Strategies for the Age of Digital Disruption
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N° 07 FEBRUARY 2015 Strategies for the Age of Digital Disruption DIGITAL TRANSFORMATION REVIEW N° 07 FEBRUARY 2015 Strategies for the Age of Digital Disruption Capgemini Consulting’s Editorial Board Cyril Garcia Fernando Alvarez Tabio Chief Executive Officer Chief Digital Officer Didier Bonnet Jerome Buvat Senior Vice President Head of Research [email protected], [email protected], @didiebon @jeromebuvat [email protected] The Digital Transformation Research Institute @capgeminiconsul www.capgemini-consulting.com www.linkedin.com/company/capgemini-consulting Contents The Age of Digital Disruption: Editorial 8 Digital Disruptions: Making Sense of it All Fast Thinking: Reinventing Strategy for a Digitally-Disrupted World 12 Rita McGrath, Columbia Business School A New French Revolution? Building a National Economy for the Digital Age 22 Philippe Lemoine The Power of Sharing: How Collaborative Business Models are Shaping a New Economy 28 Rachel Botsman 15 Startups to Watch in 2015 36 Brian Solis, Altimeter Group Collaboration Redefi ned: Engaging with The Disruptor The Silicon Network: How Big Corporates and Digital 44 Startups Can Create a More Innovative World David Cohen, Techstars Black Swan Startups: Spotting Tomorrow’s Big Digital Disruptors 52 Saul Klein, Index Ventures Winning Digital Disruptions Riding the Wave of Digital Disruption: Scripting a New Digital Future, the FT Way 60 Caspar de Bono, Financial Times Designing Transformational Business Models 68 Serguei Netessine, INSEAD When Digital Disruptions Strike: How Can Incumbents Respond? by Capgemini Consulting 78 The Age of Digital Disruption – Editorial The Age of Digital Disruption Introduction By Capgemini Consulting’s Editorial Board hese are uncertain and • Assessing the most effective How can we plan for the challenging times for strategic response to existing emergence of disruptors? traditional organizations disruptions with an analysis T We open the Review with Rita across every industry. The digital by Capgemini Consulting of Gunther McGrath, a professor at economy is turning the traditional incumbents’ winning strategies. Columbia Business School, who rules of the game upside down, as is a globally recognized expert on a scan of business press headlines strategy in uncertain and volatile illustrates. “Since 2000, 52% of Digital Disruptions – environments. “It is important companies in the Fortune 500 Making Sense of It All to understand that most digital have either gone bankrupt, been disruptions don’t happen suddenly. acquired or ceased to existi”. Working with a global panel They take place over time,” she “Uber Valued at $40 Billion in of industry leaders, venture explains. “Most companies often $1.2 Billion Equity Fundingii.” capitalists and academics (see get so caught up in everyday “Is Silicon Valley the Future of Figure 1), we have built a detailed operations that they don’t take a Finance?iii” “How Bitcoin can and picture of the digital disruption step back to think about what the will disrupt the financial systemiv.” phenomenon, probing the key future might hold.” This small sample of recent press questions that organizations need headlines reveals why the leaders answers to: Why are we seeing so many of traditional organizations might • How can we plan for the disruptions? feel a strong sense of disquiet. emergence of disruptors? Philippe Lemoine, who recently Disruption can happen at any • Why are we seeing so many authored a report for the French time, in any sector, and its effect disruptions? government on the digital on traditional organizations can • What shape are these transformation of the country’s be fundamental. Against this disruptions taking? economy, outlines three factors backdrop, this seventh edition of driving disruption: automation, the Digital Transformation Review • Which startups are likely to dematerialization (substitution of is dedicated to three themes: emerge to disrupt sector value physical products and processes chains over the coming years? with digital alternatives) and • Understanding more about the changes to the value chain. nature and context of digital disruption, from assessing where disruptors gain their competitive advantage to the emerging disruptors of the coming years. i Forbes, “Ray Wang: Cloud Is The ‘Foundation For Digital Transformation’”, December 2014 • Examining how collaboration ii Bloomberg, “Uber Valued at $40 Billion in $1.2 Billion Equity Funding”, December 2014 and engagement can help both iii NY Mag, “Is Silicon Valley the Future of Finance?”, June 2014 iv Visual Capitalist, “How Bitcoin can and will disrupt the financial system”, July 2014 incumbents and disruptors. 