Reasons that traditional biz are still not overshadowed by digital disruptors

Malav Kapadia

Digital disruption is changing the way people live their lives. New companies that are natively digital are using social media, mobile devices, internet of things (IoT), cloud and big data to deliver digital services to their customers.

Many assumed that this disruption would put traditional business - out-of-business. If a business is not natively digital, it would be overshadowed and disrupted by some fast moving, innovative new player.

Of course, we have all heard everyone’s favorite proof points for the emergence of the new economy, dominated by digital disruptors – the largest media company owns no media (YouTube/Google), the largest car service company owns no cars (Uber) and the largest vacation rental property company owns no property (Airbnb). Yet, many traditional industry-leading companies are proving to be surprisingly adaptive in this new digital economy.

According to Capgemini Consulting, since 2000, 52 percent of companies in the Fortune 500 have either gone bankrupt, been acquired or ceased to exist. At first glance, this might seem to be the reality where business ‘Goliaths’ are been toppled by digital ‘Davids’.

But, traditional companies across industries still continued to thrive in the digital economy. This is a result of strategically adapting to the digital environment and integrating them to the present business model.

Traditional insurance industry leaders have equipped their claims agents with tablets and mobile apps to capture on-scene details at an accident site and submit claims in real-time. Traditional banking leaders are transforming the retail banking experience with mobile apps, eliminating physical branches and leveraging big data to customize services and reduce fraud. Traditional industrial manufacturers are integrating Internet-connected sensors into their machines and equipment, providing them with real-time data on performance so they can schedule preventive maintenance and improve product design.

How are some traditional businesses remaining relevant today?

First, the competitive advantages that allowed traditional industry leaders to dominate their markets has proven a lot harder to disrupt than expected. Strong brands and customer relationships, tested business processes and risk mitigation policies, global supply chains, and manufacturing expertise are difficult to replicate. The value in experience and proven operating models have been realized. This value and the vision of traditional business leaders has given them the knowledge to assess the new business landscape and retool offerings with new technology that spans a broader set of business scenarios than those of their less mature rivals.

Second, these assessments have led many traditional industry leaders to realize that the digital economy presents many opportunities for them to expand their core businesses and dramatically increase the value they offer to their customers. New digital services are also offering new potential markets to tap, streamlining operations in their current lines of business and also strengthening the competitive advantages they have developed over the years.

As traditional industry leaders find ways to use digital technologies to develop new competitive advantages, some unlikely players are getting into the game.

Tyre manufacturers are considering how they can add sensors to their products, allowing them to collect data on tyre performance that can be analyzed to provide valuable insights into vehicle performance and driver behavior. These insights can then be sold to a whole new set of relevant customers, such as insurance carriers.

Mining companies are using the IoT to both monitor and automate the performance of mineral collection vehicles, reducing maintenance and operating costs.

Farm equipment manufacturers are building tractors that independently determine the best way to plow fields and collect crops.

Theme parks are using Internet-connected wristbands to help families automatically check-in to hotels, order meals and get quickly onto their favorite rides – transforming their guests’ theme park experience.

Auto manufacturers are launching digital services that provide customers with on-demand car services–delivering a car that customers can drive right when they need one.

The process of transforming or gradually adopting to digital technologies brings in an array of challenges as well. To fully embrace the promise of the digital economy, businesses need to figure out how they can speed up internal processes and procedures, so they can continuously introduce innovative new digital services. Security must be a priority so that customers continue to trust new services offered.

Finally, companies shouldn’t miss the fact that they are redefining their image in the industry while digitally enhancing their services and offering a whole new set of customer experiences.

Many businesses are experiencing the benefits of digital transformation. Ownership of enterprise systems is now easier and more cost-effective with cloud-computing solutions. Mobility and BYOD (bring your own device) initiatives are enabling greater flexibility to employees who can work from anywhere and anytime. Business technology is smarter and better connected with the introduction of IoT.

Traditional business leaders are quickly and intelligently integrating digital technologies into their businesses without abandoning their existing assets, while traditional industry leaders are accelerating their competitive advantage and extending themselves into new markets.  This is also a great proof point that the new digital era is here.

The author is Global Director & Head of Indian Outsourcing Partners, BMC Software