Disrupt – or get disrupted!
Translation: SkyViewCRM e-book No. 15
Take disruption seriously! Right now or soon it may affect your company and industry. This e-book explains what is at stake.
“Multiple sources of disruption trigger different forms of business impact. On the supply side, many industries are seeing the introduction of new technologies that create entirely new ways of serving existing needs and significantly disrupt existing value chains. Examples abound. New storage and grid technologies in energy will accelerate the shift towards more decentralized sources. The widespread adoption of 3D printing will make distributed manufacturing and spare-part maintenance easier and cheaper. Real-time information and intelligence will provide unique insights on customers and asset performance that will amplify other technological trends. Disruption also flows from agile, innovative competitors who, by accessing global digital platforms for research, development, marketing, sales and distribution, can overtake well established incumbents faster than ever by improving the quality, speed or price at which they deliver value. This is the reason why many business leaders consider their biggest threat to be competitors that are not yet regarded as such. It would be a mistake, however, to think that competitive disruption will come only through start-ups. Digitization also enables large incumbents to cross industry boundaries by leveraging their customer base, infrastructure or technology. The move of telecommunications companies into healthcare and automotive segments are examples. Size can still be a competitive advantage if smartly leveraged. Major shifts on the demand side are also disrupting business: Increasing transparency, consumer engagement and new patterns of consumer behavior (increasingly built upon access to mobile networks and data) force companies to adapt the way they design, market and deliver existing and new products and services.”
Schwab, Klaus. The Fourth Industrial Revolution. World Economic Forum.
Change happens at high speed – and at an accelerating pace. Those who sit back with old and well tested business models are lagging behind. Such companies loose value. Close down!
Think for example about AirBnB. Founded in August 2008, now the world’s largest landlord of rooms without owning a single one. And about Uber, founded in 2009: in Denmark alone, 300,000 customers and 2,000 drivers have been linked to each other by means of the Uber app (and the taxi industry’s struggle against Uber is on borrowed time). Also bout Amazon, who uses drones for very quick delivery of packages (a profound change of the market where many letter and package transporters have not reconsidered the competitive situation).
How can you meet the challenge?
The reason for disruption: companies that create completely different business models and -methods using new technology – especially digitalization. You can do that as well and thus become among the winners. Read our upcoming e-book about how your business can grow exponentially.
You probably work in an SME! SMEs are Small and Medium sized Enterprises. There are many of them. In fact, almost all Danish companies are SMEs: 99 per cent. And in 2012, micro enterprises with less than 10 employees represented 93 per cent of all companies.
Small /micro enterprises are important for the Danish economy!
About 2 out of 5 employees in the private sector (37.9 percent converted to full-time) work in a SME, accounting for more than half (52.3 percent) of total turnover in Danish companies. More than 90 percent are micro enterprises with less than 10 employees.
SMEs mean more to the Danish economy than they do to other EU countries. In the whole of the EU they account for 42 percent of total turnover, but also here they account for 99 percent of all businesses (more than 20 million).
Therefore, it is very problematic that Danish SMEs do not grow or create new jobs. In the ten years 2004-13 their growth was slower than that of the few large ones. SMEs have thus lost share of total turnover. The number of employees has decreased by 2.4 percent, revenue per employee has decreased, too, and they have fewer employees per SME. Danish SMEs are inferior to those in our neighboring countries in exploiting growth potentials, and to convert new technologies into productivity and value.
Despite this, the former Minister of Business and Growth launched a goal of creating 32 new companies with more than 1,000 employees by 2020. None has been created since 1996. Ministers are neither able to – nor must – create and develop private companies, and it will hardly be ministers who solve SME growth problems.
If your company does not grow it may end up being disrupted
“What then is disruption?” you may ask.
Disruption is radical technological innovation that creates a new market, or changes/displaces an existing market. The term is used to describe business models that cover a need or solve a problem in ways that the existing market does not expect. If a company is exposed to disruption it will have major negative consequences. It may even mean that the company loses its existence completely.
