What's Driving Disruption and Digital Transformation?

Disruption and Digital Transformation

This post has already been read 7274 times!

A theme going around right now is that the new innovators, or “disruptors” as they’re often called, such as Amazon and Netflix, didn’t kill traditional companies like Borders and Blockbuster. The traditional retailers did it to themselves, Accordingly, their death was a suicide, all their own doing. Alberto Brea, the author of this idea, explains on Medium:

Amazon did not kill the retail industry. They did it to themselves with bad customer service.

Netflix did not kill Blockbuster. They did it to themselves with ridiculous late fees.

Uber did not kill the taxi business. They did it to themselves with a limited number of taxis and fare control.

And so on for Apple and music… You get the idea.

If they’d only been more in tune with what their customers wanted, so the argument goes, these traditional companies would have changed and survived, even thrived.

Brea recognizes the importance of technology in the equation, but argues that “technology by itself is not the real disruptor.” I agree, but many commentators have focused on the customer-centric imperative and dismissed the role of technology. That’s a mistake. An end without a means is futile. Further, most of these innovators have employed the same or very similar means to transform their industries, and there’s an important point to learn from their success.

“We’ve had three big ideas at Amazon that we’ve stuck with for 18 years, and they’re the reason we’re successful: Put the customer first. Invent. And be patient.”
-Jeff Bezos, Amazon Founder and CEO

What Did the Disruptors Really Do?

Digital transformation is both strategy and action.

What exactly did these new companies like Netflix bring to the market?

It wasn’t what customers wanted, since none of them really knew that they wanted what these companies were offering at the time.

No one conceived and made a viable online bookstore before Jeff Bezos. And no one proved the economic feasibility of the business model until he made it work.

Until Uber came along, most of us were quite content with buses, trains and taxis. Uber didn’t just lower fees, they revolutionized the way people offer and connect with ride services.

Essentially, the disruptors collapsed the chasm between supply and demand - Nigel Duckworth Click To Tweet

Essentially, what most of these disruptors like Uber, AirBnB and Amazon did, was create real time marketplaces, collapsing the chasm between supply and demand. They have cut out the layers of middlemen and associated expenses and delays, and match supply to demand in near real-time.

LinkedIn and Facebook and other social network services, also provide networks that connect people, and satisfy a non-economic demand or desire, that of socializing and sharing and consuming interesting content.

The one thing most of these disruptors have in common is that they provide a real-time network that connects people, and enables them to instantly and easily share information and transact. These networks connect supply to demand, efficiently and conveniently.

The “Uberization” of Everything is Underway

There is now an explosion of networks. You can use UberEats and other Uber-like services to have almost anything delivered. The Wag! app will connect you to a local dog walker. You can also share/rent just about anything. Spinlister is AirBnB for bicycles. Stop hauling your bike on road trips, rent one when you get there. DogVacay is AirBnB for pets. These networks are flourishing, DogVacay is doing $70 million in business a year.

These new, direct and highly collaborative marketplaces are popping up in all areas of the economy because they are proven to eliminate costs and speed up the trade.

This is not just better customer service.

What makes the new companies disruptors is that they didn’t just service customers better, they brought a radically new way of doing business to the market.

Yes, it is one that makes life easier for the customers. But a new kind of technology is at the heart of the transformation. Most of these disruptors implemented a network that simplifies the business processes, eliminate layers of intermediaries to directly connect trading partners and instantly service demands.

I can log on to a network like Amazon and quickly and easily buy just about anything I want with a few clicks. I can go log on to Uber and get a ride from LA to LAX in minutes, know the fee in advance, and have the transaction processed seamlessly in the background.

What Networks Do Differently

Networks (and I mean multi-party networks, not hub-spoke models), provide fundamental advantages over the old way of doing things. Here are a few examples.

Connect Once and You’re Connected to All

One big advantage is that you connect once and you’re connected to all parties on the network. You don’t need to connect individually to each person you want to communicate or do business with. At most, whether it’s LinkedIn, Facebook, or a marketplace like Amazon or AirBnB, it’s a few clicks to connect and you’re doing business.

