Once upon a time, the lines between industries were clear. It was obvious what companies like ‘British Gas’ and ‘The Prudential Insurance Company’ offered, and customers were clear that they needed to visit their bank for a loan and their grocer for their bacon and eggs. Now, in the age of digital disruption, we are seeing a shift away from these traditional markets, as the barriers between long-standing sectors become more and more blurred.
Take telecoms company Bharti Airtel, with its extensive heritage in phone networks and manufacturing handsets. Just this year, the company has moved into the financial services space, launching a payments bank across India which will enable consumers to make payments through their mobiles.
This reflects a shift in the consumer mindset. Customers are more willing than ever before to buy different services from providers established in other industries. Our New Pace of Change study found that a fifth of people would buy banking or insurance services from potential disrupters like Google, Amazon or Facebook. On the other hand, around a third of consumers would consider buying home energy, broadband or mobile contracts from their bank or insurer. Clearly, customers don’t see the same boundaries between sectors that might have once existed.
Crucially, it is now much easier for new market entrants to break into different sectors. In the hyper-connected digital age, companies face much lower barriers to entry, thanks to the ability to develop and scale new digital services at speed. Digitally native companies in particular can move very quickly to establish themselves in a wholly new area, and even disrupt it. As a result, companies are competing in new digital arenas that transcend traditional established verticals, and may face competition from hitherto unexpected sources.
Companies globally are aware of this threat, as Fujitsu’s Fit for Digital report showed. 93% of business leaders admitted that their sector has been impacted by digital disruption, with nearly half (46%) stating that the most significant impact had been increased competition or new entrants into the sector. When asked who is leading digital disruption in their industry, 29% pointed to an established organisation like Google or Amazon entering their sector from outside, while 15% said a start-up.
Established industry leaders can be particularly vulnerable to these new market entrants. In a fast changing market, larger, older businesses can be slower to adapt to new conditions and competition; their ability to move quickly to adopt new technology and services can be hindered by extensive legacy IT systems. However, the blurring of existing markets can also present opportunities for these traditional companies, if they are prepared to adopt an agile mindset and make use of the assets that they do have.
In the age of digital disruption, you need to learn fast, act quickly and scale rapidly to stay ahead. Established companies must be prepared to quickly identify and take new opportunities, both within their established industry and outside it. That means embracing the agile mindset – being prepared to try new things, with an acceptance that not every project will be successful. The principle of co-creation is also be a vital ingredient for success – being prepared to combine your expertise with that of technology experts, to quickly develop and trial innovative new services.
Companies must also look to take advantage of what they already have – including their existing IT infrastructure. By pursuing a hybrid IT strategy, businesses can make use of the power in their legacy systems, while introducing new cloud-based IT where needed. This can enable businesses to rapidly develop, test and release new offerings, keeping up with fast-moving changes in the market.
And finally, in the face of blurring vertical markets established businesses should be ready to leverage another of their strengths – their reputations. Market leaders have often built up a strong brand and consumer trust, which means they can be very well-positioned to offer new services or enter a new sector. It’s all about realising the possibilities that digital disruption brings, thinking creatively and being prepared to be bold. There are more opportunities than ever before – and it’s up to businesses in every sector to take them