- Digital disruption is increasing, but many companies believe if they just keep up with the change, it isn’t their problem.
- Only 12% of businesses in the PwC Global Digital IQ survey said they are using digital to disrupt their own or other industries.
- Companies need to pay attention and engage with disruption now or risk becoming obsolete.
When you look at your business today, what do you see? Go ahead, take a few seconds to think about how your company operates, the competitive landscape, the realm of possibilities for your success.
Now, randomly take half of those assumptions and toss them out the window. How do you operate, compete and succeed? It’s not a frivolous exercise for any company, large or small, established or new. Think back just over a decade. The idea that a company whose viability hinged on people forgoing hotel stays in favor of sleeping in a stranger’s spare bedroom, or riding in the backseat of a personal car instead of hailing a taxi or ordering up a car from a service was, well, entirely illogical. It wasn’t in the realm of assumptions if you were a hotel chain, taxi company or car service.
Then came Airbnb in 2008 and Uber in 2009. Other home and rideshare companies, like HomeAway and Lyft, followed. By 2018, Airbnb had achieved a US$31 billion valuation — higher than Hilton.1 Hotels have lost some control of the accommodation pricing model in the cities where Airbnb operates. And according to Certify, ride-hailing has captured 70 percent of the business traveler ground transportation market in 2018, up from 8 percent in 2014.2
Even as evidence of digital disruption is on the rise, many companies don’t think it’s their problem. Just 31 percent of the 2,280 respondents in last year’s PwC Global Digital IQ survey said digital disruption presents a threat to their business. Why? Because by the time they notice it, they view disruption as a moment, a single shift in relative profitability from one operating model to a new one. Many companies view it as a standalone, sudden, monumental event. But, that’s just not the case most of the time.
Disruptive forces are typically more gradual, there all along, slowly integrating into the lives of consumers and businesses. In 2015, many consumers owned smartphones, but playing video on them was slow and unimpressive. When 4G arrived two years later, with its faster download speeds, companies like Netflix were able to iterate from physical product (DVDs in the mail) to digital, streaming entertainment to people on demand.3
More than half of PwC’s survey respondents provided responses that suggest that they are working for companies that are already in a cycle of disruption. Some are just beginning to see new competitors emerge and experiment. Others find themselves vying with upstarts in a fight for survival with companies that didn’t exist a few years ago. The good news, though, is that there’s still time to take advantage of these disruptive forces to propel success. And for those who are paying attention and putting their money where their mouth is, there’s payoff.
not just defence
Digital can and should do much more than many companies are using it for — only 12 percent are using it to disrupt their own or other industries, and 13 percent are using it to combat new industry entrants, according to the Digital IQ data. But, among that swath about 45 percent say the investments they’ve made are paying off. Far fewer said they saw payoff if their goal was to increase profits, innovate, or achieve savings.
Many companies also say they still determine their adoption of new technologies by evaluating their internal readiness. Technological maturity, for instance, drives 38 percent of decisions as do the moves of their nearest competitors (also 38 percent), rather than proactively exploring new innovations with specific business needs in mind. And they’re relying on competitors and trends in their own industry to determine what they should do to keep up, rather than broadening their efforts to identify trends and capabilities elsewhere that will lead them to solutions to their own customers’ problems — or new buyer behaviors entirely.
If you find yourself in that category, it’s time to re-calibrate to make better use of big data to inform decisions — and refocus on external competitors you haven’t even imagined to seek new ideas, and identify potential threats. It’s highly likely the living, breathing disruption happening in your sector is brewing outside it right now, so if you’re not looking beyond the bounds of what you know, you’re likely to miss it. You can’t wait to look up after everything has changed — after all, gradual changes that lead to disruptive moments are happening now — and you need to pay attention to avoid becoming obsolete.
Of course, not all companies are ignoring the threat. A full 64 percent of top financial performers in PwC’s Digital IQ survey — defined as companies reporting increased profitability over the past three years and expecting to see increased profitability over the next three — acknowledge the threat of digital disruption.
Top performers are investing twice as much in emerging technologies, a smart move given the transformative and disruptive nature of things unknown. They’re twice as likely to say they expect their digital investments to help them disrupt their own or other industries or combat new industry entrants. And it’s paying off: 57 percent say that effort has helped disrupt their own or other industries and a whopping 74 percent say it’s helped combat new industry entrants. No wonder they’re finding financial success.
For more insights on digital top performers visit PwC’s Global Digital IQ survey.