that MIT Sloan builds on to cultivate a portfolio of venture ideas so that they can sow multiple seeds of growth opportunity and further develop those that achieve market traction and success.
As Gartner concludes: “CIOs now face the challenge of straddling the second era of enterprise IT and a new, third “digitalisation” era — moving from running IT like a business within a business, into a period characterised by deep innovation beyond process optimisation, exploitation of a broader universe of digital technology and information, more-integrated business and IT innovation, and a need for much faster and more agile capability.”