One example is Netflix whose streaming service has forced established movie rental companies like Blockbuster out of the market. Similarly, Airbnb and Uber challenge traditional industries by enabling their customers to utilize available residential- & private car capacity through superior user orientation and use of new technology.
You may soon lose your work to disruption
A large majority of people does not yet take it very seriously that the many SMEs represent a very high risk to our prosperity and well-being: SMEs are extremely sensitive to disruption and they do not realize that they are. Even large Danish companies are quite carefree: 55 per cent of the DI (employer organization) Enterprise Panel has little or no focus on disruption, despite the fact that 25 per cent have experienced disruption within the last five years. Only a similar proportion expects to be disrupted within the next five years – which is very optimistic.
80 per cent of participants in a seminar on disruptive technologies at Singularity University in Silicon Valley estimated that their business could be disrupted within two years, and all participants believed that they would be exposed to it within the next five years (participants were mainly CEOs from some of the largest US companies). Even the largest companies are exposed: in the period 2001-14, 52 per cent of the “Fortune 500” companies were disrupted. On average, they now only exist for 15 years and their lifespan is decreasing.
Which business sectors have especially experienced disruption?
In recent years, companies in the service sector have experienced most cases of disruptive technologies. Around 30 per cent of all service companies have become victims of disruption over the last five years but it only applies to 17 per cent of manufacturing companies. The same picture appears when companies state their expectations for the coming years. Almost one third of service companies expect it to affect their business within the next five years while just under every fifth of manufacturing companies expect the same.
About 2/3 (200,000) Danish SMEs are in the Danger Zone.
In which order will they be hit?
Disruption is expected to hit industry sectors in a certain order. The first one – which is hit already – is the technology industry. Then came the Media & Entertainment sector. Now the following sectors are exposed:
- Information & communication
- Hotels & Restaurants
- Oil & gas
- Pharmaceutical industry
- Property sales and rent
- Knowledge service
- Business services
- Travel agencies/cleaning/other services
Twelve technologies which cause disruption
- Next generation gene technology. Fast, cheap gene sequencing, advanced Big Data analysis, and synthetic biology (to “write” DNA)
- Advanced materials, created to have superior characteristics (e.g. strength, weight, conductive properties) or features
- Energy storage. Units or systems that store energy for future use
- Advanced oil & gas extraction which makes extraction of unconventional oil and gas economical
- Renewable energy. Generation of electricity from renewable sources with less harmful climate impact
- Advanced robots. More and more capable robots with improved senses, skills, and intelligence which are used to automate tasks and increase human capabilities
- Self-propelled and nearly self-propelled vehicles. Vehicles that can navigate and work with limited or no human intervention
- 3-D Printing. Manufacturing techniques for creating objects by printing layers of material, based on digital models
- Mobile Internet. Still cheaper and better performing mobile devices with internet connections
- IOT – “Internet Of Things”. Network of cheap sensors and actuators for data collection, monitoring, decision making and process optimization
- “Cloud” technology. Using computer hardware and software resources through a network or the Internet – often as a service
- Automated knowledge work. Intelligent software systems that can perform work including unstructured commands and demanding assessments
We might continue with e-commerce and drones, and you may be able to mention more yourself. If that is not enough, there are three global changes causing disruptions: rising urbanization, an aging world population, and the ever-increasing and closer links between trade, people, and financial data.
It is EXOs that do it!
The radical technological innovation which causes disruption takes place in “ExOs”. These are exponential organizations – companies that do not grow linearly (like all others have done so far) but exponentially.
Unicorns. From “Fortune” February 2015
The effect or output of an ExO is disproportional (at least 10 times) greater than its competitors because it uses new organizational techniques and accelerating technologies. ExOs grow with enormous speed. “Unicorns” are startups that reach a market value of 1 billion US $. Previous examples include Facebook, Uber, AirBnB, Snapchat, Dropbox, and Pinterest. The fastest does it in months and weeks now.
If you have not yet digitalized your customer management system or sales process – or if you have not yet had time to do it – then contact us on:
Phone: +45 7070 13 12
We have assisted hundred of companies in increasing turnover and reducing costs by quickly implementing our efficient SkyViewCRM system.