Transformation or disruption?

Ahead of the AICD’s inaugural Australian Governance Summit, Nigel Phair GAICD, offers practical advice for directors who are facing challenges brought by digital disruption.

Digital disruption will ultimately impact every aspect of commercial life.

Disruption is the transformation of a business or business process through innovative models that aren’t used in the market today. Combined with a digital component, such an approach may change business process, functions, or an entire organisation.

Directors and the organisations they govern face challenges brought by the increasing impact of disruptive technologies, shifting competitive landscapes and consumer behaviours. Organisations require leaders who can operate in a challenging, and rapidly evolving context. Such leaders in the digital age need to combine traditional leadership qualities (vision, commercial attention) with a technology-literate operational focus (customer-centricity, data-driven, adaptable and agile).

Companies have a choice: use digital technologies to expand rapidly in their current market (essentially disrupting themselves); or into adjacent or entirely new markets.

Digital disruption, powered by such technologies as cloud, mobile, data analytics and social media, can create a whole new customer interface. It’s also about modernising processes, overhauling entire supply chains, bringing more intelligence to marketing and sales strategies, making it easier for people and teams to collaborate, and rethinking talent recruitment and management.

Digital disruption is about:

• Not being constrained by “legacy” software or systems.
• Having a strategic vision backed by the ability to innovate.
• Creating a culture of agility and speed to market (scale quickly or failing fast).
• Having the right mix of technology expertise.

In many organisations technology has traditionally been focused on lowering costs and creating standardisation, however such an approach may be in direct conflict with the fast delivery of customer experiences. An IT strategy should be simple and focus on benefits to the business. Small pieces of work should then be prioritised, where ideas can be tested and either quickly discarded or given more resources.

The commercial battle that now matters most is for control of the digital customer interface. The organisations which can create the software interface which leads customers to the services they want will win. Big data can help solve this puzzle of what customers actually want (even if they don’t know it yet themselves).

The biggest risk is to do nothing. Mobile phones were once dominated by Motorola, then Nokia, then Blackberry. Kodak invented the digital camera technology, but failed to capitalise on it.General Motors – produced the first commercial electric car, but now finds itself trying to catch up with the Japanese built hybrids. Bookstores, the music industry and newspapers – all of which were the giants of their time, and now find themselves trying to avoid extinction.