The Threat of Digital Disruption and the Role of Software Development

Created: 06/27/2017
Updated: 10/29/2017
By: Roberto De Simone

Digital competence and related digital strategies are topical issues these days. Enterprises not addressing these issues are in danger of getting disrupted by new players. Moreover, digitization is not limited to one business sector; startups with big money pockets filled from venture capitalists and funds try to disrupt even the most traditional businesses. Law firms for example, are disrupted by startups which allow the online creation of verified contracts. A simple and secure income gets lost. New ideas are coming up every day. Additionally, IT giants like Apple, Google or Microsoft are looking for new business opportunities which lead again to disruption. Pharma, for instance, is disrupted by IT giants as they collect huge amounts of personal healthcare data which allows them to provide better diagnostic methods and better personalized treatment.

The bottom line is, digital disruption is strongly related to software development.

Symbolising digital disruption, digital player entering the market

Digitization is not something new but many parameter have changed

Digitization is not something new. Enterprises always tried hard to optimise their business processes. Supply chains (B2B) and production processes are already highly automated. Nevertheless things have changed:

Consumer behavior has changed

Consumers got used to buying over the internet even products such as cars, which, up to a little while ago, were unthinkable to buy over the net.

Software evolution gives new possibilities

Software evolves very quickly and opens possibilities for which technology hadn’t been ready up to now. To be specific, Machine Learning (ML) and Artificial Intelligence (AI). Both topics are for all IT giants a strategic growth market. Learning from data and analysing pictures opens a new immense field of automation even in administration (back office).

IT skills become more important compared to business skills

As mentioned above, technology progresses rapidly in all thinkable areas. It is very difficult to keep up with the technical leaders. IT is getting more and more complex and interconnected. Profound knowledge in various fields is required. Perhaps it is easier for an IT company to get the business knowledge than for a traditional company to get the IT skills. IT giants are already hiring non IT related scientists.

Regulation is not any longer a guarantee to protect existing business

Governments are slowly realizing that startups are a crucial factor in making their economies more competitive in the long run. This leads to less protection for traditional businesses: in the financial industry, for example, Fintech companies are getting banking licenses; Uber is fighting legal battles to break down the taxi monopoly.

Startups with a disrupting idea get unlimited financing

The available cash in the market has to be invested. Startups get the necessary cash for growth even though it might take years before investors can benefit from their investments. Companies such as Uber or Tesla burn billions for growth and they are still not profitable. As a side effect, even small startups get sky high valuations which make them hard to buy (especially for traditional businesses trying to incorporate an intruder). The same goes also for IT giants, who have to reinvest their huge earnings in order to grow even stronger.

Success stops innovation

A lot of well established enterprises do not realise that they are in danger, because their profits are still growing – maybe, also due to regulations. In some cases, management lives in the misconception that it is not possible for its business to be disrupted.

Disruption starts in business segments companies do not pay attention to

Often disrupters get a foot into business through less important business areas, from where on they start creating a market. Disrupting the key business segment is much more difficult, because, there, disruption becomes immediately obvious and it is easier to take the right measures to strike back.

How to face the digital disruption

Digitization has to be addressed at the top management level

This is perhaps the most important measure which has already been pointed out by multiple blog posts and articles. Business strategy has to be adapted to digital opportunities and to digital threads. Less important business sectors have to be checked for intruders.

Corporate culture has to be adapted to the digital business

Implementing digital strategies requires, most of the times, a corporate culture change, as well. Visionary thinking has to be integrated with digital competences. Staff has to be prepared for the new digital possibilities and has therefore to be open-minded about change. Some workplaces will disappear but, at the same, time new workplaces will be created. A very difficult issue for all kinds of companies.

Digitization of the whole customer journey

The whole business chain has to be analyzed, and the whole customer journey has to be reviewed, to identify where digitization can be applied. Partially digitized processes lead to frustration and are sometimes even useless.

But, as already mentioned above, it is also noteworthy, that, in many cases, today’s regulations prevent a complete digitization process.

Keeping customers in the company’s own ecosystem

Digital players try everything to move customers to their ecosystem, with innovative and comfortable solutions. For a traditional company trying to digitize its business model, it is always to weigh things up, whether to seek cooperation with a digital player or to build its own solutions. Apple Pay is a very good example - it is simple and very nice: banks are in the dilemma whether to give their customers this solution or to provide an own payment solution. Own solutions carry the risk of being unprofessional ones, when not applied correctly.

Data has to be kept under control

Data is the new gold. At the same time, it is also necessary to integrate as close as possible with business partners, so as to provide the best possible customer experience. When making data public, there must be a win-win situation. If data is given away to third parties, who claim to provide advanced solutions for customers, attention is needed in order not to lose the commercialisation of the customer.

Software development to address digital solutions

After identifying digital challenges and defining digital strategies, there also comes the time for implementation. Software development provides a large amount of starting points to implement the digital strategy.

Website

The website, with all related applications, is still the number one signboard of a company. It has to be made sure that it supports the digital business with a great user experience - users always compare with the leaders. Mobile first support, speed and a smooth complete workflow are critical issues. It is astonishing how many sites still don’t meet these criteria.

Apps

Apps should be built where the characteristics of the device provide additional value to the solution: the mobile phone camera, for instance, could be used to scan items, to build Augmented Reality (AR) solutions or even to interpret focused items with Machine Learning (ML, the latest hype); sensors could be used for data collection; NFC or Bluetooth can be used to get connected with hardware (see also next section); speech recognition can be implemented as an alternative user input. There are many more possibilities to benefit from the device. It is quite useless to build apps as a replacement for a mobile website (the website itself should support best practices for mobile devices).

Internet of things (IOT)

Hardware should be made intelligent to allow communication with other devices and to provide remote diagnostics. This way, business processes can be simplified and automated. Data collection and smart data analysing lead to optimized business processes from which customers benefit as well (see also “Big Data”). Again, apps could help to communicate with the hardware, to provide customers additional value. Actually, there is also a hype in the consumer industry to control hardware through voice commands with Amazon Echo and Google Home (Apple announced HomePod).

OpenData platforms

The building of APIs (Application Programming Interfaces) on the one hand, as well as the related data portals on the other hand, allow better and easier integration with business partners (see also above about the dilemma of data sharing). APIs are also necessary for creating internal web apps and apps.

Data analysis (Big Data)

Enterprises have a huge amount of data, most of which is not yet exploited. Data can be used to make better decisions and to provide more precise solutions to customers. Machine Learning (ML) and Artificial Intelligence (AI) are the buzzwords!

Conclusion

Software development is the key to face digital disruption. At the same time, creating software solutions which are at the same level as those by digital leaders, is a tough issue. It requires widespread technical knowledge, a vision adapted to the changed consumer behavior, and a strong mentality to reinvent the existing business!