6 D IGITAL T RANSFORMATION R EVIEW N° 07 DIGITAL TRANSFORMATION REVIEW Figure 1: Guest Contributors to the Digital Transformation Review N o07 Serguei Netessine, Rita McGrath, Caspar de Singapore New York, USA Bono, Saul Klein, Brian Solis, London, UK London, UK San Francisco, USA Rachel Botsman, David Cohen Sydney, Australia Philippe Lemoine Boulder, Colorado, USA Paris, France What shape are these Which startups are likely to many large firms are often disruptions taking? emerge to disrupt sector value ignoring. There are, however, chains over the coming years? some traditional incumbents that Rachel Botsman is a global understand that they do not have thought leader on one of the Brian Solis is a digital analyst, all the answers and are partnering emerging business models of anthropologist, and futurist at with startups across sectors. We the disruptive segment: the Altimeter Group. He studies the spoke to two individuals who are collaborative economy. “The effects of disruptive technology closely associated with startups to collaborative economy drives a on business and society. He understand how incumbents can shift from centralized asset-heavy identifies a select set of startups engage with startups at an early organizations to decentralized that he believes will start hitting stage of their lifecycle. This allows asset-light networks and the headlines in 2015. The eclectic the incumbent and potential future marketplaces,” she explains. “It list spans companies from the disruptor to cooperate rather than typically does this by creating sharing economy, virtual reality, simply compete. business models that enable 3D Printing and more. underutilized assets - from spaces David Cohen is the founder, to skills to “stuff” - to be used more Managing Partner, and CEO of efficiently.” She believes there are Collaboration Redefi ned startup accelerator Techstars. The five key drivers of disruption – – Engaging with Potential Techstars network has so far funded wastage of resources, redundancy, Disruptors 484 companies and it works with complexity, limited access and large corporates to run mutually broken trust. Each of these areas Understanding the nature and valuable mentoring initiatives. creates new opportunities for context of disruption is the first step. “Techstars runs the program and startups and incumbents alike. Crafting a response is the second, is also the investor. The corporates and collaboration and engagement don’t take direct equity in the are important approaches that startup; they don’t take rights to D IGITAL T RANSFORMATION R EVIEW N° 07 7 The Age of Digital Disruption – Editorial follow on or acquire the startup or Saul Klein is a Partner with smaller firms are often driving the anything like that,” he explains. Index Ventures, an early-stage technology innovation. Instead, “They simply provide mentors and venture capital firm with €3 he argues, big companies focus on access to their technologies.” By billion under management and a buying from big companies and fail doing so, these corporates secure portfolio of 140 companies across to engage with small companies. new insights into how third- 20 countries in almost all sectors. He says: “Big companies will truly parties can use their APIs and data Saul Klein believes that traditional engage with the startup ecosystem in innovative ways. incumbents need to respond to when they spend between 5% and ‘big-bang’ disruption by really 25% of their tech and innovation engaging with smaller companies, budget with a small company.” not in the least because the Figure 2: Response Tactics of Successful Incumbents 48% 36% 32% 32% Judicial Route Mimicking Acquiring Acquiring Digital Competition Competition Talent N = 84 Note: Figures refer to percentage of companies adopting a particular approach. Multiple responses per company Source: Capgemini Consulting Analysis 8 D IGITAL T RANSFORMATION R EVIEW N° 07 DIGITAL TRANSFORMATION REVIEW Winning Digital Disruptions We close this seventh edition of the We hope this edition of the Digital Responding to digital disruption Digital Transformation Review Transformation Review has helped is now a critical weapon that all with Capgemini Consulting’s increase understanding of the organizations need to have in their view on how organizations can disruptive and challenging times strategic armory. The story of the respond when digital disruptions we live in. Digital disruption is a Financial Times’s response to the strike. Our research, involving fact of life and a sweeping force for digital disruption of the media over 100 companies, draws on the business change. Senior executives industry is a salutary example. lessons learned from incumbents therefore need to be confident in Caspar de Bono, Managing that have successfully tackled their abilities to assess and respond Director, B2B at the FT, outlines disruption