There’s an Earthquake happening all around you! Digital Disruption

When I arrived here in Bali so many lifetimes ago there were no smartphones, no facebook, twitter or LinkedIn, no Trip Adviser. Hardly any internet, and what there was happened at mind-numbing slowness.

 

Now new tools and apps see people checking up on and passing comment on your business at the speed of light. With Trip Adviser linked to facebook on my phone, I now have sent to me my friends’ reviews from all over the world. So here I am in Bali reading about a friend‘s impressions of a restaurant in Malta.

 

Digital disruption is Happening now!

 

Digital disruption is happening now and will only become more intense. Normal business – your business – is going to be affected in major ways, the only question is when.

 

A Deloitte study published mid-year identified a third of businesses in Australia would be subject to a ‘big bang’ disruption with just a short fuse.  If your business is in media, retail, communications, finance, real estate, professional services, and arts and recreation, then the state you could be facing an immediate 35 percent change in key metrics such as revenue or cost structures. If your business is in education, health and transport then you have up to five years to adjust, but the degree of change will be just as severe.

 

What to do? If retirement is an option then you can avoid the pain and the fun that such massive change will bring. But for the rest of us, perhaps better to be proactive than reactive.

 

Here are Some thoughts:

 

There are as many opportunities as there are threats from digital disruption.

 

Strategy Implications

  • Focus on your core business, stick to your knitting. Non-core business adds risk because it doesn’t use your hard-won competitive capabilities but does over-utilize scarce resources. Best performing companies not only focus but continue to invest in their core regardless of the business cycle. Better to clean non-core out, sell them in the good times with a premium. Think of it as eBay on steroids, your trash is someone else’s treasure and is a good fit for their business model. Just not for yours.
  • Review your business model ( the way you create value) based on likely changes in your industry.
  • Review your strategy for growth. Where are you most at risk? Check to see how relevant your current strategy will be. What are the new opportunities that digital disruption can offer your business? What different mix of capital do you need?
  • Review your fixed assets – are they still suitable for where you want to go?

Revenue streams

  • What are new revenue sources going to be available that you can exploit? New customer segments, new distribution channels, new product and service offerings.
  • Disruption is caused by faster speeds directly affecting business models, new applications to utilize those speeds, much cheaper storage costs. How can you use any of these in your business?
  • Right now internet speeds aren’t fast enough here to provide slick cloud-based customer interface, such as order taking and bookings. But this will change.
  • Over the past few years, fiber optic cable has been buried in orange plastic pipes along roads all over Bali. It even winds its way right up to Kintamani. I’ve watched a couple of guys splicing the cables in a little van alongside a pit by a road in Bangli, just near a water tap where people were lining up for their twice-weekly water ration. I don’t know when the cable (or the water) is going to be available for connection to everyone, but cable will affect the economy and opportunities of Bali dramatically, with universal access up to 100MB. What services could you be ready to offer all these people with direct internet access? As an example, a full high definition movie was recently downloaded in a trial in just 39 seconds; if you either store movies electronically or currently rent them out from a shop then this will totally change your business model.

    Business Costs

  • Look at your cost base very critically. The three key areas are staffing, supply chain, and overheads.
  • One of the evident impacts of the business growth in Bali is the shortage of trained people, especially in finance and accounting systems. What can you do to reduce the need for trained people in some of your processes? To put your processes in the cloud, and buy office services in the cloud? Do to your business model if you are currently offering office services as a product?
  • Your supply chain, simple or complex, involves the movement of products, information, and money from your suppliers through to your customers. Product and information at least need to travel together and at the same speed – your supply chain is only as fast as its slowest element.
  • Create partnerships with your key suppliers. Understand in detail their cost base, and time constraints and work with them to reduce their costs, improve their quality and reduce their lead times. Help them become more financially secure to reduce your own risk while helping you become more competitive and profitable with higher quality, consistent supply, and reduced selling prices.
  • See where you can pay your suppliers directly via internet banking. I have watched staff spend hours writing out bank transfer slips then spend even more time queuing at the bank.
  • With one of my clients here we are working to dramatically increase productivity and so increase value added. The goal is to eliminate all duplicate processing; direct entry of sales, better computer linkages with key suppliers, auto-matching of receipts to outstanding purchase orders. We are building business rules into the software planning module so that there is consistency, reduced operating costs, and better management reporting capabilities. There are a lot of little things that add up to make a very big difference, so we identify them and priories them

 

Let me know if there is any aspect of developing a successful business you would like me to write about.

 



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