Dis­rup­tion comes from both expect­ed and unex­pect­ed sources. There are the expect­ed play­ers in the dis­rup­tion game that many orga­ni­za­tions keep their eyes on — for exam­ple Ama­zon, Airbnb, Uber, or Tes­la. But the real­i­ty is that the least-expect­ed dis­rup­tors might present the great­est com­pet­i­tive threat to your busi­ness, espe­cial­ly when we nev­er see them coming. 

It’s Pos­si­ble to Pre­pare to Be Disrupted

Asso­ciate Pro­fes­sor Randy V. Bradley spends most of his time teach­ing stu­dents at the Uni­ver­si­ty of Ten­nessee about infor­ma­tion sys­tems and the sup­ply chain. When he’s not in a lec­ture hall, you can find him speak­ing to busi­ness lead­ers, indus­try groups, and SAP cus­tomers about dig­i­tal dis­rup­tions. He’s pas­sion­ate about help­ing orga­ni­za­tions shore up their busi­ness prac­tices to defend against that least-expect­ed com­peti­tor com­ing around the cor­ner. Pro­fes­sor Bradley has even brought his mes­sage to the atten­dees of our SAP-Cen­tric EAM conference.

Ann Marie Gray, VP of con­tent strat­e­gy and research at ASUG, had a con­ver­sa­tion with Pro­fes­sor Bradley about the three key approach­es to dis­rup­tion orga­ni­za­tions can watch out for. He described what he calls the ​“kryp­tonite” that you can use to keep your dis­rup­tors at bay. And he spoke about what’s miss­ing from most dig­i­tal trans­for­ma­tion ini­tia­tives that would tru­ly help orga­ni­za­tions meet the lofty goals they’ve set out to achieve.

Ann Marie: In your pre­sen­ta­tions, you often talk about the kryp­tonite to dis­rup­tion. What is that? 

Randy: Inno­va­tion is the key. That is the kryp­tonite to dis­rup­tion. Whether they’re new orga­ni­za­tions or whether they’ve been around for hun­dreds of years — the rea­son they are dis­rupt­ed is because they stop inno­vat­ing. And when they do inno­vate, they tend to inno­vate around the next iter­a­tion of their prod­ucts or ser­vices. They’re not trans­form­ing them. They’re not chang­ing the ways cus­tomer engage with these prod­ucts and ser­vices. They’re not chang­ing how cus­tomers get val­ue from them. 

Often, we stop inno­vat­ing because we think we can inno­vate only so far because that’s what we’re capa­ble of doing. Well, that’s not inno­va­tion because the goal is to not think about what we can achieve, it’s to think about any­thing that could pos­si­bly happen. 

I always say you’ve got to reimag­ine your sup­ply chain, reimag­ine your orga­ni­za­tion. And then, the ques­tion that comes up is, ​“Well, where do you start?” And I say, ​“Look for inspi­ra­tion from indus­tries that are dif­fer­ent from you.” Look at what they’re doing, and then ask your­self, ​“If I brought that into my indus­try, maybe that could be the first move that gives me a com­pet­i­tive advan­tage.” And the oth­er thing is this: Sim­ply ask your cus­tomers what they want and lis­ten to them. That’s how you con­tin­ue to innovate.

Ann Marie: Why do you think it’s so hard for orga­ni­za­tions to inno­vate once they’re set on a par­tic­u­lar path? Are there prac­tices or philoso­phies that com­pa­nies can put into place to help keep them from get­ting stuck?

Randy: If you’re not an inno­v­a­tive com­pa­ny, know that you’re not one. But at the same time, if you know that, then you need to admit, ​“We can’t bring this under our roof because we’ll kill it. Because that’s not who we are.” 

What you must do is cre­ate a sep­a­rate strate­gic busi­ness unit, whether it’s a func­tion that acts as an ideation cen­ter or a think tank or an inno­va­tion cen­ter. You sep­a­rate this group from your rev­enue, mean­ing that they’re not respon­si­ble for gen­er­at­ing sales or affect­ing the bot­tom or top line. Their goal is to imag­ine what could be pos­si­ble. And if it is pos­si­ble, how can we go about achiev­ing it? 

You don’t want peo­ple under the main tent of your busi­ness to be in that space because they can’t think the same way as the peo­ple who are in this side tent. When you see com­pa­nies who excel, it’s often because they sep­a­rate their inno­va­tion cen­ters from their pri­ma­ry activities.

