How digital disruption impacts your business

Digital disruption is the change that happens when new digital technologies and business models affect the value of existing products and services. Yet the term is often misused to describe simply using digital tools to compete better.

So what does digital disruption really mean? And how do you turn it from a threat into an opportunity? We spoke to Tom Hallaert, managing partner of Blastic, who followed an online course on digital disruption at the University of Cambridge, about his insights and how Blastic can help businesses facing disruption.

"Digital disruption is often used as a buzzword. Many Blastic clients are confronted with it, so I saw this course as a great opportunity to learn how we can support them even better.

When I saw the syllabus, I was eager to discover how the University of Cambridge looks at digital disruption. The course covered the characteristics of different business models, what you can do when your business is in a disrupted context, and how you can adapt your business model to it."

"That you can turn an existing, trusted business model completely upside down in a digital way. Hotel group Marriott, for example, announced a new hotel in New York City with more than 5,000 beds, one of its largest hotels. It was a huge investment and a project that took a long time. The CEO of Airbnb answered: 'We provide 5,000 beds in one day.'

Marriott invested in a brand-new building, while Airbnb is purely a platform. Airbnb can add hundreds of places to stay every day, without huge investments. You no longer need to stay at a Marriott when you travel to New York, because Airbnb offers all sorts of accommodation.

These digital platforms are huge competition for hotel groups. That's what disruption is about: new digital platforms can simply destroy a successful existing industry. That was one of the most important lessons."

Industries that think digital disruption won't happen to them live in a naive world. Just because it isn't happening now doesn't mean it won't happen in the (near) future.

"The subscription economy, used by companies like Amazon, Disney and Netflix, came up throughout the course. It's a model where you get content, products and services in exchange for a recurring payment. In short, everything revolves around subscriptions.

This model disrupted the media and entertainment industries, because it changed how customers access content and how advertisers monetise it.

The course also went into the consequences nobody talks about. On the one hand, the revenue of subscription models depends on the number of subscribers, and it's questionable whether there's a limit to that. On the other hand, people now subscribe to several streaming platforms, which weighs on their household budget.

Together, these two elements mean this model won't hold at some point. For an industry that depends on subscribers, that can trigger a serious crash."

"I'm convinced it's an opportunity for every business, but each company is responsible for taking digital disruption into account.

Companies that saw it as a threat instead of an opportunity are now struggling to survive. Kodak is the best example: digital cameras completely disrupted film photography and photo processing. Making film was an enormously complex manufacturing process, so the barriers to enter the market were high and competition was tight. Digital imaging was far outside Kodak's core capabilities, which made it hard to compete and offer something distinctive. Instead of facing the disruption and investing in the future, management ignored or failed to see what digital technology would bring.

As an established player, you already have a serious advantage over potential disruptors. You know the business and the client base, and you probably have an R&D department that follows the latest trends. For new disruptors, it's much harder: they need to find investors, the right people, study the market..."

What could be a threat of disruption can definitely be turned into an opportunity, with a positive mindset and a proper plan.

"Definitely! It was Steven Sasson, an engineer at Kodak, who invented the digital camera. His management was very sceptical about the early prototype. When the technology developed and gained scale, they saw the evolution coming. But the disruption brought challenges on many fronts, and instead of driving change, that led to a lack of determination. If Kodak had invested in the innovation and developed the digital camera themselves, it might never have disrupted their market. On the contrary, it would have been their innovation.

Industries at risk of disruption can turn it into an opportunity by innovating. If you keep investing in innovation, I think you have a serious head start, and disrupting your industry, product or service becomes much harder."

"It's essential that we think about a disruption strategy together, as a team. The pace, scale and impact of innovation have accelerated over the years. Innovation can increase the value of existing products and services, but it can also make existing business models obsolete.

To support our clients, we need to talk with them and give them the right advice on how we can face these challenges together. That was the foundation of this course, and it gave me several new insights that will help us support our clients even better."

Questions about digital disruption, or can you use our help? Get in touch with our experts: they're happy to help.