Not only are business models changing but value chains and product offerings are also undergoing change

Bengaluru

The top priority for most CEOs across industries today is how to make their company a digital one. Almost every company is thinking of ways to become a digital company first and a physical company later. Digital business transformation is a journey to adopt and deploy digital technologies and business models to improve performance quantifiably. Critical is to grasp the need for change.

The second is the “Internet of everything” (IoE). As the IoE becomes a reality, every industry vertical is being forced to embrace the digital revolution and every business is transitioning to become a tech one. Sensors, monitors and data are getting digitised and revolutionising the way health care, education, citizen services and even entertainment is delivered. Key here is the speed of change.

Digital disruptors

Digital disruption, which is the effect of digital technologies and business models on a company’s current value proposition, and its resulting market position, has the potential to overturn incumbents and reshape markets faster than perhaps any force in history. The difference between digital disruption and traditional competitive dynamics comes down to two main factors — the velocity of change and the high stakes involved. Digital disruptors innovate rapidly, and then use their innovations to gain market share and scale faster rather than clinging to predominantly physical business models.

Consider the case of WhatsApp, bought by Facebook in 2014 for a whopping USD 22 billion. WhatsApp’s overwhelming impact on the USD 100 billion global text messaging market delivers a powerful lesson in digital disruption. In addition to free text messaging, WhatsApp now allows users to make free mobile voice calls. However, Facebook is not only looking to disrupt the telecommunications industry. Having introduced person-to-person (P2P) payments via Facebook Messenger, the company is now poised to extend this service to WhatsApp’s 800 million users.

WhatsApp is also testing a business model that would help Facebook challenge Google’s domination of the mobile advertising market by charging businesses for the right to contact its users directly. All this disruption comes from one innovative platform that has the seemingly simple function of allowing consumers to send messages to each other via smartphones for ‘free.’

In a way, WhatsApp’s success (or potential failure) leaves no question that the stakes are very high-not only for Facebook’s potential revenue, but also for the many companies WhatsApp disrupts.

WhatsApp and other over-the-top (OTT) services are projected to drain global telecommunications companies of USD 386 billion in revenue between 2012 and 2018 from the use of OTT mobile voice calling alone.

Adoption of cloud technology will grow multifold in the coming years. Operators today have a clear agenda which is to virtualise their functions and move them on to the cloud. The technology will, in the long term help reduce cost of production. Cloud will also bring agility in time-to-market and time-to-service deliverables. While this technology will thrive, data analytics is another opportunity which will to help increase business efficiencies.

Getting success

It is not just business models that are changing, value chains and product offerings are undergoing change as well. Digitisation is changing industries and increasingly blurring the lines between them. Changes start with companies being more agile, more willing to partner, and build systems and processes to accommodate that change. Combining value-cost, experience, and platform-to create disruptive new business models will bring exponential gains.

As businesses stand in the midst of digital disruption, getting success will depend on three pillars, first getting market transitions right, and obviously, digitisation and the Internet of everything are at the front of that. The second is not doing the same thing for too long.

Companies have to move into market adjacencies, and bring what is learned, back into their core capability. The third and the most difficult one perhaps, is for leaders to reinvent themselves as a CIO, as a CEO and the company.

The author is the Managing Director, Service Provider Business, Cisco India and SAARC. He can be reached at www.cisco.com