Extraordinary Digital Disruption Mini-Case Studies

R. D. certainly has that right, doesn’t he? Think about it for a moment and I’m sure you can come up with several examples. These are scary times for many industry veterans. Hardly a day goes by without news about disappearing businesses and shrinking revenues. And why? It is called industry disruptive change and we will examine some great digital disruption examples.

Is your company in an industry that is experiencing digital disruption? Many industries have experienced this “disruptive” change, a phenomenon that has transformed many. Even with an excellent industry reinvention roadmap, there is little guarantee of survival. But still, you must do something; will it be to build a shelter or a windmill?

The bad news is that when the dust of disruptive change settles, historically even the best-run companies typically end up in the loser’s column.

Let’s examine some very notable industry examples:

Computer Industry

In the computing industry, for example, Digital Equipment Corporation missed the personal computer (P.C.) in the early 1980′s, started to fall apart in the early 1990′s, and got acquired by Compaq in 1998.

Dell Computer’s low-cost business model destroyed Compaq, forcing a merger with Hewlett-Packard (H.P.) in 2001. Dell’s continued incursion into the P.C. and printing office now threatens H.P., which announced more than 10,000 layoffs last year in an effort to remain competitive.

And who can forget IBM and its denial of the personal computer? After the last 35 years, they have gone from the largest computer manufacturer in the world to barely being in the hardware business at all. Luckily new leadership found new markets to keep them in an industry leadership position.

Publishing industry

Publishing is an industry full of traditions and habits. But it is also a very inefficient business. For ideas to get from one person to another, they have to be put down on paper, that paper has to be distributed to a bookseller, and then someone has to decide to buy the book and eventually receive the ideas expressed in the book.

A digital infrastructure built by Amazon for finding books or by Kobo for reading books makes that whole process shorter and cheaper. Ideas can go from one person to another much more quickly and with much less cost and hassle. That created an opportunity for new competitors to jump in and try to publish books.

The publishing industry is undergoing significant disruption. Amazon is pushing down book prices and controlling the point of sale. And self-publishers are flooding the market with cheap books, producing some very high quality work that competes with traditionally published books, and proving a new business model that may well lure authors away from traditional deals.

What’s important to learn? Try not to wait until you see the lights of the on-coming train before you act. Seize the initiative early.

Typewriter industry

This is my favorite example. Why you may ask? It is simple, the largest competitor in the industry, Smith Corona new where the market was going and had prepared itself. But just couldn’t let go of the old for the new.

Here is a synopsis of the story. Smith Corona was the best typewriter company for … well, a long time leading to the late 1980’s and the development of the personal computer. From then to the mid 1990’s, they became a leader in technologies related to typewriters , such as:

Grammar checkers

Built-in dictionaries

Laptop word processor

PDA’s

So they had a strong foothold in personal computer word processing just as personal computers and word processing were in their infancy.

Interesting, no?

They were in a perfect position to transition from the typewriter market (which was soon to be digitally disrupted) to the word processing market.

But they didn’t pull the trigger. Why, you may be thinking?

My view and takeaways:

They viewed the personal computer market as a rival technology and market. It was to a degree … but it was also a complementary market and technology at that time.

They believed they could win the competition by continued improvements in typewriter technology.

They found it too difficult to give up their …cash cow’s market position for a new market (Even if you suspected the long term forecast was pointing to your competition).

They were locked in to one frame of reference and refused to consider alternative situational views.

It is all about the timing of decisions, the culture of change, and the ability to take risks. If you want to have any chance of avoiding digital disruption … you need to be able to make changes and do so before you have to. Smith Corona had the opportunity but failed to take it;

Newspaper industry

Back in 1993, a man named Gordy Thompson worked for the Times. His job title was “internet services manager,” and I’m sure the big bosses at his company had no idea who he was, or what that really meant.

What did he try (and fail) to tell them?

“When a 14 year-old kid can blow up your business in his spare time, not because he hates you but because he loves you, then you got a problem.”

You see, Thompson was in the habit of hanging out on internet message boards. And he had noticed that fans of the Miami Herald’s popular humor columnist Dave Barry were re-posting Barry’s columns online, so people who couldn’t read the Herald could enjoy them.

In other words, the greatest competitive threat for newspapers was… the popularity of their own content. People wanted more of it, and they wanted it instantly.

Lessons learned? Don’t ignore the handwriting on the wall, no matter how much you might like to.

Higher education

Do you think most institutions of higher learning are facing the on-coming train? Rethinking education? Not too many in our opinion. Certainly not enough. And maybe too little, too late.

