The recent crisis triggered by the Covid-19 pandemic around the world has made companies and leaders suddenly wake up to the urgency of digital and ecommerce. This has significantly increased the demand for terms like digital transformation and disruption and given even more space to corporate gurus and professional speakers who indiscriminately use the concepts to sell talks, workshops and consultancies.
As well as often being used synonymously, which is a misconception, digital transformation and diruption are the subject of dilemmas like that of the chicken or the egg. In practice, it doesn't really matter who hatched first. The important thing is to understand their differences and practical applications in order to minimize the risks for your business.
A bit of history
In the 2019 book "Unlocking the customer value chain", Thales Teixeira and Pixeiota published studies on digital disruption based on the concept of decoupling the value chain in traditional business markets. The authors explore the evolutionary movements that digital has brought about, influencing the way consumers and companies interact with each other.
The evolution of the concepts established by Teixeira and Peixota in the book has been taking place since the beginning of the Internet. Studies began between 1995 and 2005, and the result was observed in three movements:
1st - What is known as unbundling, where consumers, for example, can now buy just one song instead of an entire CD by a band.
2nd - It emerged at the end of 1999 with the emergence of ecommerce and was called disintermediation, which deals with breaking the rule that only retailers could serve consumers and industries, offering consumers the possibility of buying directly from those who produce.
3 - And much more recently, "decoupling", where products and services are separated in a way that values what creates the most value for the consumer. One example is Netflix, which has eliminated commercials and waiting for an appointment (friction) to watch your favorite shows and movies, keeping only what creates value for the consumer, with a focus on the experience.
This definition makes it easier to answer the question in the title. Digital transformation is a phenomenon that traditional companies have to go through in order to react to, or even avoid, digital disruption.
The concept in practice
By eliminating the need to allocate huge amounts of capital to enjoy the benefits of the product, an example of the decoupling concept is Zipcar, also cited in Teixeira and Pixeiota's book - "Zipcar, as discussed earlier, and other on-demand car rental companies such as CarShare and Enterprise's Gig, offer drivers access to a car without the need for contracts and reservations. Zipcar's prices are reasonable for short periods, say a few hours."
Traditional companies, which understood the movements, began to look for ways to react. Others, who chose to fight the newcomer with the same old weapons, saw their businesses dwindle until they were sold or closed down. The fact is that large corporations have been pressured to invest time and money in new businesses and to fight disruption in various business segments. Harvard professor and researcher Sunil Gupta explores the subject in his book "Driving digital strategy", where he shows how large traditional companies have invested in an attempt to combat disruption.
The drinks giant AmBev, for example, founded ZX Ventures in 2015 to explore the ecommerce market, digital models and craft beers. From this initiative came the Zé Delivery app, in which I had the pleasure of being part of the team that launched it. With the app, consumers can receive cold beer at home in 30 minutes, delivered by the nearest bar.
Unilever bought Dólar Shave Club, a recurring delivery service for shaving products, and kept its operation 100% separate in order to have a startup within its operation. Another example is what General Motors did by investing in Maven, a car-sharing app in the US, which was given a dedicated area within the company in Detroit.
Technology X Disruption
"Promoting change in a large, established organization is never easy, but it's even more difficult in the face of rapidly evolving technology and emerging business models that create huge uncertainties for the future. Unlike startups, companies have legacy technologies, assets they can't ignore and shareholders who demand profits," says Gupta about the relationship between technology and disruption.
An MIT study divides traditional companies into four categories: weak, medium, semi-innovative and innovative according to the intensity with which they react and the level of investment they have in technology in relation to these new competitors. In this model, only 16% of companies are classified as innovative and able to react to a process of disruption.
However, the study also reinforces that digital transformation will not always generate a new competitor, but that it can change the way consumers relate to your brand, your product and, above all, their purchasing journey.
Examples from the print media sector, for example, can be explored, showing how a service (classifieds) was still desired and sought after by the consumer, but it was necessary to change the channel in which it was offered.
The inability of print newspapers to react to this new behavior meant that they allowed new entrants to dominate the online classifieds market (Zap Móveis, OLX, Craiglist, among others) and thus began the process of bankruptcy or the decline of a large part of the traditional print newspaper and magazine industry.
In conclusion
In other words, the egg, the chicken, the hen house, even your morning scrambled egg, doesn't matter. The order of the factors in this case really affects the sum, especially the speed and culture of innovation in your company.
Covid-19 has arrived and, if all goes well, it will pass. However, the effects it will have on consumers will not pass. Adapting your business model is essential for the future, which will be more digital, mobile-centric and with a lot of demand for more transactional services in the digital environment.
In other words, if your company is ahead of the curve, an opportunity is opening up to "disrupt" your competitors by going digital. If not, transform urgently and start innovating now.
Text originally published in HSM Management*
