Disruption

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BUSINESS 8/27/2015 @ 11:37AM 2,751 views
Paul Taylor , SAP
The Darwinian theory of natural selection holds
that it is not the strongest of the species that
survives, or even the most intelligent, but the
most adaptable.
It’s the same in business: the companies that will
thrive in the digital economy are those that are
best able to respond to its demands – in
particular, the shift to a consumer driven
marketplace.
As Bill McDermott, SAP’s chief executive, noted
last week, “the digital economy is disrupting
businesses, industries and entire value chains.
The proof is everywhere, from how we use
technology and data as consumers, to how
cutting-edge businesses are reshaping the
consumer marketplace.”
“Anywhere we look – sports, healthcare,
manufacturing, finance and government – digital
transformation is a pervasive force. Our
customers are increasingly facing a difficult choice
today: they either adapt or they die.”
SAPVoice
RUN SIMPLE
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2. The evidence for this is all around. In just the last
15 years the media, publishing and advertising
markets have been reshaped by online giants like
Google, Yahoo and Amazon, the cable TV and
video markets have been up-ended by streaming
services including Netflix and the market for
recorded music has been shaken to its core by
upstarts like Spotify.
Hardly anyone buys physical maps anymore and
sales of personal navigation devices and digital
cameras have plunged as consumers tap into the
astonishing capabilities of their smartphones. The
smartphone market itself provides a textbook case
study in the dangers of complacency and failure to
adapt.
Less than 10 years ago Nokia, Blackberry and
Motorola dominated the market for high end
feature phones and smartphones. Today, Nokia is
out of the market entirely, Motorola is owned by
China’s Lenovo and BlackBerry is struggling to
survive – a shadow of its former self.
Meanwhile new digital leaders are emerging to
shake up traditional, staid markets like banking
(PayPal), hotels (Airbnb) and even taxi service
(Uber and Lyft). The automotive industry is being
disrupted by Google, Tesla and Apple and
software is replacing steel and other hardware in
connected and self-driving cars.
Industry boundaries are blurring. Embedded
software is changing everything. Smart executives
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3. know the world has changed, but aren’t sure how
to respond. Research shows 90% of CEOs believe
the digital economy will have a major impact on
their industry. But only 25% have a plan in place
and less than 15% are funding and executing a
digital transformation plan.
This digital transformation is being driven by a set
of technology mega trends including mobility,
hyperconnectivity, super-computing and
real-time big data analytics, cloud computing and
social. The resulting pace of change is
staggering. In the next 10 years it is estimated that
40% of the S&P 500 will no longer exist if they fail
to keep up with these technology trends and
recognize that the world has changed.
In the new digital economy, every company is a
technology company and every company needs to
embrace change before new digital competitors
emerge – even if it means cannabalizing their
existing operations . As Andy Grove, Intel’s
former ceo, noted, ”Business success contains
the seeds of its own destruction…..Success breeds
complacency. Complacency breeds failure.
Today consumers are in the driving seat and they
expect a new type of experience: one that is
frictionless, where commerce is seamless, and
where technology is invisible. One that makes
their lives easier.
Significantly research shows that companies who
have embraced the digital world and execute on
their digital strategy register real gains in
shareholder and stakeholder value. Typically they
boost revenues by 9% , increase profitability by
26% and gain 12% in market valuation.
But companies also need to address another key
issue: complexity. “Complexity is the most
intractable issue of our time,” says McDermott.
He describes it as “an epidemic of wide-ranging
proportions, affecting our lives, our work and
even our health. “
Complexity also exerts negative pressure on the
collective bottom line. The 200 biggest companies
in the world lose over 10% of their annual profit
because of complexity – over $237 billion. As a
result, productivity growth in almost every
advanced economy is slowing or declining.
Business technology companies, including SAP,
have a unique role to play in helping their
customers reduce this complexity, foster
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4. This article is available online at: http://onforb.es/1hIaXDW 2015 Forbes.com LLC™ All Rights Reserved
innovation and respond successfully to the special
challenges of the digital economy. If he were
around, Charles Darwin would approve.
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