Ann Marie: Yes, but I think some­thing else must hap­pen under the main tent where lead­ers are will­ing to take a risk on cer­tain things that come out of their R&D. Take Xerox PARC, for exam­ple, which devel­oped advance­ments that were way ahead of the com­pe­ti­tion but sold these off to oth­ers rather than cap­i­tal­iz­ing on them. 

Randy: Here’s where you avoid that, par­tic­u­lar­ly if we’re talk­ing about pub­licly trad­ed enti­ties. Even if they’re not pub­licly trad­ed enti­ties, it comes back to look­ing at the exper­tise that’s on your board or in your board­room. Look around the room and ask your­self, does every­one look the same? Does every­one think the same? Does every­one, for the most part, come from a sim­i­lar career? Because if that’s the case, then your busi­ness will for­ev­er be the same.

If you have con­straints that pro­hib­it you from build­ing your board out with that tal­ent and exper­tise, then go out and find some­one to speak to your board. I’ve seen CEOs say, ​“I know we’ve got to inno­vate, but my board doesn’t seem to under­stand this. We don’t have any­one with this exper­tise inter­nal­ly. Will you come to our next board meet­ing and enlight­en them?”

Ann Marie: What are the three key approach­es you see from orga­ni­za­tions that are dis­rupt­ing their industry? 

Randy: The first approach I refer to as aug­men­ta­tion by tech­nol­o­gy. Essen­tial­ly, all aug­men­ta­tion by tech­nol­o­gy means is that you’re going to take a tried-and-true process that peo­ple already under­stand and that they already fol­low, but you’re going to lever­age emerg­ing tech­nolo­gies to exe­cute the process dif­fer­ent­ly. Or in some cas­es, to give peo­ple greater vis­i­bil­i­ty or make them feel as if they have a lit­tle more con­trol with respect to how that process takes place. 

An exam­ple of that is Uber. If you had to break it down, what inno­va­tion did it devel­op? Ulti­mate­ly, it took a ride-hail­ing ser­vice or the process of hail­ing a ride, which we’ve done for years. Even when we had hors­es and car­riages, we hailed a ride. The dif­fer­ence is, they took a tech­nol­o­gy that was rel­a­tive­ly new — a social plat­form if you will — and put it in your hand and said, ​“Now you dic­tate what hap­pens. You dic­tate where it hap­pens.” Rather than you going to a spec­i­fied spot, you’re indi­cat­ing the spot where you want this trans­ac­tion to take place. And by the way, we’re going to give you vis­i­bil­i­ty as your trans­ac­tion is play­ing out, so you feel as if you have a lit­tle more con­trol over it. That’s all they did. That’s aug­men­ta­tion by technology. 

Ann Marie: Right. It’s a rein­ven­tion of some­thing exist­ing. What about the next approach to disruption? 

Randy: The oth­er one I talk about is cus­tomer appeal. Cus­tomer appeal is one of the approach­es I think is the biggest threat. In par­tic­u­lar, very old orga­ni­za­tions are like­ly to feel the effects of this. It’s essen­tial­ly where your com­pe­ti­tion is an orga­ni­za­tion that is not in your indus­try or sec­tor, but it has rela­tion­ships with your exist­ing customers. 

One of the exam­ples I give of this is the Aus­tralian gro­cery chain Coles, which dis­rupt­ed the finan­cial sec­tor by offer­ing finan­cial instru­ments to the peo­ple who shop with them. They had no expe­ri­ence or exper­tise, but they went from being just a gro­cery store to becom­ing an actu­al bank. I’m not talk­ing about putting a lit­tle stall with­in the gro­cery store. They became a full-fledged finan­cial insti­tu­tion with no his­to­ry of being in this busi­ness what­so­ev­er. And they banked on one thing, which is, ​“We know your cus­tomers bet­ter than you know your cus­tomers. We see your cus­tomers more than you see your cus­tomers, so why wouldn’t they trust us?” 

Ann Marie: That sounds a lot like how Ama­zon is mov­ing into new busi­ness­es, for exam­ple, going head-to-head with phar­ma­cies. What about the third approach to disruption? 

Randy: Num­ber three is what I refer to as a ​“new” product/​service push. Here, it’s focus­ing on the new and the push angle. With this approach, you take an orga­ni­za­tion that has a tried-and-true prod­uct — let’s say LG or Sam­sung. Look at what they’ve done with refrig­er­a­tors now, how those have become com­mu­ni­ca­tion com­mand cen­ters for your entire home. My point is, it’s still a refrig­er­a­tor that you’re buy­ing, but the new part is that they’ve cou­pled that with addi­tion­al tech­nol­o­gy and then pushed the prod­uct out as if it’s some­thing total­ly different.

