You’ve probably heard the story of a frog in a jar filled with water. If you start heating the water gradually, the frog adjusts its body temperature. When the water is about to reach boiling point, the frog cannot adjust anymore. At this point when the frog decides to jump out, it is unable to do so because it has lost all its strength in adjusting with the rising water temperature. What killed the frog is not so much the boiling water, but its own inability to correctly decide when to jump out of the water. Similarly, there are times when organizations must decide to take action or wait to act while competitive pressures continue to heat up, such as with their digital strategy and digital transformation.
Many companies are facing the digital forces like the frog, hoping the water will cool down, rather than taking the jump and changing their business to address the new digital era. Digital pressures are not going to get less. Organizations must take action now, or your business could be severely impacted. In fact, the digital era has the potential to overturn incumbent companies and reshape markets faster than any other force in history.
We’ve talked for years about how Amazon reshaped the bookstore industry, and now we see them reshaping delivery expectations and the distribution industry. We continue to see industry after industry have similar disruptions while some face total extinction. When is the last time you’ve used a travel agent to book a flight? Look what Uber and Lyft are doing to the cab industry (see my previous blog).
The Global Center for Digital Business Transformation did a study and found that an average of four of today’s top ten incumbents (in terms of market share) in each industry will be displaced by digital disruption in the next five years, with the average of major disruption in each industry being within 3.1 years. In fact, 52% of the Fortune 500 have gone bankrupt, been acquired, or ceased to exist since 2000, with a big reason being the new digital era.
Yet with all these examples and studies right in front of us showing that digital disruptive change is inevitable, I see very few boards and executive teams proactively discussing the digital disruption, how it could impact them, and how they can lead their industry.
All companies must challenge the basic assumptions in their business model and re-think how they can deliver value to customers with a new lens. Don’t assume the previous barriers to entry will keep you safe, as digital disrupters come from unlikely places, even new companies or companies outside the industry. Proactively design your future now, or risk being disrupted. Digital disrupters can appear quickly and take over market share and customers before you know it. The stakes are too high to take a wait and see approach.
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Don’t be like the frog and wait to take action until it is too late.
