Disruptive innovation entails creating a new market and value network, as well as eventually disrupting and displacing an existing market and earlier technology.
“The key is to have an outward focus, instead of inward looking focus,” says Norrie, who spoke at this year’s Institute of Directors (IoD) Leadership conference.
For today’s enterprises, it is “disrupt or be disrupted,” states Norrie, who chairs the Hi-Tech Trust and the beachhead program of the New Zealand Trade and Enterprise. “It is so easy to become yesterday’s rooster to today’s feather duster.”
“It is a scary world out there, but you can stop being a victim of disruption,” he adds.
“If you are thinking local, you are in danger of being blindsided.”
“You have to work out what you do has to be globally competitive and unique; you have to add value and be able to operate in a global market.”
“What is your core competitive advantage? What is your unique IP, or do you have a lot of baggage that you carry with you?”
“Transforming the company’s core business is extremely difficult and requires leadership and courage,” he avers. “Foresight is not enough.”
What is your core competitive advantage? What is your unique IP?
He cites the case of Kodak, which declared bankruptcy in 2012. Yet, it had identified, as early as 1979, digital photography as a possible disruptor to their business. “They had 33 years to do something.”
Netflix, on the other hand, went online and cannibalised its own model of DVD by mail, its core business, “to leapfrog the rest of the industry. ”
“It takes courage to kill your own cash cows.”
“You need to think about that, because I guarantee you, your competitors are,” he stresses. “When you are not thinking about it, that is the time you are more vulnerable.”
“Disruption is everywhere, if we start to open our eyes to it,” Norrie says.
He poses some ideas companies can consider to determine if their organisation or industry is among those being disrupted.
Old patterns: Look for industries that do same patterns for many years. He cites Uber and Zoomy, the local taxi booking app, for disrupting the taxi industry.
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On premise: These are industries with big investments in physical buildings – think of universities. He then notes Coursera, which is now offering free online education delivered by academic institutions including Stanford, Princeton, and Yale.
Local views:Industries that think locally and think they are too far away give them the benefit of distance. He says Vidyo is challenging the videoconferencing industry that provides “mind-blowingly good, but mind-blowingly expensive” services. In healthcare, the service can be used for doctor and patient interactions.
Personal network: These are companies that rely on a person to introduce new products. He points out how Stock X sells cattle without using cattle agents. It allows buyers to see online the cattle, history of the cattle, weight, how they look like. He says some companies are also recruiting staff through Seek and TradeMe, and not using recruitment agents.
Industries with long supply chains These include industries like meat and wool, where “everyone has to have their slice of the pie” in each step of the process.
These disruptive innovations show that “technology is something we should embrace and leverage,” he advises. If not, it is like “walking into the future facing backwards.”
Rise of the 'new world' industries
Another speaker, Ross Buckley, executive chairman of KPMG in New Zealand, talked about the global megatrends to 2030 that will impact New Zealand’s prosperity.
Like Norrie, he highlights the exponential growth in the volume and speed of access to information and communications technology.
He says 75 per cent of the world’s population has access to a mobile. By 2020, there will be five billion Internet users and 80 billion connected devices.
Meanwhile, the average number of years a company stays in the S&P 500 Index has gone down. According to the Economist, in 1937, it was estimated to be 75 years, and in 2011, this was down to 15 years. In 2025, it is forecast to be five years.
Looking at the NZX 20 Index this year, only six of the companies were listed before 1995 – these are Air New Zealand, Fisher & Paykel Healthcare, Fletcher Buiding, Infratil, Port of Tauranga, and Spark.
Digital technologies, meanwhile, are creating “old world” and “new world” industries.
The real estate industry used to have classified ads in newspapers, with physical real estate agent offices representing the “old world”. The “new world” setting includes specialist real estate websites that connect buyers and sellers, although the latter are still predominantly real estate agents.
The same is true with the recruitment industry, which had ran job ads in newspapers and applicants speaking to recruitment agents. Today, there are specialist websites such as Seek that connect jobseekers and employers.
In this fast paced environment, he lists the top 10 questions boards can consider:
1. What will your clients of the future look like?
2. How will the industry value chain be impacted and what role do you want to play?
3. How will your proposition and service model need to change to meet evolving client needs?
4. What are the implications for your brand and market profile?
5. What opportunities are available to extend or reshape your existing geographical footprint to take advantage of emerging market developments?
6. Have you got the right operating model for the future?
7. How are you capturing and leveraging internal and external data to help you better engage with clients and remain relevant?
8. How are you ensuring that a risk focus is embedded within your organisation?
9. What people skills and capabilities will you require in the future?
10. Where do you see the key risk of market discontinuity coming from?
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