Or you take the exam­ple of a John Deere or a Cater­pil­lar. They know their cus­tomers rely on their prod­ucts, so they’ve focused on how to make them more enjoy­able to use. If you have a love of farm­ing, they’re only going to help you do it bet­ter so you’re more like­ly to enjoy it. Now their prod­ucts can ana­lyze soil sam­ples on demand and tell you the right time to plant seeds in a por­tion of a field. They’ve built in a tele­met­ric com­po­nent that sends infor­ma­tion back to the deal­er­ship where you pur­chased the equip­ment, so the deal­er­ship now has a bet­ter idea of how to meet your needs. That’s what I call a ​“new” product/​service push. 

Ann Marie: What are the ways you’ve iden­ti­fied that orga­ni­za­tions can imple­ment a suc­cess­ful dig­i­tal strategy? 

Randy: There are a few over­ar­ch­ing dig­i­tal strate­gies that we see orga­ni­za­tions tak­ing, based on some work done at the MIT Cen­ter for Infor­ma­tion Sys­tems Research. One strat­e­gy is cus­tomer engage­ment, where the goal is to cre­ate loy­al­ty and trust. You’re going to do that by pro­vid­ing supe­ri­or, per­son­al­ized cus­tomer expe­ri­ences. The com­pa­nies that use this strat­e­gy don’t see it as ser­vice. It’s about nav­i­gat­ing the cus­tomer expe­ri­ence, cre­at­ing a fric­tion­less envi­ron­ment in which a cus­tomer can do busi­ness with you.

Orga­ni­za­tions try to do this by cre­at­ing a seam­less omnichan­nel expe­ri­ence. Imag­ine now if you’re going to buy a car. Why is it that so many peo­ple are attract­ed to Car­vana? Well, it’s because I can shop for a car on my phone, on my tablet, or on my PC. No mat­ter where I ini­ti­ate the inter­ac­tion, when­ev­er I go back to that plat­form I can pick up where I left off. I don’t have to start my trans­ac­tion from zero again.

Take the tra­di­tion­al car buy­ing expe­ri­ence now. Auto­mo­tive com­pa­nies may say, ​“We have a web­site to help you find your car.” So, you find a car, and you put it in your wish list. But when you go into the deal­er­ship, they have no idea what you’re talk­ing about. That’s not a tru­ly omnichan­nel expe­ri­ence with mul­ti­ple points where I can enter the engage­ment process as a customer. 

Anoth­er strat­e­gy we see is called a dig­i­tized solu­tions strat­e­gy. This goes back to the ​“new” product/​service dis­rup­tion approach I described. When you build a dig­i­tized solu­tion to go along with that approach, we’re either going to change the solu­tion or we’re going to give you addi­tion­al infor­ma­tion about how to get bet­ter val­ue, greater use, and more enjoy­ment from the solu­tion that you have pur­chased from us. The goal is to give cus­tomers enough infor­ma­tion to help them solve the prob­lem they’re try­ing to solve or to find more val­ue in what they already have — such as a refrig­er­a­tor that texts you when you are out of something. 

Ann Marie: Why is it so hard for orga­ni­za­tions to imple­ment a dig­i­tal strategy?

Randy: Most orga­ni­za­tions lose sight of the fact that a dig­i­tal strat­e­gy is a busi­ness strat­e­gy. I heard one group say, ​“We don’t have a dig­i­tal strat­e­gy, our busi­ness strat­e­gy is dig­i­tal.” That’s a cute, catchy say­ing, but the real­i­ty is that a dig­i­tal strat­e­gy is in fact an inte­grat­ed busi­ness strat­e­gy that is informed or inspired by capa­bil­i­ties based on read­i­ly acces­si­ble tech­nol­o­gy. You don’t nec­es­sar­i­ly need to have these tech­nolo­gies already, but they must be in the mar­ket­place. And then, that inte­grat­ed strat­e­gy must lead the deci­sions you make. It must have the intent of deliv­er­ing a unique, inte­grat­ed busi­ness capa­bil­i­ty behind it.

