Radical change or incremental steps? Digital disruption is both

Digital disruption is associated with speed and surprise. But CIOs need to know that incremental change also has strong disruptive potential.

When Murshid Khan, corporate CIO at Stewart Information Services Corp., considers digital disruption, three words come to mind: not so fast.

Don't look five years ahead; ask 'What does my customer need next?'

James McQuivey,
analyst, Forrester Research Inc.

After a day of wake-up calls and calls to arms at the recent Forrester Research Inc. forum for CIOs on digital disruption in Orlando, Fla., Khan's reaction was one of calm concern. He knows the importance of harnessing digital technology for competitive advantage. But he also knows that the Houston-based real-estate services provider where he oversees IT doesn't have the vast budget and resources of leaders in digital disruption, such as Nike Inc. or Amazon.com Inc.

"The concern is money and time," Khan said. "Nike and Amazon are good examples, but they might represent a half percent or 1% of companies. For the majority of companies, digital transformation is a journey."

In conference settings, CIOs are made to feel that all they need to do is "to spend a few million dollars and you're there," Khan said. The reality of aligning IT with the business -- whether it's a digital technology or otherwise -- isn't easy. "It is, in fact, going to take a lot of effort because it's a change in the business process as well; it's not only changing the technology," he said. "At a philosophical level, it's good; but when you bring it down to the business and what it means and how quickly you can adopt it, it's a journey; it's not going to happen overnight."

Series of small steps lead to big digital disruption

"Digital disruption," as defined by Forrester, refers to the practice of leveraging digital platforms to meet the expectations of tech-savvy customers and to deliver a more compelling product and service experience faster and at a lower cost. According to Forrester, the two hallmarks of digital disruption are surprise and speed. CIOs need not only to expect the unexpected, but also to be prepared to respond to it immediately. Of the two, surprise trumps speed: The loftiest goal is to be the company that others don't see coming. And as Forrester analyst Nigel Fenwick pointed out, some of the most successful disruptions happen over time.

Such was the case with Rolls-Royce. For years the company toiled along in the same business model as its competitors: build jet engines, sell jet engines, make a profit on jet engine parts and repairs. But some years ago, Fenwick said, Rolls-Royce began thinking differently. Rather than sell engines, it began leasing engines. The venerable manufacturer eventually realized it wasn't really engines it was leasing, but propulsion hours. The business of Rolls-Royce now was keeping planes in the air. This placed a premium on reducing downtime, and the way to do that was to place digital sensors on the engines to transmit real-time maintenance information to the data center. From there, service crews could be informed about which repairs were needed before a plane even landed.

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"The result is happier customers, fewer hours of downtime for engines and ultimately, happy consumers, because people like you and I aren't sitting around airports waiting for engines to be fixed," Fenwick said. "And that increases revenue for Rolls-Royce."

Rolls-Royce's use of digital technology was part of an evolutionary process, but when it crystalized, it caused a radical disruption of the jet engine marketplace. The point, Fenwick said, is that disruption grows out of a culture of continuous change: If you don't get started, you'll never get there. "Disruption doesn't fit neatly in your planning," he said. "Really successful organizations think of strategy as a continuous cycle, and that's a challenge for many IT organizations."

Serving the customer serves the company

Some digital disruption is even slower and subtler, but in the end still lands its punch. When American Airlines created its first mobile app, it started out by giving users simple flight information, such as gate numbers and boarding times.

After some success with that, the airline took a page straight from Forrester analyst and author James McQuivey's forthcoming book, Digital Disruption: Unleashing the Next Wave of Innovation. Rather than planning a big leap, it moved quickly by "innovating the adjacent possible." In other words, the airline put itself in the customers' shoes and took the next logical step. "Don't look five years ahead; ask 'What does my customer need next?'" McQuivey said.

For American Airlines, this was offering a digital boarding pass, which turned out to be another hit with users. Today users are able to book flights straight from the app, a successful culmination of incremental changes.

McQuivey suggests creating a flexible list of ideas about things you can do for your customers. Some might be crazy, some could be complicated; but in doing so, you will identify ways to meet their needs and benefit your business. "Then take another step," he said. "Let the future of your project find you."

Let us know what you think about the story; email Karen Goulart, Features Writer.

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