Digital Disruption Masthead

Digital Disruption: A New Risk Profile

Rhommer Varilla • August 6, 2018

We have seen multiple singular waves of technology disrupt businesses and change the way we live our lives. The web has brought new ways of publishing content, buying products and collaborating. Mobile smartphones added ubiquitous access, socializing online, global positioning system and other sensor data. The cloud made it possible for companies to focus on their business instead of how to keep up with the rapidly changing technology landscape. In the last three decades, we have seen once dominate companies become eclipsed by new companies that have leveraged emerging technology in ways that have radically changed the experience. Once dominant players like Kodak, Blockbuster, Barnes & Noble and BlackBerry are practically nonexistent. Whole industries like the consumer retail, transportation and hospitality have been disrupted by companies like Amazon, Airbnb, and Uber.

Each technology wave on their own has had a major impact. Every wave contributes to cumulative capabilities that lower the barrier to innovation and creates an opportunity for products and services that previously were not possible. The viral nature of information online helped Facebook go from 250 million users in 2009 to 1 billion users in 2012. Cumulative web, mobile and cloud capabilities helped Airbnb and Uber come out of seemingly nowhere and radically change the experience. After nine years of existence, the valuation of Airbnb topped the hospitality industry at $2.3m in 2017. The average lifespan of S&P 500 companies have been shortening over the last half-century. Based on this downward trend it is logical to expect many long-standing industry incumbents to become be displaced by companies that have applied emerging technology to achieve higher cost efficiency, better quality, more features and better overall experience to the consumer.

New waves are emerging. Each of them individually has the potential to have a similar impact. Many of them will converge and bring a level of disruption that we have never seen before. Already we are seeing evidence of artificial intelligence in everyday experiences. More and more connected devices are collecting data and controlling the environment in ways that were not possible before. Distributed ledger technology (e.g. blockchain, bitcoin) are reducing intermediaries in the value chain. Every business is now at threat of disruption in a major way.

Facebook Chart

Company Lifespan Chart

Lodging Chart

For decades companies consciously decided to wait on adopting new technology. The risk profile was such that it was high risk to adopt technology early. [see black line in image below] Technology was expensive. It often did not scale well. It would require an expensive organizational change to adapt. The user experience was not intuitive and efficient. It was relatively safe to be a Late Majority technology adopter. These companies benefited by letting others exercise the technology and experience the hardship of bleeding edge technology. The journey of a given technology on the Hype Cycle was long relative to the technologies of today.

The risk profile has changed. Many of the same risks still exist but the cost of entry is lower today with cloud technologies, open source software and technology built for easier integration. In the new risk profile [see red line below], companies that are late with experimenting or adopting new technology are at risk of their business or industry being disrupted with devastating impact. Companies that shift from a rigorously planned strategy and incremental growth mindset to experimental and adaptive strategy will be positioned best to thrive in this new digital landscape.

Risk Model Chart

If your company has not started their Digital Transformation strategy the time to begin is now. If you need a jump start, SafeNet Consulting can bring experience and perspective to help!

Share
back to blog