The Disruption

A change is taking place and the “value vampire” within Digital Vortex will disrupt every single industry. A value vampire is essentially a company that uses its competitive advantage to shrink the overall revenue from a given market. Value vampires are basically an extreme form of digital disruption, and their ability to create three fundamental forms of value for customers— cost value, experience value, and platform value— is exceptional. They are hazardous to competitors because they provide a blueprint on how disruption occurs— one followed, to varying degrees, by a horde of digital disruptors bent on unseating market leaders.

The pace of technological change, business model innovation, and the blending of industries accelerate as companies are drawn into the Digital Vortex. So which “big bets” companies should place to thrive in this uncertain and highly competitive environment? The answer, as difficult as it may sound, is that: no single strategy will guarantee success. Why? Because individual moves tend to focus too much on tweaking the company’s existing value chain in order to compete with traditional foes (all of which have similar value chains), rather than transforming how the company delivers cost value, experience value, and platform value to customers. Meanwhile, digital disruptors focus on precisely that: supplying the cost value, experience value, and platform value customers’ want. Increasingly, a company’s most formidable competitor will be a start-up or a firm from another industry that uses digital technologies and business models to create “combinatorial disruption”— where cost value, experience value, and platform value are created concurrently. In such circumstances, “big bets” look like forceful punches from slow-footed boxers that miss their opponents— lots of energy, no impact.

To win in the Digital Vortex, companies must be dynamic enough to understand the risks disruptors pose to their business, and to maximize their revenues in the face of tough competition. At the same time, the percentage of revenue from new businesses needs to increase, as margins from core businesses will frequently decline. This puts pressure on companies to improve the “hit rate” of marketable innovation, an area in which nearly all incumbents struggle. As we saw in “Digital Vortex,” incumbents are less able to innovate and adapt to speed than the startups that are disrupting their core businesses, putting them at a stark disadvantage.

The need for a platform

Researchers and experts are advising companies on how to transform, they have come to understand that companies need to develop a “meta capability” we call “Digital Business Agility.” Digital Business Agility is the capability companies must develop in order to use digital business models to create new forms of value. Companies that possess Digital Business Agility respond quickly and effectively to emerging threats to their business, and seize new market opportunities before their rivals even notice them. They use combinatorial disruption to differentiate their core businesses, making it hard for value vampires or other disruptors to replicate or supersede the value they provide. When disruptors do strike, digital business agility allows companies to harvest maximum value from declining businesses. Most important, they can identify and exploit value vacancies, which all companies will need to maintain growth as some businesses hit disruptor-induced revenue stalls.

Digital Business Agility has three main pillars: hyperawareness, informed decision-making, and fast execution.

In Technology, or for an IT department, the Digital Business Agility means to have a flexible Platform Enterprise - “Core”.

“In today’s era of volatility, there is no other way but to re-invent. The only sustainable advantage you can have over others is agility, that’s it. Because nothing else is sustainable, everything else you create, somebody else will replicate.” – Jeff Bezos, Amazon founder

Enterprises that leverage the power of platform business models have grown dramatically in size and scale over the past decade. No longer the sole domain of social media, travel, books or music, platform business models have made inroads into transportation, banking and even healthcare and energy. Platforms are now active in North America, Europe, Asia, Africa and Latin America. Some platforms are household names such as Amazon, Apple, Google and Alibaba. Others have emerged more recently or hail from parts of the world that get less attention such as Rakuten (Japan), Delivery Hero (Germany), Naspers (South Africa), Flipkart (India) or Javago (Nigeria). Platform ecosystems are gaining ground through the digitalization of products, services and businesses processes and in the process are reshaping the global landscape.

What is a platform

Platforms have unique characteristics, with a central feature being the presence of network effects. Network effects are prevalent in platforms, and they mean that more users beget more users, a dynamic which in turn triggers a self-reinforcing cycle of growth. Further, most of today’s platforms are digital: they capture, transmit and monetize data, including personal data, over the Internet. They may not be purely digital; in that they may have physical elements included in the product offering, but most successful platforms today take advantage of the power of pervasive Internet connectivity in the hand of billions of users and have at their heart a software engine.

Platforms create value in two principal ways. The first way, which corresponds to what we call transaction platforms, facilitates transactions between different types of individuals and organizations that would otherwise have difficulty finding each other. Obvious examples include Uber, Google Search, Amazon Marketplace, and eBay. This type of platform is sometimes called a multi-sided market.

There are also innovation platforms, which consist of technological building blocks that are used as a foundation on top of which a large number of innovative services or products. These innovators can be anyone, anywhere in the world, and together they form what is called an innovation ecosystem around the platform. An example is the iPhone, which has hundreds of thousands of applications. Those applications are developed by innovators all over the world, who use Apple technology the company makes available through software connectors called APIs— application programming interfaces—which will in effect continue the cycle of innovation and growth.

Do not be afraid of the change and do not let existing technologies frighten you. At Herron Tech we acknowledge the pain of Digital Agility; this why we create solutions to help you solve digital transformation in an adaptable way. We give you Digital Agility by helping you build your Enterprise Platform.