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The 3 Factors that Enable Digital Disruption

In this blog post, digital media expert Matt Kollmorgen explores the factors that drive companies to change.

April 12, 2017

Every tech industry blog, newsletter, and weekly update email is packed full of articles about digital transformation: why you should be doing it, how to be successful at it, and statistics demonstrating the haves and have-nots of digital nirvana. But very few of these articles discuss the factors that led up to this revolution or those driving the need for companies to change. Perhaps a brief look at history—very recent history, but history nonetheless—will spur onlookers to jump into the game.

Uber, Facebook, Alibaba, Airbnb, and several others have disrupted their respective industries—but what made this disruption possible? It’s not as if consumers were truly unhappy with the status quo… or least it didn’t seem that way. Digital disruption was possible because of a convergence, or the timely occurrence, of three key factors outlined below.

Convergence Factor #1 – Technology

Advances in technology, especially surrounding mobile, data analytics, and Cloud computing, seemed to flourish overnight and dramatically affected the overhead required for businesses to launch, reach their customers, and collect the data necessary to tailor their new customer-centric business models around existing paradigms.

It wasn’t only the development of these technologies that made this possible, but our adoption of them as well—especially mobile. In what felt like no time at all, everyone not only owned smartphones but they were using them everywhere. You can’t walk down the street or sit in a restaurant without seeing people with their faces buried in screens.

According to Pew Research, 77% of US adults now own a smartphone.

Similarly, in less than 4 years, Snapchat went from being a quirky mobile-only app that your teenager used to a major media outlet valued at over $20 billion. Seventy percent of 18- to 24-year-old Americans with smartphones use Snapchat, which is why Snapchat is now considered by many to be the best place to market to young people.

Convergence Factor #2 – Intelligence

At the same time that technology was advancing we started the practice of collecting—and analyzing—people’s views, swipes, and clicks. Amazon, Facebook, Google, and Netflix quickly became highly adept at capturing user data and turning this data into valuable insights into their customers’ behavior.

According to IBM, more than 90% of the data in the world was created just within the past two years alone.

Some organizations are still struggling with how to leverage this data, while others have learned to do some amazing things with it. eBay claims to have amassed one of the greatest consumer repositories of data on the web today. The company has been gathering data from its digital shopping experience across all of their platforms since its inception. A recent article in Marketing Week describes eBay’s targeting tool’s ability to break down audiences typically grouped together as a whole into new niche segments.

Tools like these allow brands to identify exactly where shoppers are on their purchasing journeys and target them with products accordingly. For example, within the consumer segment of new parents, eBay has defined ways to predict what stage of pregnancy or parenthood a new parent might be in based on their purchasing behaviors. By tracking behaviors like the fact that a shopper bought clothes for a newborn 12 months earlier, eBay can predict when these customers are likely to be in the market for clothes for one year olds.

Convergence Factor #3 – Customer Expectations

The change in consumer expectations is likely a result of advances in technology and data analytics, but it is also the single most powerful influencer of digital disruption. Society quickly learned to value the experiences associated with the purchasing of products and services. In some cases, we have also demonstrated we are willing to pay more for premium experiences and some customer segments, namely Millennials, appear willing to pay for an experience over a product.

Disney launched their MagicBands and MyMagic+ program in 2013 with the goals of increasing personalization and transforming the customer experience through data analytics and wearable technology. MagicBands and MyMagic+ not only allow guests to customize their experience while on the property, but also provide a wealth of data to Disney cast members, enabling the company to offer highly-tailored experiences.

According to the Los Angeles Times, the experiences paid off. For example, when a guest now enters Disney’s Be Our Guest Restaurant, he or she is greeted by name and told to sit anywhere they like. Their food will “magically” find them. Similar experiences include characters greeting guests by name and knowing important information like birthdays. Disney’s friction-free interactions allow customers to focus on the magic of the experience and keeps transactions hidden in the background.

Revenue increased 20% to $805 million from its parks and resorts compared to the same period the previous year.

Convergence and Its Impact on the Business Landscape

These three elements coming together have created a tsunami of change that rippled through countless industries and laid the foundation for what some refer to as the Fourth Industrial Revolution. Industries that had low barriers to entry bared the brunt of the storm, including retail, financial services, media and entertainment, and healthcare, but others are still in the storm’s path. Siloed business units and deep-rooted legacy infrastructures enable lean nimble start-ups cultured in design thinking and agile development to ride in on the convergence and steal market share at an unprecedented pace.

Truthfully, this convergence changed our business landscape forever. Many of the companies now at the top of the Fortune 500 weren’t even on the list until very recently—and only 61 of the original 500 remain. Companies like Kodak, Polaroid, Blockbuster, and Sports Authority could not pivot fast enough, and although warning signs were there, they succumbed to this disruption. Why? While this convergence was happening, some organizations sat idly by and watched their market share erode and their business models become irrelevant.

Consider their outcomes a cautionary tale on the importance of digital transformation. Forward-thinking organizations embrace it as they adopt new business practices and take proactive measures, positioning them to stay competitive in an increasingly competitive market.

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