Digital-native companies: A new form of competition?

April 5, 2016

 

 

 

Digitization has been known to cause disruption unequally in various companies and industries. The disruption often takes the form of a faster process, a better customer experience, lower prices, or more customization.  And while all these aspects are relevant, another facet of digitization may be taking an increasingly important role.

 

How disruption has changed

As has always been the case, an innovation disruptive enough to change the rules of the game often originates from outside the current industry.  For example, the biggest disruption to the music industry did not come from the music industry itself, but from the computer world.

 

Although many leaders acknowledge this fact, it is quite difficult to predict where a disruption will come from when one has to consider, not only his industry (with regular competitors and substitution products), but a host of other industries. Worst, many founders and executives are experts in their respective industries, but may not be so comfortable with the digital world.

 

This makes a recipe for a perfect storm, with change accelerating in a field that is largely overtaking all others -  while the captains have no instruments to detect the incoming storm.

 

Why are they so disruptive?

Companies that were formed with digital at the base of their business models are often dubbed “digital-natives”. They have an important over incumbents:  the digital model is anchored in their business model.  It is not simply bolted-on as an afterthought.  It lies at the basis of how they compete and how they deliver value. When such a model manages to reach the wants and needs of customers, it becomes very difficult for incumbents to organize a response.

 

What can you do?

For incumbent companies who see such a storm approaching – or who are currently fighting against the waves - two things are important:

  1. Realize that digital natives also have their weaknesses.They often do not have the partnerships, industry background, customer base and operational capacities of incumbents.Find out where your advantages and their weaknesses are – that is where you can fight this game.

  2. Understand that it is rarely possible to fight this new battle with old tools.In order to remain relevant, you will have to hire tech savvy employees, train your internal laggards, and change some processes. Mind you, cosmetic changes to your marketing will rarely be enough.If your competitors are attacking by changing the business model and operating practices, and the customers are responding well, there is little chance of you succeeding without serious reconsideration of those sensitive areas.

In other words, don’t despair, you still have some great advantages – but you must be ready to jump in to take advantage of them.

 

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