Posts Tagged ‘blockchain’

Part 2: How Can Incumbents Respond to Disruption?

Monday, August 8th, 2016

3 Questions to Ask!

By Dawood Khan

When it comes to disruption and the introduction of disruptive practices in a particular market, we should keep in mind what renowned Canadian communication and media theorist Marshal McLuhan said in 1964 about the heavy reliance of newspapers on classified ads and stock-market quotes. McLuhan said that “should an alternative source of easy access to such diverse daily information be found, the press will fold.” But as we all know, the demise of classifieds in print media did not happen until just a few years ago. And even more than a decade after the advent of the internet, many print publications did not care to invest in digital technology and transition to online publications. As a result, many of them suffered royally at the hands of startups and a few incumbents that had the foresight to make the transition and disrupt themselves.

Netflix’s transition in 2011 from DVDs to streaming is well documented. The company suffered 80% drop in its stock price as it transitioned to online streaming, but it eventually paid off as evidenced by a 134% spike in its stock price over the last 12 months, causing the cable industry to lose more than 6.7 million subscribers over the last five years[1], and driving BlockBuster, its arch-rival at the time, out of business. Another testament to Netflix’s success: the number of hours many of us spend on weekends, binge-watching our favorite shows.

” The challenge for incumbents is the task of preparing for the day when their cost structure won’t be aligned with alternatives in the market. The preparation can entail taking measures against some of their current operations with subsequent hits to their profitability. But those measures may eventually pay off handsomely. The challenge is that it’s difficult to predict accurately what may and may not work.”

The questions then are:

  • What is an incumbent to do as it prepares for emerging disruption – Is there a way to know what will work and what may not?
  • When should it act – while timing is important, is it possible to get the timing mostly right with a high degree of certainty? and
  • How it should bring its new approach to the market?

As no one really knows what approach would work best, or how to predict market reaction, prudent organizations are tackling disruption as a transformative journey rather than a discrete action at a point in time or the proverbial “destination.”

A Digital transformation journey means that these organizations are continuously experimenting with new business models, emerging technologies and ways in which to engage and interact with their customers.

As part of this journey, organizations are increasingly looking at determining how an approach may be desirable (do people want it?), design thinking - ideoviable (is there a business case/model that will work?), and feasible (is there a technical solution?). These three elements form the foundation of design thinking, as illustrated in the image courtesy of IDEO. Which, when used as part of an organization’s digital transformation journey, allows an organization to rapidly identify opportunities, test them through quick and iterative proof-of-concepts, refine the approach or move forward.

For anyone, and especially incumbents, it is important to accept market realities. Disruption is inevitable. In order to survive, organizations have to be prepared, and the way to do this is via a journey towards transformation. While many call this “digital transformation,” people (customers and organizational culture) form the core of any successful transformation. An innovation-focused culture that is open to employing a human-centric approach to solutions, rapid prototyping, and experiencing failure, is the corner-stone of success in addressing the ongoing disruption in the market.

[1] “Can Netflix Survive in the New World It Created?”, New York Times, June 15, 2016

How Can Incumbents Respond to Disruption?

Thursday, August 4th, 2016

Part 1: Start by Accepting that Disruption will Happen!

By Dawood Khan

It is well-known that incumbents in any industry seldom feel the impact of an early-stage disruption on their core business for many years or even decades. This is even truer for those industries that are heaviCryptocurrencyly regulated, as regulation creates a barrier to new entrants. Hence, in such situations, incumbents are typically highly profitable and may not feel threatened. They may prefer to remain on the sidelines for an extended period of time, often somewhat skeptical of the degree to which the disruption may impact their business. In this period, they may experiment with new technologies and business models, or hedge via investments in emerging start-ups. In some cases, they may take a wait-and-see approach. The question is at what cost?

As an example, one could say that FinTech is another oft-hyped, early-stage technology. But a look at alliances, investments, FinTech-focused technology accelerators, and the growing number of Fintech Unicorns suggest otherwise. Exponential growth in global FinTech investments attests to the industry’s path toward acceptance. Over a span of five years (2010-2015), global investment in FinTech reached $49.7 billion. In the U.S alone FinTech investment doubled from $4.05 billion in 2013 to nearly $10 billion in 2014 and by June 2015 it skyrocketed to $31.6 billion[1].

Today a new breed of FinTechs is focusing on crypto-currency, which are powered by blockchain technology.  Crypto-currency is a blockchain technology that involves financial transactions based on encryption technology. Blockchain is on its way to disrupt a wide range of transactions in the financial industry such as stocks, bonds, loans, and payments with a subsequent transformative impact on the banking ecosystem.

From a financial perspective, blockchain technology keeps all transaction records permanently on thousands of computers from various networks distributed around the world. Each of these computers attests to the authenticity of transactions with no single entity controlling them as they all run on open-source collaboration. Hence the arrival of frictionless transactions and possible disappearance of intermediaries. Blockchains can be used to record transactions of asset exchanges (or “value”) among owners. Transfer of assets, buying and selling of stocks and properties, private banking, and lending will all be disrupted. These are what blockchain FinTechs are focusing on. 2015 U.S investments in blockchain-focused FinTechs stood at $400 million and over $150 million in Q1 2016[2].

The global FinTech Unicorns (20 and rising) are bound to make their impact felt at the corporate boardrooms of incumbent banks. However, it may appear that there is a lack of urgency among incumbents, this is because their market share has not, and may not be impacted for some time to come.

By now, you may have already asked the proverbial $64,000 question: How will the incumbents react?

Part 2 of this piece looks at this question and provides an approach to addressing on-going disruption.

[1] The State of Fintech Industry as We Know It Infographic:    http://www.fintech.finance/news/the-state-of-fintech-industry-as-we-know-it-infographic/

[2] Quartz, “Money keeps pouring into blockchain startups”, April 19, 2016   http://qz.com/662596/startups-are-raising-huge-rounds-to-feed-wall-streets-fascination-with-blockchain/

How Different Sectors Adopt Digital Transformation?

Thursday, June 2nd, 2016

Digital transformation (“DX”) is inevitable!

According to a McKinsey & Co. finding, 40% of Fortune 500 companies will not exist in 10 years, if they fail to transform. However, there are vast opportunities for those who take action!

The first Canadian Digital Transformation (“DX”) Think Tank session was led by RedMobile Consulting in Toronto on May 25, Dx Journey Pic2016. Select business leaders from a diverse cross-section representing public and private sector organizations participated. The participants examined various aspects of digital transformation and underlined the significance of anticipating and embracing disruption, and the threats posed if digital transformation was ignored.

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