The pace of technological change, business model innovation, and the blending of industries accelerate as companies are drawn into the Digital Vortex.
At the DBT Center we are often asked how companies should respond in this uncertain and highly competitive environment. There is of course no single or simple answer, however our research does indicate strategic approaches and capabilities that companies can develop to counter digital threats. It is important to recognize though that the ultimate goal of digital transformation is not achieved by a series of individual or isolated actions, which tend to focus on tinkering with existing value chains to compete with traditional, well-understood foes. Rather, transformation is a holistic re-imaging of the entire enterprise to focus on the value delivered to customers.
Meanwhile, digital disruptors focus on precisely that: supplying the cost value, experience value, and platform value customers want. Increasingly, a company’s most formidable competitor will be a start-up or a firm from another industry that uses digital technologies and innovative business models to create “combinatorial disruption”—where cost value, experience value, and platform value are created concurrently. In such circumstances, tweaking an existing value chain is unlikely to be enough. To win in the Digital Vortex, companies must be dynamic enough to understand the risks disruptors pose to their business, and to maximize their revenues in the face of tough competition.
Through the Center’s research and experience advising companies on how to transform, we have come to understand that companies need to develop a meta-capability we call “digital business agility.” We define digital business agility simply as the capacity of an organization to use digital means to understand and react to digital threats and opportunities.
Companies that possess digital business agility respond quickly and effectively to emerging threats to their business, and seize new market opportunities before their rivals even notice them. They use combinatorial disruption to differentiate their core businesses, making it hard for value vampires or other disruptors to replicate or supersede the value they provide. Most importantly, they can identify and exploit value vacancies, which all companies will need to maintain growth.
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