“Businesses now fear being ‘Uber-ed'”

I was working on the Digital Transformation Project as I went for some distraction to Facebook. The Financial Times popped up above with the title ‘Transformation is crucial when digital disruption is the norm’. I began reading and, as the title assumed, I found out that the article was in great way related to what I what was doing for the Digital Transformation Project. Instead of zooming in on one company, as we’re doing for the project, the article zooms out and looks at the bigger picture. In this post I want to share some lines of the article about digital disruption and transformation and talk about why so many established companies have difficulties with digital transformation.

illustration for the COnnected Business special report September 2015

Let’s start, where the article starts:

Memories of the last tech bubble, when big companies worried about being “dotcommed” by internet start-ups that wanted to take their trade, have faded. Instead businesses now fear being “Uber-ed”. From taxi drivers to television networks, from filmmakers to restaurants and banks, the ways in which individuals and companies do business is metamorphosing so quickly that many companies find it hard to keep pace. The obsession with digital disruption has reached a flashpoint with the arrival of the smartphone, which is the platform for an invasion of older companies’ hallowed grounds. The success of online lift-sharing company Uber has become an example for entrepreneurs out to attack industries once thought immune to digital upheaval.

So, as we read, obsession with digital disruption is extremely high at the moment. Incumbents are scared, but what can and should they do? That’s where the middle part is about. Eventually, reaching the most important and toughest question that the businesses face:  how quickly should they pull back from their traditional, profitable — but nonetheless shrinking — operations to invest in the digital future?

This is the innovator’s dilemma, as described by Clayton Christensen, a Harvard Business School professor. Incumbents can find it hard to respond to newcomers with a good enough product, since doing so often involves turning away from doing profitable things.

For example, Steve Ballmer, the former Microsoft chief executive, by most standards had one of the most effective runs of any chief executive in his 14 years at the top. Its revenues climbed fourfold and it was the world’s second most valuable tech company, though topped by Apple. Since he stepped down last year, however, Microsoft has raced to rebuild its business around the mobile devices and cloud computing.

The key message is that technology leaders evaluating whether to invest in new and immature technologies must do so with a futuristic frame of reference. The key question is, if these technologies found new customers and new markets which may in themselves be small and insignificant (now and in the future), could they mature enough to make inroads into our playing field and have our lunch? And if so, does investing in them today at the risk of cannibalizing ourselves make sense in the longer term? Hence, the innovator’s dilemma.




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