Matthew O’Neill, Financial Services Industry Managing Director, Office of the CTO, VMware It doesn’t matter what bank or financial institution they work for, there’s one thing that I guarantee keeps all CIOs awake at night – Cyber Security. To be fair, security in the digital era is probably the number one topic across all sectors. […]
Disruption has been the buzzword over the past few years. Markets upended, established orders thrown into chaos, industry titans laid low. Usually, the apparent catalysts for this disorder are start-ups; digital natives unshackled by legacy systems and empowered by technology.
Yet this disruption narrative might be changing – where once new entrants were the ones shaking up established markets, now it seems that incumbents are best placed to effect seismic change in their own sectors.
Thanks to established brands and deeper resources, as well as accumulated sector knowledge, these incumbents are well placed to capitalise – if they are ready to do so. As ‘Innovating in the exponential economy’, a report from Cass Business School and VMware, says ‘Incumbents can disrupt multiple stages of the value chain, pushing an industry over the tipping point and prompting radical changes.’
That said, the path to disruption comes with its challenges for enterprises. As they seek to drive radical overhauls, incumbents need to be wary of what the report terms the ‘hybrid trap’.
Not all hybrids are good
While established organisations have significant advantages, they are also burdened with the same issues that first came to light when digital natives started disrupting markets – namely legacy infrastructure and culture. Quite often, incumbents are unable to create digital-native variations of their mission critical applications.
This can create issues if they allow the challenges of transforming systems to impact the transformation of their business.
This is where the ‘hybrid trap’ comes in – instead of fully committing to new tools and technologies, they develop hybrid products combining the old and new, or adapt technological platforms and business models developed in one market for another. This can leave enterprises exposed to disruptions by start-ups armed with new platforms and business models specially designed for the new market.
To overcome this, incumbents need to be bold, and ruthless. They need to use technology effectively, moving their applications as the business requires, not as the applications dictate. Yes, they need to have the right environments in which these systems operate effectively, and a way to manage it all efficiently but the overriding thought has to be; how will moving things around help the business achieve its goals, rather than how can the business achieve its goals with as little moving as possible?
Netflix would be a prime example of a business that understands the need to be bold. It started life as a DVD rental mail-order service at the end of the 90s, seeking to harness new technology (DVDs, smaller and therefore easier to post than VHS) with a remote version of the classic video store model. Seeing how the advent of broadband and more powerful personal devices, coupled with social trends such as boxset binging, were going to radically alter the way consumers watch content, it went ‘all-in’ on streaming. This was in effect betting against the natural competitor of their existing business.
Had it attempted to offer some sort of hybrid, such as renting digital downloads or free limited streaming to repeat DVD customers, it would likely have struggled to be as successful, as disruptive and as pervasive as it now is. By being bold, it is now one of the world’s most recognisable and disruptive businesses, to the extent that it is now forcing content owners themselves to re-invent how they control the distribution of their films and TV series.
So, enterprises take note; trust instincts and commit to the change that’s coming. They also need an underlying infrastructure that’s fit for purpose, one that gives them the confidence to fully embrace new tools and services. That means a solid digital foundation on which to deliver innovation, making it happen more quickly, securely and cost-effectively, with zero disruption to operations.
Being bold to avoid the ‘hybrid trap’
In order to avoid the mistakes of trying to combine the old with the new, enterprises need to ensure that legacy thinking does not negatively impact new approaches – absolutely draw on the brand, the expertise and the resources of a mature organisation, but don’t let a culture of the old ways are the best ways dominate future plans.
Combined with the right foundation, these incumbents can ensure they don’t fall into the ‘hybrid trap’, but position themselves to disrupt their own markets and safeguard their future growth.