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Incumbents vs digital disruption: trends, challenges and opportunities


Today’s market realm is shaped by attractive new market entrants with customer centric business models and the struggle of incumbents to satisfy the needs of the new consumer.

Today’s market realm is shaped by attractive new market entrants with customer centric business models and the struggle of incumbents to satisfy the needs of the new consumer. The explosion of innovation makes it hard for companies to follow all the new trends that will shape their industry and even harder to assess whether their industry will be influenced by them. To encourage better understanding of these trends, we summarised the digital disruptive predictions for the years to come and prepared a set of proposals on how to find opportunities in today's markets.

What is digital disruption?

Digital disruption is the appearance of new digital technologies and business models that could potentially impact the current market and the value of products and services, offered within specific industry. Among the five most likely industries to be disrupted are the media, telecom, consumer financial services, retail and technology industry.

The most disrupted industries are predicted to be B2C industries, where technology innovations will cause the biggest changes in customer behaviour and companies will invest most to satisfy their emerging needs.




How to respond to digital disruption?

To respond to challenges within the new market normal, companies should ensure agility, customer centricity and think outside the box on strategic and operational level. In the following paragraphs we will lead you through three proposed strategies – introducing a new corporate strategy, customer centric models, new revenue streams, and what you can expect from implementing each of the individual measures.


Introducing an agile corporate strategy

SITUATION: Incumbents and other traditional players on the market often rely on legacy business models with rigid organizational structures that make them less efficient and less able to quickly respond to market trends.

SOLUTION: New corporate strategy should restructure organizational structures and anticipate increasing investments in relevant technologies and analytics to run the organization. Special consideration should be given to the relationship between business functions and IT, definition of roles and responsibilities and assurance of competencies to handle technology and data on operational level.

RESULT: Carefully considered and optimal agile strategy should present companies with smoother and faster business processes and help them win against the new competition on the market.


Focusing on the customer

SITUATION: Customers’ changing behaviour, their growing demands and lack of patience in combination with new competition that knows them so well leaves incumbents with a handful of challenges.

SOLUTION: The growing number of available customer data and marketing technologies enable companies to understand what they really want. To pursue customer centric approach, companies should ensure leadership support and put customer on strategic agenda. Customer data and digital tools that help utilize customer data should be aligned with new agile corporate strategy should reflect company’s business objectives and suit employees’ competencies and knowledge.

RESULT: Forbes estimates that 86 % of consumers are willing to pay more for better customer experience. At the same time a customer is four times more likely to buy a product from competitor if the problem is service related in comparison to price or product related issues (Forbes 2014). Especially companies that function in industries, where differentiation through products and services is practically impossible, can achieve greater customer loyalty and lower price sensitivity through superior customer experience (Mind Wide Open 2017).


3. Growth through new revenue streams

SITUATION: Technology is bringing fluidity to the market. Disrupters are able to challenge traditional companies with fewer resources but improved products and services.

SOLUTION: Companies should identify products, services and solutions that present logical extension of company’s portfolio and address identified or anticipated needs of their customers. To ensure smooth implementation and realization of growth through new revenue streams, companies should build an ecosystem not only with suppliers and customers but also with third party partners (such as start-ups, universities, companies with complementary offerings, IT infrastructure partners, etc.). Third party partners provide company with knowledge, access to the market and consumers, technology, sharing costs, etc. All parties within developed ecosystem should benefit from it, so before making decisions to build an ecosystem, companies should carefully think of added value they offer to their partners within the ecosystem.

RESULT: Within such ecosystems, companies not only benefit from new sources of revenue, but also rationalize their cost structure and enhance the speed of technology adoption.


From an assessment to securing a position in the market

To sum up, the first step to managing disruptions in today’s markets should be assessing the state of an individual industry – what are the predictions and trends, what are the risks and opportunities? After a company knows its environment well, the next step should be finding ways in which it can unlock its opportunities – introducing an agile business strategy, implementing a customer centric approach and finding growth through new revenue streams.





Dr. Mitja Pirc, Director


Neja Arčon Peklaj, Consultant





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