If you don't remake your industry, someone else will do it for you: Raskino

Social Media strategy, Analytics & Enablement, IBM
For industry incumbents, teaming up with your competitor may be the best way to survive the disruptions wrought by the Nexus of Forces. 
For companies that wait too long, it may be the only way.
Gartner VP and Fellow Mark Raskino presented that scenario in a session entitled "Every Industry will be Digitally Remastered." With equal parts excitement and urgency, Raskino reeled of dozens of examples of how digitization is remaking products and services as everyday, as unassuming and as seemingly impervious to disruption as golf balls, pizza delivery, window cleaning and cigarettes.
And even if industry incumbents can find safety in numbers, casualties will still be inevitable, he said. 
Raskino outlined four factors for CIOs to consider with the utmost urgency:
  • Every industry will be digitally remastered
  • Technology will redefine your core products
  • Attack will come from outside and underneath
  • Control of the platform will win the game

Every industry will be digitally remastered 

"Digital" is quickly becoming a business strategy keyword, said Raskino. So pervasive and disruptive is the Nexus of Forces that nearly half (49 percent) of the 391 global CEOs and business executives polled by Gartner report having a digital strategy in place. Raskino further emphasized the digital imperative with a 2013 quote from Wolters Kluwer CEO Nancy McKinstry: "When I took over as CEO, 70 percent of our revenue came from print products. Ten years later, over 75 percent of our revenue comes from online, software and services." 

Though the elements of the Nexus of Forces (Cloud, Big Data, Social, Mobile) have been in place for years, a confluence of five external factors is bringing this change about now, said Raskino:
  • The "Great Recession" of 2008 is now behind us; business leaders are turning their priorities, however cautiously, to growth.
  • Investment capital is piling up. Many companies are "embarrassed" by the size of their cash reserves; investors are itching for their returns.
  • BRIC growth is slowing: the economies in Brazil, Russia, India and China has slowed in recent months; business leaders need to look elsewhere. 
  • The disruptive potential of many technologies has been backing up unused for years. Technologies like Cloud and Social are now less risky and more reliable.
  • More than any other example, the failure of Kodak has caused leaders around the world to rethink everything. "Companies understood what was happening when the music industry changed, but many thought they were immune because they made physical products." 
Not any more.

Technology will redefine your core products

Digital services such as Spotify and digital products such as e-books and tablet-based cameras are only the beginning, said Raskino. The new frontiers see companies embedding sensors, IP connectivity and middleware into everyday objects to extend them into the internet of things and generate innovative new services. For example:
  • On the golf course: smart golf balls track the impact of the club and the trajectory of their flight, then relay that data to the owner's mobile phone in real time. Meanwhile, automated lawn mowers trim the greens in precision custom patterns. 
  • On the tennis court: racquet maker Babolat's new instrumented racquets captures and streams every aspect of a player's game - swing velocity, angle, impact point with the ball - to an iPhone. Next year, the International Tennis Foundation (ITF) will allow the use of smart raquets for the first time. 
  • In Dubai, sensor-driven robots now scale the sides of its gleaming office towers, oblivous to harsh desert winds. Smart trash bins alert garbage collection trucks when they're full to optimize their routes and cut down on fuel costs. 
  • In the UK, Domino's pizza experiments with pizza delivery drones. 
  • In the tobacco industry, e-cigarettes give smokers the desired nicotine hit wrapped in flavors like bubble gum or blueberry. 
  • In finance, Bitcoin competes for legitimacy with hard currency issued by national governments. Increasingly, it wins. 
Companies at the forefront of digitization are saying "We don't know if this will work, but it might," said Raskino.   

Attack will come from outside and underneath

Given the pace of these innovations, might be as much certainty as any CIO can expect. And it's certainly preferable to the fate that befell Borders, Circuit City and hundreds of other well-known brands that have simply disappeared over the past five years. A host of major disruptive forces including pay-as-you-go consumption, mass customization and on-demand delivery is making it possible for competitors to enter new industries - witness Google's entry into the automobile industry, for example. Or Apple's disruption of the film and music industry. 
Competition can also come from underneath your industry, said Raskino. In these cases, small startups can arise quickly by using existing technology in new ways. This was precisely the case with e-cigarettes, which were developed not by tobacco companies, but by Chinese contract manufacturers using lithium ion and USB connectivity. As of this year, four major tobacco companies have or will launch their own brand of electronic cigarette. 
"Disruptive companies are taking over more and more companies because they can," said Raskin. "If you don't move as quickly as they like, they'll move for you."  
Not that every industry will see the same degree of disruption at the same rate, said Raskin. The heavier the industry (for example, mining), the longer the runway. Further, he added, obstacles such as government regulation, talent shortages and oligopoly markets will impede the pace in regulated industries. But the change will come, said Raskino. "You don't want to wait until you see disruption in your own industry. By  then it'll be too late."

Control the platform, master the industry

The battle for survival will be fought on the platform, said Raskino, pointing to examples of how Apple wrested control away from music labels through iTunes, and how Amazon wrestled control away from publishers through the Kindle. He then pointed to the recent merger of Penguin and Random House as a necessary move. "By 2020, the strongest companies will be those with the most industry digital platform control," said Raskino. 

What CIOs must do now

CIOs who've adopted the phrase "That's not my industry" as a defensive posture will soon have nowhere to hide. Nor will they have an excuse for their companies' decline. "These CIOs will have no option but to say, 'this is happening on my watch. The examples are there. I have no excuse.'"
To compete, Raskino urged companies to learn the same techniques as those used by their new competition, such as data science, freemium pricing, co-opetition and vertical integration. He also left attendees with the following recommendations:
  • Organize for digital at the C-level - look for leaders who can drive change.
  • Make digital a core part of your business strategy - a standalone strategy is simply old media in new skin.
  • Ensure core product innovation is included - any product you make can be connected and advanced.
  • Fund digital business seriously - cancel other projects if need be.
  • Talk to your competitors - they're in the same boat.

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