GITEX_Williams_FINAL_Digital Disruption.pptx

digital Disruption

1. Digital Disruption How IT Investments Affect Established, Service-Based Industries Dr. Branden R. Williams @ brandenwilliams | brandenwilliams.com

2. Disruptive Innovation Sacrifices features and performance that are important to an established customer base and offers markedly different packaging of attributes that are not (yet) valued by those customers. New packaging can open up entirely new markets. Retail Example, Amazon: Initial offering was a book store only (1995). Diversified to music and movies, and is now largest Internet-based retailer. What was the impact? Several large bookstores went out of business. Now positioned to take on traditional retail.

3. Sustaining vs. Disruptive Innovation

4. Challenges with Disruptive Innovation New, young, and rapidly iterating business units stand at odds with established, slow-moving, stable business units at scale. Imagine combining a 50-year old bank with Beehive: Both facilitate lending. Both work with businesses. Both aim to turn a profit to investors/shareholders. Both carry risk. Managing these entities is VERY different with the former really being in the money business and the latter being in the connecting people business. Additional Reading: Current ambidexterity literature contains both research and practical advice for managing dual business models in established & emerging markets.

5. What is Digital Disruption? Digital disruption is the change that occurs when new digital technologies and business models affect the value proposition of existing goods and services . * Examples: Netflix disrupting movie rental markets (ahead of cable/satellite). Trade*Plus/ E*Trade disrupting stock traders/brokers. Failures: Palm, arguably way ahead of Apple & Samsung. CueCat * http :// searchcio.techtarget.com /definition/digital-disruption

6. Dynamic Capabilities and Rapid Iteration Intangible assets (intellectual infrastructure, skills in workers, recognizing and leveraging these intangible assets), can explain sustained competitive advantage when physical assets and resources are similar. Corporations are shifting to intangible assets to derive value! Technology makes resources perfectly mobile and perfectly imitable. Duplicate source code/IT infrastructure is possible. Outcomes are often different. Cautionary Tale: Anyone can get an app! Doesn’t make it strategic. Facebook vs. MySpace

7. Durable Competitive Advantage Requires control of an asset that is valuable , and a key contributor to the strategy, rare, difficult to imitate, and difficult to substitute. Asset can be intangible such as a dynamic capability. Potentially be digitally disruptive, or at least a new and different business model. And potentially leverage assets inside and outside the firm. Remember, any new business may be disruptive to your existing business, but there is research to guide you!

8. How to make Digital Disruption Work in Retail Number one requirement for success: INFRASTRUCTURE Think through the entire supply and value chain to ensure you have command over the right resources. Understand the part of the value-chain you are changing for the customer, and ensure you have solved any relevant last-km problems. If you are aiming for disruption, focus on industries that do not have a sustained innovation cycle (Livery). Culture of sensing and reacting (testing/iterating) is critical. Be aware of existing business motion. Confine early iterations to a specific geography (Test market).

9. Infrastructure: The Last Kilometer Problem Colloquial phrase that typically applies to telecom, cable television, and Internet service providers. Delivering service to a central hub in a geographic area is relatively inexpensive. Extending that central hub’s service to hundreds or thousands of homes is expensive to build and to maintain. Grocery Delivery: Sourced from multiple locations to central warehouses, then distributed to stores. Last kilometer problem: how to deliver to homes!

10. Current Digital Trends Subscription Services for Retailers: Non-durable goods such as basic food or household items you use on a regular basis. Unique offerings customized for a niche market. Exploit excess capacity: Build digital platforms to connect buyers & sellers. Tapping into the human capital market ( UpWork ). Interact with Others: Leverage APIs to automate parts of the retail experience.

11. How do these investments impact retail? IT investments can reach new customers: Allows a retail firm to serve new markets that competitors can’t reach. Can serve existing markets in novel ways that competitors may ignore. Invest to do it right: Firms that under-invest or do not consider infrastructure will be negatively impacted. “Just Get An App” is not a strategy. Pure digital strategies are volatile, but can have biggest gains. Mixed strategies are more stable and can weather economic changes better (booms and busts).

12. How do we do it? Tools for everyone!

13. The Business Model Canvas Free tool, info guide here: https://strategyzer.com/canvas/business-model-canvas Describe, design, challenge, and pivot your business model. Allows you to build digital business models and work through the details before launching. Improves success rates through iteration. Designed to work with other tools from Strategyzer . What does it look like?

14. Questions? For a copy of these slides & reading materials, send a blank email to " [email protected] " with the subject: gitex2017

15. Thank you! Dr. Branden Williams @ BrandenWilliams brandenwilliams.com

16. Appendix

17. Resource-Based Theory Lists attributes of resources that create sustained, durable competitive advantage—an inability for current or future competitors to duplicate strategy to create competitive advantage. Resource Characteristics, they must be: Valuable, and a key contributor to the strategy, Rare, Difficult to imitate, and Difficult to substitute. Retail Example, Nebraska Furniture Mart HUGE investment in store experience, inventory, and supply chain.

18. Open Innovation Innovation builds upon the discoveries of external firms with an outbound reliance on firms to capitalize a particular innovation. Not all innovation must be created internally, and not all internal innovation must be used in a final product (See Xerox PARC & 3Com). Retail Example, Etsy: Combined concepts such as the online shopping cart, networks, and auction store fronts to allow sellers to create an online store for their products quickly and cheaply. Continued innovation by pairing those shops with Pinterest, which further drives sales for their merchants by providing a social component to the shopping experience. Etsy disrupts normal retail channels in the physical realm (individual stores that carry unique goods), while also taking business from other established digital storefronts like eBay Stores and Shopify.