By Freek Vermeulen
Judging by the headlines, digital is about to disrupt your industry. I don’t disagree. But in most businesses, digital’s impact will be different from that faced by behemoths, like Amazon.com, Google and Facebook. Here are four guidelines for managing the disruption.
- Winner doesn’t always take all.
Many digital business models rely on networks. The more users and content providers that sign up, the better the network. But networks are rarely exclusive. Travel to Singapore, for example, and you’ll see why. Every taxi driver has at least two mobile phones in her window: If a ride comes in on one network, she will click “accept” and turn the other off. Similarly, most riders have at least two apps on their smartphone. When they need a ride, they use the app where a taxi is available quickest and cheapest.
- Complements aren’t substitutes.
More often than not, digital will complement a business rather replace it. Consider my own field of higher education. Many have proclaimed that online learning will render lectures obsolete and that brick-and-mortar colleges will be replaced by online universities. However, this isn’t what seems to be happening.
- Geography (still) matters.
Some people assume that geographic distance is less relevant today since we can now communicate instantaneously with anyone, anywhere. But closeness still matters. The strategy consulting firm Eden McCallum developed a business model based on a pool of freelance consultants, but rather than rely on a database, a matching platform or some other digital search function, they understood that there’s no substitute for really getting to know people. They developed a team of about 20 partners who maintain relationships and interact regularly with about 700 consultants and over 300 major clients.
- Speed? Not so fast.
If in a fast-changing industry you change equally fast, you’re likely to jump into all sorts of fads. Remember “Second Life”, the online virtual world? It was supposed to be the next big thing. Dutch bank ING rapidly assembled a large team to explore the new technology, develop applications and market its products in the virtual world. “Second Life” turned out to be a fad, and ING’s big investment came to nothing.
Freek Vermeulen is an associate professor of strategy and entrepreneurship at the London Business School.