Digital Transformation Brings Disruption, Tipping Points, And Business Opportunities


Larry Myler

May 18, 2016

We are seeing it on a daily basis. Digital transformation of legacy processes, cloud-based SaaS app proliferation on a scale unimaginable just a short time ago, and slow-moving market leaders being diminished as smaller, more nimble upstarts do more than just nip at their heels. It is critical to get in front of this wave, or be left behind in the foaming aftermath of opportunity.

Take the taxi industry for example. On a recent business trip I hopped in a legacy cab to take me from the airport to my hotel. In the seat-back pocket in front of me was a laminated card extolling the convenience and ingenuity of a “new” way to order a cab through my mobile device. The advertisement was nothing more than a knockoff of Uber that had long since disrupted the taxi industry, leaving the yellow vehicles in the dust of disruption. The tipping point was unseen until too late and the business advantage was lost. More disruption is coming, too, with the imminent arrival of autonomous (driverless) vehicles, which will surely replace both taxi and Uber drivers at some point. Who will win by properly positioning for that disruption?

Staying ahead of change is an art best embraced by successful entrepreneurs. Here’s how they do it:

  1. Be the disruptor, not the disruptee. Change will always produce winners and losers. In Clayton Christensen’s book The Innovator’s Dilemma a typical disruption cycle begins with a smaller, newer competitor taking the low end of the market away from a larger market leader, who initially doesn’t much mind because, after all, “it’s just the low end of a larger market and we (the established company) still have the lion’s market share of the more profitable business.” However, the disruption continues as the smaller company moves up the ladder to take more and more of the business through better technology, lower prices and higher quality. Paradoxically, it may be that the best disruption strategy is to be both disruptor and disruptee, as a company self-disrupts before others can do it to them. The main reason why this so rarely happens is because it generally means that a company would have to voluntarily give up profit margin while investing heavily in technologies that replace legacy (and expensive) support systems. Self-disruption is seen as self-destruction, thus eliminating it from any logical C-suite agenda.
  1. Time the tipping points. Disruption has a timeline and a recognizable pattern of events that open up a window through which to jump. Market demand begins to shift. Customer requests, reasons for buying, bigger problems in need of better solutions, all begin to surface with greater urgency. And existing business models start to reach maturity—unable to serve markets adequately, as they once had. A tipping point, where customers become more willing to look at new solutions, can be discovered only with the divining rod of customer inquiry. Knowing what the customer really needs is the early-warning system for product and service development and disruption.
  1. Take advantage of business opportunities. It’s critical to have all business ducks in a row. Is your message, value proposition, pricing model, sales force, go to market strategy, financing, customer awareness and leadership poised to convert a tipping point into market share gains and increased revenue? All of this takes a tremendous amount of planning and consideration.

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Business Case

Advances in data storage technology have created a disruptable environment in the storage industry, and large storage vendors are feeling the pinch. Although the cost of storage has been going down steadily for years even while demand exploded, traditional storage vendors have continued to base profits on selling more high-margin storage capacity.

The arrival of cloud computing has changed everything, however. Born out of the realization that great economies of scale could be realized by cutting costs and centralizing infrastructure, cloud has become the storage industry’s great disruptor, and companies like Amazon, Google and Microsoft are in a race to make storage an essentially free commodity. What matters most to these disruptors is not selling more capacity but keeping costs low as they build giant data centers around the world.

The cost of building a new data center (about one-third of which is dedicated to data storage) is around $3,000 per square foot. That’s extremely expensive. When you consider the additional cost of powering, cooling and maintaining such a center, reducing the amount of data that needs to be stored starts to look like an inevitability. Permabit Technology Corporation is a company that reduces the footprint of data by four times or more through patented data deduplication and compression software technologies. Permabit President and CEO Tom Cook explains, “Companies can get more for less by managing their data better. This is a fundamental shift in the data storage industry.” Now, enterprise companies have begun employing the same techniques as Amazon and Google, building private clouds that interoperate with large public clouds, and creating what are referred to as hybrid clouds.

According to Cook, the tipping point has been sneaking up on the industry for years, and accelerating in the past eighteen months as cloud technologies and acceptance matured. While traditional suppliers were hesitant to embrace data efficiency because of the established growth model of simply supplying more capacity “that has all changed with the arrival of the hybrid cloud,” states Cook. “The whole cloud ecosystem of IT leaders, software and service providers is now all about cost savings versus providing more storage. Fortunately, we saw the change coming and built our business model around this approach.” This trend could save $1.2T in data center investment alone by 2020 if widely embraced. That’s a business opportunity worth taking advantage of.

This article was written by Larry Myler from Forbes and was legally licensed through the NewsCred publisher network.

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