DISRUPTIVE INNOVATION I
Updated: May 9, 2020
Disruption is a topic that many people have been talking about lately, but they don’t know what to do to protect their companies. I do not write with the definition of disruption that described by cool consulting companies with their fancy words. You can find that with googling. So what is disruption with a very simple expression exactly? Within the scope of customer journey, with the help of technology, it is the creation of a business model with the new value proposition and revenue model by touching the problems and needs of the customers at different digital touch points. It is the whole disappearance process of the current business models day by day where the companies provide cash flow in the market.
I’m not going to give you a typical blockbuster vs Netflix or Kodak examples. Do not be afraid. :)
Before moving on to the examples, let’s talk about the digital transformation that big firms are working on without knowing exactly what they are doing.
What do you need to do? First, you need to clarify the direction of your company and then find an answer to the question of why you have to transform with your core c level executives. By the way, this is not a one-shot tactic or strategy once you set up. It is a living organism that you systematically have to analyze the nature of digital disruption threatening your industry, formulate a strategic response by leveraging digital to enhance your value proposition and then prepare your strategy execution by mapping your new value proposition into organizational activities. In other words, you must answer these two questions at the beginning.
• What are the potential digital trends and disruptions your industry facing?
• How do you see the likely magnitude and speed of impact of these digital changes?
Let’s look at the perspective of a company in the financial sector that gives microcredit to make it more understandable. I think they should formulate their strategic plans to tackle the rise of FinTech Startups in the P2P lending, Crowdfunding, Alternative Credit Scoring, Money-Transfer Domain and White Label Platforms in Micro Lending market. I tried to illustrate potential digital trends in a table below.
A strategy is fundamentally about how organizations adapt to their changing environment. Therefore, the value proposition of companies is very important in changing environments. If necessary, they should be able to develop or transform it quickly. In order to do this, it is necessary to develop the digital competencies and create the organizational chart required for execution. Finally, all other resources such as technical infrastructure need to be provided for the changing organization. Let’s examine on the framework, if you like. Then, look at the product and value propositions that Microsoft and BMW offer to tackle in their markets.
Are their value proposition and strategies sufficient to compete? Give yourself the answer to this question. But I’m giving the rank of the automotive market cap to help.
Now let’s look at how the value proposition part should be in the framework.
Willingness-to-pay (WTP) is the most valuable thing that a buyer will pay for a product or service given the alternatives and given a take it or leave it offer.
Value creation is the difference between WTP and Resource Cost. In other words, value creation determines the size of the pie. I don’t want to deep dive RC part now but in a very quick explanation, The resource cost reflects the value of all the inputs required to produce and deliver the product or service to the buyer.
RC ≠ The firm’s actual costs.
Let’s examine by banks in this part. Banks are trying to transform rapidly within the scope of digitalization and branchless banking. So what is the value proposition? How will technologies work to create value? I tried to summarize below.
Life moves faster than the pace of bank queues and in store credit application from partnership brands. Smartphone is making the world a smaller place and a faster one. No more waste of time to make your dreams come through.
Value Proposition: Financial access. Anytime, anywhere, whenever you need from your smartphone.
Let’s meet at Disruption Innovation II - Industry Value Chain and Company Value Chain with new initiative and its enablers.