The key here is that those capa­bil­i­ties are inte­grat­ed, rather than siloed. A good dig­i­tal strat­e­gy allows your orga­ni­za­tion to exe­cute in such a way that you’re respon­sive to chang­ing mar­ket con­di­tions as well as to evolv­ing con­sumer expec­ta­tions. When you do this, now you tru­ly have a dig­i­tal strat­e­gy. The prob­lem is, orga­ni­za­tions take on pieces of these strate­gies, but not all of the nec­es­sary components.

Ann Marie: Or they’re not tied into that evolv­ing mar­ket data, the evolv­ing cus­tomer needs in a rapid enough way.

Randy: Exact­ly. There was an arti­cle I read that talked about why GE’s and Ford’s dig­i­tal trans­for­ma­tion ini­tia­tives failed. It talks about the $900 bil­lion rea­son GE, Ford, and Proc­ter & Gam­ble failed at dig­i­tal trans­for­ma­tion. It’s a fas­ci­nat­ing read in terms of look­ing at how big, estab­lished com­pa­nies that have a tremen­dous amount of cash flow can start these ini­tia­tives, but they fail on the jour­ney. One of the things that I’ve pre­sent­ed on before is why small and mid­size busi­ness­es suc­ceed and large busi­ness­es fail on their jour­ney toward dig­i­tal busi­ness transformation.

Ann Marie: What is the key? Obvi­ous­ly, the small­er orga­ni­za­tions can be more nim­ble. Is it that big orga­ni­za­tions are just too heavy to move at that pace?

Randy: It is, and they think, ​“If I throw enough mon­ey at dig­i­tal, I can change. I can look dif­fer­ent; I can be dif­fer­ent.” But we don’t change how we do busi­ness. We don’t change how we engage. We don’t look dif­fer­ent to the mar­ket­place. We just think we look different. 

Ann Marie: Let’s face it, a lot of big orga­ni­za­tions hire exter­nal part­ners to do the work. That’s an out­side-in approach ver­sus an inside-out approach. And if you don’t change your inter­nal mind­set — if you don’t have the right tal­ent to sup­port these changes, then they will nev­er take hold — espe­cial­ly if you have 100,000 employees.

Randy: It’s mind-bog­gling to see that of the $1.3 tril­lion that is believed that these three orga­ni­za­tions have invest­ed in these ini­tia­tives, that $900 bil­lion of that — approx­i­mate­ly 70% — was wast­ed because those pro­grams failed. When I talk about this top­ic at SAP-cen­tric events, I want to get the atten­tion of SAP cus­tomers. When you talk with the con­sul­tants, when you talk with a lot of the trade asso­ci­a­tions, they show you the shiny pos­si­ble things. But no one’s talk­ing about the hard work of dig­i­tal. It is hard, it can be cost­ly, and it could cost you every­thing if you get it wrong.

Ann Marie: Are there ways that you can make inno­va­tion more scal­able by break­ing it down into incre­men­tal improvements? 

Randy: Orga­ni­za­tions have to ask them­selves, why are we doing this? And many orga­ni­za­tions, say when you ask them, ​“We’ve got a dig­i­tal trans­for­ma­tion ini­tia­tive.” I would ask, why? What do you hope to achieve? What are you going to get from it? Some­times they focus on the how they’re going to do it but aren’t real­ly dri­ven by the why they need to do it. 

What I find is orga­ni­za­tions who are real­ly high on their desire to embrace dig­i­tal tend to be very low on the degree to which they engage cus­tomers via dig­i­tal. And so, I always ask the ques­tion, ​“For whom are you inno­vat­ing? Your­selves?” Because at the end of the day, the inno­va­tion has to be for the cus­tomers if you’re going to get val­ue from these dig­i­tal ini­tia­tives. Some­where between 75% and 80% of orga­ni­za­tions don’t have a dig­i­tal strat­e­gy, yet every orga­ni­za­tion that I have met with or done work with all had dig­i­tal initiatives.

Ann Marie: Yes, there’s a big dif­fer­ence between an ini­tia­tive and a strat­e­gy. Thank you so much, Randy, for shar­ing your per­spec­tive on such an impor­tant topic. 

Tune in to watch the com­plete SAP-Cen­tric EAM vir­tu­al con­fer­ence online until May 1, 2020. You can learn about the role inno­va­tion plays in times of uncer­tain­ty in this inter­view with SAP’s chief inno­va­tion offi­cer Max Wes­sel. Or, down­load the ASUG Pulse of the SAP Cus­tomer 2020 infographic to find out what we learned about inno­va­tion among ASUG members.