Eliminates Data Redundancy and Latency

Let’s take a simple example. In the old days, you have an address book, either hard copy or an email address book. You had to manually maintain every contact. If someone’s phone number or email address changed, they’d typically alert all their contacts and send them their new contact info. Each recipient would have to update their records. The contact data was duplicated (and often different) across all parties. And in fact, you never knew whether you could trust it or not because the data was isolated in the “silo” of your address book.

Now consider a network like LinkedIn. Instead of multiple connections between individuals, they enable you to join the network and then interact with anyone else. Your information is represented once, in your profile. You change it there and everyone immediately sees your new email address and phone number. There’s a “single version of the truth” accessible by all your contacts. Everyone has real time access to one authoritative truth.

Join the network, set up your profile and you can do business with anyone else on the network, with all the data management and transactions handled by the network.

Provide Global Visibility in Real-Time

Although supply chain visibility has been a priority for many companies, a recent survey reported that only 6% of companies had actually achieved visibility. This is a huge missed opportunity.

All other things being equal, better data means better decisions. A real-time network with a single version of the truth provides a huge advantage by relaying actual conditions to all parties on the network, who can then act accordingly.

A good example of how useful this is, is the way Google Maps uses the signals of Android members of the cell phone network to compute and display traffic congestion on its maps. This real-time data allows other drivers to avoid congested areas, simultaneously speeding up their journeys and relieving the congested area of further burden.

In the complex world of supply chain, a real-time network with a single version of the truth means that all parties on the network can have visibility to orders, inventory, shipments and more. The moment a problem arises, all relevant parties across the network can respond immediately to resolve it. By catching it early, they have a much better chance of fixing the problem cheaply and before it impacts customer service.

Delivers a Rich Ecosystem of Intelligence, Potential Partners and Customers

Once you’re on the network, relationships between your connections and groups are exposed, offering new opportunities to you. As the network gains critical mass, new insights and opportunities emerge.

With the emergence of the Internet of Things, machine learning and artificial intelligence, the potential for new relationships, social and commercial, and even whole new markets is enormous.

Consider one example of a fleet owner of vehicles, it could be an airline, a taxi company or a carrier with a fleet of trucks. By managing the fleet of vehicles on a single network, where all travel, environmental conditions, and maintenance data is collected, new insights emerge that can reduce costs, improve reliability and utilization.

One customer on One Network manages a fleet of vehicles and uses data and diagnostics to optimize vehicle availability and minimize downtime (see: Using IoT to Optimize Fleet Management). If a vehicle is operating under challenging conditions, say carrying heavy loads across a desert, then maintenance can be matched to those operating conditions.  A similar vehicle might be doing fewer miles in a mild climate on paved roads, and so would be need less maintenance.

All this data can easily be collected by sensors and processed by algorithms, with maintenance and potential part replacements being ordered and scheduled automatically.

As another example, One Network also has a thriving operating network in the grocery value chain.  A grocery supplier can join the network once and instantly gain access to retailers on the network and their logistics service providers and carriers. With mutual consent, the supplier can get visibility and start collaborating and transacting business with network members immediately. The supplier can also subscribe to a rich library of intelligent agent-based services that enable smarter, more profitable, execution.

Such is the power of a network.

So let’s not underestimate what the “disruptors” are doing. It’s not just being more attentive to their customers. That always pays and can lead to new insights and strategies. But it’s rare that merely a change in operations delivers a leap forward in results. It also requires innovative technology that enables these new and better ways of doing business, technology, and methods that dramatically simplify business processes and do it faster and more efficiently.

Digital business networks are collapsing the supply chain, connecting supply directly to demand, and removing latency and reducing costs for all trading partners. Networks offer huge potential to all trading partners, and yes, to customers too. In fact, the most successful networks are oriented around the consumer. From using real-time consumer demand signals to providing a great customer experience, the customer is front and center.

In today’s competitive environment companies have to strive to be more consumer-centric. But a goal without a means is but a dream. Consumer-driven networks are a proven way to implement the customer-driven strategy that Brea champions.

If you want to know more about using the power of these new business networks in your business, take a look at the video Uberizing Your Logistics – aPaaS for Business Networks. It explains how these multi-party, consumer-driven networks can be used, and gives case studies and results.


Nigel Duckworth