Will digital disruption send large corporates the way of the dinosaurs?

Whale shark about to eat a swimmerI should start by saying that it’s not an easy time to be a large, established, publicly-quoted business. But there came a time when it was not an easy time being a dinosaur either. In the 1960’s and 70’s, being large and public was a great model. You had scale, access to capital for investment, and an established brand which was a household name. All of these served as a handy barrier to entry to competitors, which meant that these companies dominated the market.

Unfortunately, the advent of the World Wide Web has brought forward new business models. And perhaps the most challenging of these is the platform. So some enterprising market entrant creates an online marketplace to bring together buyers and sellers who previously would never have been able to find each other. Hats off here to EBAY for pioneering the model, which has since been exploited time after time in other markets, Airbnb in accommodation, Uber in taxis, Etsy in handicrafts, Amazon Marketplace in, well, everything, and the list goes on. On the platform, a brand is replaced by the “recommendation economy”. If we have an interaction, you rate me, and I rate you, so we both work hard to maintain our reputations, or nobody does business with us in future. And we know, these days, customers trust personal recommendations more than a brand’s promises.

At the same time, small companies can now access many capabilities that were previously only accessible by large corporations. So AWS and Azure give access to large scale computing, Google and Facebook to large scale targetted advertising, and Seedrs and CrowdCube offer access to crowdfunded capital. And so our large public corporates are left with almost no upside of being big, but a lot of downsides.

Say what you will, large companies move slowly. In the past, this deliberate, risk-averse approach helped avoid costly mistakes or brand-damaging actions. But fast is the new big in today’s market. Add to this that large public companies are forced to focus on continued delivery of near term results for investors, which makes it harder for them to disrupt their own business models. And finally, experimentation can often be more brand damaging than brand enhancing.

Executives are caught between a growing worry that their market is next for disruption, but a business model that is the very opposite of risk-seeking and nimble. So it’s with some nervousness that large companies have embarked on their digital transformations, whatever that phrase may mean. And it’s the very opaqueness of digital transformations that have made this all the harder. So let’s bring in a Chief Digital Officer as a disruptor and hold onto your seats, this is going to be a bumpy ride.

But as many of these first generation digital attempts end in disappointment and exits, what have we learnt? At the very highest level, it must still be about two things, customers, not competitors and what you do, not how you do it. It’s customers that choose to use Airbnb, Uber and Amazon because these companies offer them something they are not getting today. I’ve worked with a number of companies worried about being disrupted, but with ample evidence of customer dissatisfaction that they were doing nothing about. If you can’t do the easy things, how do you expect to do the hard ones?

Will digital disruption send large corporates the way of the dinosaurs?

Rob works with technology start ups and leading retailers on the impact and opportunities of digital technologies