At the time of his death in 1992, Sam Walton, founder of Walmart, was estimated to hold a net worth of US$4.6 billion. In today’s money, it has been speculated that the collective wealth of the Walton family extends beyond US$150 billion. Walton was an innovator and possessed an acute understanding of value creation. Walton realised that for his business to thrive, the organisation needed to surpass the expectations of its customers. Perhaps that is why Walton made the following remark; “There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.” With a few minor tweaks, this article will demonstrate why Walton’s words apply to and are of incredible strategic importance to your business as it attempts to navigate the digital frontier.
There’s a feeling of unease in the business community as organisations both big and small grapple with the notion of digital disruption, a wildly misunderstood and often unfairly maligned phenomena. What is digital disruption? Where will it attack me from? When will it get me? Will I still have a job? These questions aren’t uncommon when the topic is broached and to further compound the distrust, start-up organisations can attack with such ferocity, market dynamics can remodel overnight. Airbnb opened up new accomodation spaces without owning a hotel, Uber transformed transit services by connecting users with under-utilised vehicles, Netflix offers subscribers a consume on demand entertainment platform, and Dropbox took the physical hard-drive, put it in the cloud, and turned storage into a service. What do all four have in common? They are platforms that created and added value not only for themselves but for consumers. Are these stories of fear or examples for learning? That depends on your perspective.
Let’s take a step back for a moment. Change is nothing new, in fact, there have been three major industrial revolutions preceding our current fourth position. Innovation turns the world on its head, some businesses collapse and others thrive. That’s the nature of a revolution or as Merriam-Webster eloquently puts it, “a sudden, radical, or complete change”. Therein lies the inherent misunderstanding of digital disruption. Too often, the discussion revolves around digital disruption being a ‘thing’ rather than a way of doing things. Attention focuses on who will initiate disruption instead of investigating and describing the nature of the transformation faced. Take Airbnb for example. The nature of change was the introduction of spare rooms to the market. Now, shrewd hotels advertise available rooms on the platform almost resigned to the fact that the service is a competitive booking agent equal to or better than providers such as Expedia, Trivago, and Hotels Combined. Ultimately, digital disruption comes down to one thing; its effect on market dynamics.
Lost in the hustle and bustle of acronyms, cute hashtags, and buzz terms like agile and ideas boom, we find ourselves dealing with a business fundamental, supply and demand. An industry is ripe for disruption when digital can change the nature of supply, demand, or both. Technology changes everything. Tech holds the power not only to alter products or services but also consumption preferences of consumers. One forecast states by the end of 2017, phones will account for 60 per cent of e-commerce visits. That’s a textbook example of smartphones disrupting supply channel distribution. Interestingly, it doesn’t stop there. With purchasing power now in the palm of their hand, enterprise needs to understand consumers are growing accustomed to having their needs fulfilled in places of their choosing and on their own schedule. Below is an example of my own personal use of disruptive technology (in the interest of disclosure, I will state Law Central is a current client).
Law Central is an online legal document pioneer who developed an innovative technology that allows users to build lawyer-authored legal documents. The company offers over 120 documents in categories such as trust, superannuation, and company. Each document is written, maintained, and signed off by a lawyer and enjoys the protection of the authoring law firm’s professional indemnity insurance policy. Through Law Central, I was able to register my company online as the organisation is only one of a few recognised ASIC EDGE agents. This means Law Central directly connects to ASIC and lodges Form 201 on behalf of the user. Within a matter of minutes, sitting in my email inbox, was the Certificate of Registration of a Company (including the ACN) and all the documents one would expect to receive when establishing a company. If I was unsure of anything, a myriad of support mechanisms were available (including lawyers). From start to finish, the entire process took about 10 minutes and was delivered at a fraction of the traditional expected price. What’s the value to me? I was able to register my company in a place of my choosing, on my own schedule, enjoying a premium service at an attractive price. A prime example of technology disrupting the supply chain.
Digital is moving beyond screens and is beginning to firmly entrench itself in the real world, often at times, moving at the speed of light. To sustain your competitive advantage, you can do one of three things; you can use digital to (1) enhance your current position; (2) explore adjacent offerings or purse adjustments to your value chain; or (3) transform your business. The three options offer varying degrees of value creation but also, significant differences in risk. For instance, enhancing your current position will come with less risk than enacting a full transformational strategy. Mind you, the level of return is commensurate with the level of risk. Whatever the course of action, prioritise your initiatives then work through them one by one. Rome wasn’t built in a day.
What does digital value creation mean to your business? Is it gathering intelligence to better understand behaviours and expectations of your customers and partners? Perhaps it’s developing constantly evolving processes to deliver efficiency gains? Do you combine intelligence gathering with automation and develop real-time insights that afford you the flexibility to anticipate and respond to situations as they arise or unfold? However you choose to acknowledge digital value, there’s a commonality to it; a digital mindset establishes its value to you by allowing you to do ‘it’ better. It’s imperative you understand revenue is not and never will be the perfect measure of digital value creation, what it measures is a floor for digital value creation. That’s all.
In a previous article, it was mentioned every second, there are 40,000 searches conducted on Google. That extrapolates to 1.2 trillion annual searches worldwide. In the opening paragraph you were introduced to the following Sam Walton quote; “There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.” Let’s apply Walton’s comment to the Internet and e-commerce consumption. We know the Internet is a distribution channel for your business. We know e-commerce smartphone consumption is trending upward. We know smartphone operating systems offer search functionality (think Siri and Google Assistant). We know smartphones come with browsers and applications, both which connect users to the Internet. Traditional marketing theory says consumers will go through three of the five stages in the customer buying cycle before making a purchase. What does that mean? If you have not yet engaged in something called Youtility, a strategic approach which recommends helping people find solutions to their problems (this should scream out Google connecting a user entering a search query with a search return) and your website isn’t mobile optimised, you’re making a monumental strategic error, one which your competitors should thank you for. If you’re not offering solutions to the search queries entered and you’re not mobile optimised, how do you expect prospective smartphone dominant consumers to become aware of, consider, and preference your organisation with the intention to buy? Walton’s money will be spent elsewhere because prospective consumers will click elsewhere.
As you read this, you’re one of about 3.5 billion people connected to the Internet. In July 2008, Airbnb, in its current form, had not yet been founded. In under 10 years, the company has grown to over 100 million users with a US$30 billion valuation. What is the lesson you can take from Airbnb? Disrupt yourself before others disrupt you. Look at the nature of how your business can be disrupted. “What can I forecast?” “Where can I be disrupted?” “What do I need to change?” These are all questions you should have been asking yesterday. Digital disruption is creating value by expanding frontiers, improving processes, evolving capabilities, and reimagining consumer experiences. Are you going to release yourself from the shackles of your outdated approach and embrace the available growth opportunities or are you mired in the past, content with resting on your laurels? Ask the hotel industry how it feels to be disrupted, sight unseen.
TLDR CliffsNotes Version
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