All aboard the disruption train – staying ahead of the technology curve
Across the world, emerging industries are disrupting traditional business models at an unprecedented pace. Overnight, brands and entire sectors, which once enjoyed a majority market share, have been relegated to the category of endangered species. One can conjure up a list of examples to illustrate the issue, from household brands such as KODAK, put out of business by the digital camera, through to industries such as travel agencies put out of business by the milliard of travel websites providing easy and affordable access. And the trend is likely to continue, with even large traditional industries such as banking and logistics threatened by the growth of new technologies from innovations in the field of fin-tech through to 3D printing and drone technologies.
Today it is often said that every business is a technology business and those not agile enough to keep up with the wave of disruption are seriously at risk. Companies must understand the potential of technology to disrupt the delivery of their products and services, and from there make a definitive course of action to ensure they can stay ahead of the curve. I discuss alternative options below.
You could consider converting your business into a technology business, that embraces innovative new methods and tools to complement experience acquired over the decades – not an easy undertaking, particularly for well-established institutions which prove difficult to transform. Nonetheless embracing technology could be the difference between going under and flourishing under new market conditions. Large established global institutions like Goldman Sachs tout the number of professionals they have in their technology departments and try to call themselves “technology companies”, in recognition of the importance disruption is having on the market. However, technology transformation is easier said than done. While technology can enhance a business’s operations, it is challenging to transform a business, mainly if the aim is to compete with much smaller, agiler enterprises such as technology start-ups. Resistance from above is also a consistent challenge for companies in need of transformation. This, however, is no longer an option for those businesses intent on being around in the next decade.
Another option consists in investing in the smaller, more agile technology company that could be disrupting your business. While it might sound counter-intuitive to support enterprises which could put you, in theory at least, out of business, the logic of this is that if you do not support them, someone else will, in which case you will still be put out of business anyway. By maintaining a portfolio of companies, one of which could be the David that takes down Goliath, you maximise your chances of backing the right horse and benefiting from its success as an investor and strategic partner.
Indeed, other benefits include the commercial cooperation that you could put in place with the start-up, generating more revenues or cost savings for the investor. Also, investing is always a learning experience, and by investing in a portfolio of disruptive start-ups, the corporate will learn from their experiences and mistakes and will be best positioned to choose the technologies that could transform its business. Finally, one option always on the table is for the corporate to take over the start-up. However, it is not recommended for early-stage start-ups to be integrated into a large organisation, since this defeats the idea of being agile and nimble and could stifle innovation. Once the technology company becomes well established, however, it may prove indispensable to one of its corporate investors and the right decision may well be to take it over and integrate it or turn it into a critical division or subsidiary of the parent.
Whichever path one takes to get on board the disruption train, one thing is sure – those who do not jump on board now are likely to get left behind and forgotten in the relics of history.