What about the average college student? Have they started to face the dilemma? Again not too many in our opinion. Most are still accepting a business model than will not break even for a long time, if ever.

Related: Ideas on Learning Reform and Its Instructional Implications

An article in the Wall Street Journal reports that since 1990, the cost of attending college has increased at four times the rate of inflation. Let me let that sink in … four times inflation rate. Meanwhile, student loan debt is approaching $1 trillion. And half of recent college graduates don’t have jobs or don’t use their degree in the jobs they find.

Is the on-coming train really digital disruption in disguise?

According to the article, Georgia Tech, a highly respected University, is offering the first online master’s degree in computer science. More important, the program will cost about one-fourth of the traditional on-campus degree. Granted, colleges have been offering various online courses for years. But this move by Georgia Tech significantly alters the playing field by offering a complete graduate program at a fraction of the usual cost.

Ignoring the inevitable won’t make it go away, will it?

TV and cable industry

So what is going on with alternatives or substitutes to cable and satellite services? For everyone who LOVES television but HATES being forced into a raw deal, there’s been a lot of good news lately.

These are scary times for cable and satellite television veterans. Hardly a day goes by without news about disappearing viewers and shrinking revenues. And why? It is called industry disruptive change or otherwise known as digital disruption.

See our article on creating roadmaps for disruptive change.

The winds of change are definitely blowing and now is your chance to select an alternative to cable and satellite services.

These are the cable and satellite providers that many of us fork over more than two thousand dollars of our hard-earned money to, year after year. And even though we’re seeing more ads and less real programming than ever.

If you have an Internet connection, you can probably ditch your pricey cable television subscription without noticing even a hiccup in your viewing habits. You’ll still be able to watch all the shows you love, and will even find some new favorites.

By combining a number of streaming services, you can enjoy almost all the same programming you get out of a cable subscription while saving money in the process.

So what is the cable industry doing? Not much and certainly nothing that will save their business.

Banking industry

The innovation challenge facing the banks is tough as they have inherited obsolete legacy systems and mindsets. Consider when 40-year old legacy banking systems meet the new iPhone 6 … the results aren’t pretty.

As one might expect, non-banks are moving in to meet the need. This includes IT giants like Google, Apple and PayPal, and traditional retailers like Wal-Mart.

Our study of the banking industry suggests that their problems, very pressing, they can be overcome. Most banks still focus a disproportionate share of time and attention on their traditional products. While not ignoring those products, allocating more resources towards new products and business processes are essential. Like on-line services and less investment on brick and mortar infrastructure.

It seems clear to us that banking companies must reimagine their content and business models if they hope to succeed in the medium to long term.

There is at least a little good news for the banking industry: lessons learned from past failures can help to ensure success in instilling needed change. Even better, banks have real assets to bring to this fight, and a number of experiments with new products and business models could point the way towards future positive change.

Three barriers typically make it difficult for banking leaders (just as in our earlier examples) to get disruption right:

Fail to spot the disruptive change early enough

Disruptive change tends to start innocently at a market’s fringes. Market leaders tend to dismiss early disruptive developments because they just don’t affect their core business.

Fail to allocate sufficient resources towards disruptive offerings

Disruptive innovations often have lower performance and lower prices than established offerings. Companies find it hard to prioritize spending time and money on disruption when they have seemingly attractive opportunities in their core business.

Force the disruptive initiative into the existing business model and product concept

The innovation challenge facing the banks is tough as they have inherited obsolete legacy systems and mindsets. Consider when 40-year old legacy banking systems meet the new iPhone 6 … the results aren’t pretty.

As one might expect, non-banks are moving in to meet the need. This includes IT giants like Google, Apple and PayPal, and traditional retailers like Wal-Mart.

The bottom line

The internet and digital technology have brought significant change and, occasionally, death to many industries. Your company and industry will not be the exception, as revenues and customers will rapidly switch to the next new digital product set.

A return to the old days is not in the cards, is it? But does that mean that you are doomed? Not yet, but certainly likely, if you do not act early and in dramatic fashion. Don’t convince yourself that you can weather the storm and maintain the status quo.

It won’t happen.

Mike Schoultz is the founder of Digital Spark Marketing, a digital marketing and customer service agency. With 40 years of business experience, he writes about topics that relate to improving the performance of business. Find them on G+, Facebook, Twitter, and LinkedIn.

Mike Schoultz writes about improving the performance of business. Bookmark his blog for stories and articles. www.digitalsparkmarketing.com

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Mike Schoultz

Mike Schoultz

Mike Schoultz writes about improving the performance of business. Bookmark his blog for stories and articles. www.digitalsparkmarketing.com

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