Recently I spoke at an event in Hong Kong on Digital Disruption.
This is a topic I speak on and write about regularly, although this time I had some new material thanks to Warren Buffett.
Warren recently spoke at his annual gathering in Omaha, where he was extensively interviewed on his thoughts in everything from why he sold 1/3 of his IBM stock, to why he had never invested in Amazon. You can watch the full 3-minute clip here or below.
Buffett explained how Jeff Bezos had disrupted not one but two industries almost simultaneously.
To get Amazon off the ground Bezos needed 3 key ingredients
- The internet – someone else had spent billions of dollars developing this
- Transportation – someone else had already built railroads and UPS
- A payment mechanism – it would take billions to build but Visa and MasterCard did this already
In this way, Bezos was able to start disrupting the retail industry 20 years ago by building on what was already there, and making the experience easier for the consumer.
In addition to disrupting the retail sector, he also disrupted the data centre industry and pretty much paved the way for cloud computing at the scale we see it today.
On the back of his Amazon business, he realised he had massive computing power that was not being fully utilised at times during the day. He figured out a way to rent this excess capacity to other companies at a reasonable charge, and hence Amazon Web Services was born, and this company is now the leader in cloud computing.
In my Disrupt or be Disrupted talk, I use an excellent definition of digital disruption – presented below:
The audience in Hong Kong had come to hear about how disruption might impact their business, and what they could do about it.
In preparing for the talk, I came up with something that may help others when thinking about how disruption is already, or will in the near future impact their business.
I call it the “3 D’s of disruption”
Define – you need to understand what disruption means to you and your industry and business
Detect – you need to be able to recognise where it is already happening or areas where it may occur
Defend – you need to come up with a smart strategy to defend yourself against disruption which may also mean disrupting yourself.
Why does disruption occur?
People often ask why disruption happens. I believe it occurs because three key forces are colliding – namely
- There are high profits to be made because of previous barriers to entry. A good example here is the taxi industry. In markets such as London, the barrier to entry is the need to learn “The Knowledge”, essentially learn off by heart every road in London. In other cities, Taxi plates sell for thousands of dollars. If you can enter this market with simply a GPS powered app, there are large profits to be made
- New technologies such as high-speed mobile networks, cloud computing and fast mobile processors have allowed disruptive services to flourish. I recall just 17 years ago that trying to order a pizza or check my bank balance on my mobile was nearly impossible. In 2017, we take this for granted
- Clients are now exposed to smart digitally-driven services and expect all their suppliers to offer the same. If we think back a number of years when we were able to bank
In addition, conditions are right because:
- Consumers are ready – they have been using digital services for years
- People research using digital
- People transact via digital
- Conditions favour innovation – eg Kickstarter – crazy ideas can be brought to market with other people’s money
- The technology finally works!
One of the key messages I delivered in my Hong Kong Keynote was that companies with a culture of failing fast and fostering innovation with thrive in this new economy.
Being a Practical Futurist, as with each keynote, I left the audience with some practical tips
- You need to become a Digital business
- You have to disrupt yourself
- Set aside a digital budget – stop doing something – investigate how you can take existing products and services and transform them for digital delivery
- You need a true digital board – one that has strong digital literacy
- Set up small innovation teams
- Need to have a collaboration culture – your value to an organisation is no longer what you know, it is what you share
- You need to think like a startup