Get comfortable with digital disruption, Deloitte authors say

Everyone in business is looking over their shoulders these days at yet another digital disruption, potentially in their industry. You might sell insurance, or health care, or higher education or drive a cab. No one is safe from being out of a job or having to learn new skills.

Print media learned the lesson the hard way, being body slammed by the digital revolution. I wrote about what happens when old media assimilates new media in 2010 for ColoradoBiz after listening to a speech by Jerre Stead, CEO of IHS Corp.

Information Handling Services is one of the world’s largest information gatherers and resellers. So is the New York Times but why is that company suffering and IHS seeing its revenue rise yearly? Last year they did nearly a billion dollars with net income of $135 million, thank you. This for a company that was in the $300 million revenue range just a decade ago.

So if the digital media revolution has devastated traditional media, how come IHS is thriving, I asked Stead in the Q&A period after his presentation. His simple answer was that “90 percent of our information is subscriber-based. We look at the Internet as a way to distribute information and make it more available for our clients.”

I was impressed recently when I read a report by IHS that said the terrorist group Islamic States saw its revenues drop by a third. IHS gathers its information from a multitude of sources, and analysts make their estimates based on the information. It’s naturally fascinating to learn how IS gets its money, from drug peddling, shaking down its citizens and black market oil to kidnapping.

Getting back to digital disruption, Deloitte recently published an interesting, in-depth report about the nature of disruption and how it shapes our business world. It’s a lengthy white paper, so to spare my faithful reader the time, I’ll attempt a synopsis of what the authors describe as (fad jargon alert) “the digital ecosystem.”

In “Where do you fit in the new digital ecosystem? An overview of the trends shaping the technology, media, and telecom industry,” authors Mumtaz Ahmed, Ragu Gurumurthy and Gaurav Khetan started with 11,500 companies in the CompuStat database and eventually boiled their study group down to 1,512 firms in five categories: Content, software, hardware, network and services. Though just over 1 percent of all globally listed companies, they represent about 9 percent of global enterprise value.

THE ROOTS OF DIGITAL DISRUPTION

The digital ecosystem is driving value along three tracks: creating new sources of revenue, rationalizing cost structure, and enhancing the speed of technology adoption, the authors say. What drives evolution? First, you have foundational changes, the bedrock trends that led to others’ emergence.

Foundational trends are broadband, intellectual property and ubiquitous connectivity; miniaturization and computing power and democratization of software, or open architecture. Then you have “first order” trends that build on the foundation. They include everything as a service and digitization of the world. The “second order” trends that build on the previous are security across networks and devices and data and analytics.

This framework is a way to connect the dots from foundational changes and understand how change happens. If you use analytics and the data on hand that most businesses collect, you can anticipate change.

“With digital innovations driving changes at every stage of business, from boardrooms to factory floors to retail outlets, TMT companies face unprecedented disruption—and competition, since reduced capital expenditure requirements have lowered entry barriers, making it easier for small businesses and start-ups to innovate, enter the market, and grow…The more comfortable you are with the digital ecosystem, the less likely you might be to be disrupted.” from Deloitte’s Where do you fit in the new digital ecosystem?

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