Required Reading: Disrupting Digital Business Requires Right- and Left-Brain Thinking

Since the year 2000, roughly 52 percent of Fortune 500 companies have merged, been acquired, or gone bankrupt, Ray Wang, founder and principal analyst of Constellation Research, writes in his new book. In Disrupting Digital Business, Wang says that while it's tempting to attribute the drastic changes these companies have undergone to emerging technologies, the rapid growth of the Internet, or a number of other factors, the transformation is happening at the business model level. To keep up with the shifts caused by the digital disruption, Wang urges companies to rethink how they're delivering on their brand promises before it's too late. He shared his insight with Associate Editor Maria Minsker.

CRM: Let's start with the basics. Why is it wrong to blame new technology for the "digital disruption"?

Ray Wang: When you [consider] that 52 percent of Fortune 500 companies...have been hit hard over the last decade or so, it turns out that the one thing they all have in common is that they were disrupted by digital business models. When we look at something like Uber, people like to say, "It's a mobile thing" or "It's a social thing" or "It's the cloud, or big data." But it's actually all of those things at once. It's a mobile app with a social component, where the driver can rate you and you can rate the driver, but it's also in the cloud. And if it rains, you get surge pricing, so that's the big data aspect of it. The technologies are all there, but it's the business model that transforms what these technologies do, as opposed to the technology transforming the business model.

CRM: The book also addresses the birth of the peer-to-peer economy. How does it make competing for customers even more challenging?

Wang: Consumers are starting to realize that they can buy products and services from each other. Companies like Etsy allow you to access services and goods directly from the people that are building them, and instead of buying things from dealers, retailers, or distributors, commerce is becoming more about point-to-point transactions. We're seeing the same thing in payments as well. They're becoming more about peer-to-peer transactions, and there's a great need for more banking services, even though there isn't necessarily a need for more banks.

CRM: What obstacles do brands face as they transform their business models?

Wang: One of the challenges that stands in the way is determining whether businesses have that digital DNA and that willingness to go out and deliver on a brand promise. Sometimes companies think they need a lot of math and science and engineering folks, but they also need to balance that out with folks that we call digital artisans—people who think about anthropology, sociology, and psychology...You want both right-brain and left-brain thinkers thinking about the bigger picture and elevating it to a level that businesses can execute and deliver on. Securing that vision is one of the biggest obstacles businesses face.

CRM: Data is a key focus in the book. Can you give our readers an example of how data serves as the foundation of digital business?

Wang: GE's business model, for example, is basically delivering power and ensuring consistent uptime. That's what their customers care about, so they've instrumented everything in their power grids to look at speed, temperature, strength, and vibrations—all the factors that monitor power lines. By looking at these factors, they can determine when a power line is going to go down eight to 10 days before it actually happens. It's that stuff that transforms business models because you're no longer buying the product or service...You're buying the experience and the outcome. Data is the foundation of these digital businesses because every touch point becomes part of that bigger picture.

CRM: Any suggestions for choosing the right vendor or technology that can help brands tackle the digital disruption?

Wang: This is the scary part. We don't think that a platform exists right now to deliver on digital business. The platforms are being built. Some people are building [them] themselves in the organization. Others are partnering with vendors to use pieces of solutions, but the complete platforms don't exist. Look at machine learning and cognitive computing capabilities, for example. They might exist in parts of IBM Watson, or parts of SaaS solutions, but right now, most of the [burden of] dealing with the disruption falls on brands themselves.

CRM: If you could give brands just one piece of advice to set them on the right course for digital transformation, what would it be?

Wang: The most important thing to remember is that digital Darwinism is unkind to those who wait. Companies must act, but along with that urgency is the fact that it's never too late to begin. These business models are being transformed, changed, and shifted very rapidly, but the important thing is to make sure you think about the business model and then build against it. From there, you can think about the technologies, but the business model comes first.

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