The Changing Face of Business: Disruption in a Digital Era
Since the 1950’s almost 90% of the Fortune 500 companies have been replaced. More alarming is that approximately 50% of the Fortune 500 companies since 2000 are gone. They have either fallen outside of the Fortune 500, merged with other companies or become insolvent. Disruption is more prevalent than ever.
Disruption is best described as the radical change in an industry, such as the introduction of a new product, service or delivery method that interrupts or changes the market. Businesses have always tackled the prospect of ‘disruption’, whether in the form of new competition, sudden changes in demand, efficiency innovations or a breakdown in a supply chain. During the 1700’s it was steam, then electricity in the 1800’s that radically changed industry during the ‘Industrial Revolution’.
Given we’ve always had ‘new technology’ causing business disruption, many people may ask; “What’s different today, now that we’re in the Digital Age? The answer is disruption is accelerating as outlined above with the changes to the Fortune 500 and that even small businesses can become disruptors! According to Dr Richard Foster, the Executive in Residence at Yale University; “The average lifespan of a company listed on the S&P 500 has decreased from 67 years in the 1920’s to 15 years today.”
We’ve already seen the impact of digital on industries like retail, accommodation, ICT and Media. There’s no question that many other industries will face similar disruption. Of concern however, is the apparent lack of urgency from some Australian companies as highlighted in a 2014 study by Frost and Sullivan which revealed that three-quarters of Australian executives did not accept there was rapid change in their industry, marking them among the most complacent in the world. This should ring alarm bells for many business owners, because even if their business is not directly disrupted their customers or suppliers could be.
A brief review of some ‘corporate dinosaurs’ include; Kodak, Blockbuster, Borders Books, Blackberry, Nokia, Motorola to name a few. Many of these businesses once used cutting-edge technology only to remain committed to their business model while competitors focused on:
- Finding more efficient ways of delivering their products & services
- Changing wants and needs of their customers
- Responding to their industry’s changing environment.
The message for corporate Australia is “don’t ignore the impact of digital on your industry”. A recent publication by Deloitte, on the impact of digital on business, highlighted a series of questions that business owners can ask themselves and include; “are you leading, keeping pace or lagging your competitors in terms of innovation over the last couple of years”; “what can be learnt from other industries that have been disrupted”; “who are the most prominent ‘entrepreneurs’ in your industry and what are they doing”; “what is the innovation culture within your business”; and “how curious are you about the needs / wants of your customers”.
Regardless of whether a business or industry is ready, it can’t avoid the digital disruption meteor that’s landed. All it can do, to the quickly changing landscape, is adapt or face the same fate as the dinosaurs.
This adaptation can often be aided by preparing your business for succession or exit using a methodology like what we’ve developed at Succession Plus.
Write to us for a free, no obligation preliminary consultation to work out your business value or call 1300 665 473.