Topic Workbook - Leading in Digital Disruption 1
Topic Workbook - Leading in Digital Disruption 1
Topic Workbook - Leading in Digital Disruption 1
disruption
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Chapter overview
This topic gives an understanding of the key concepts of digital disruption, and what the threats
and opportunities are that it poses to business nowadays. This topic also helps students critically
reflect on what the strategies are that companies can put in place to respond to this disruption,
and the key skills leaders need to navigate organisations through the digital age.
This topic is divided into four sub-topics:
• What is disruption?
• What is digital disruption?
• Strategies that companies can implement to respond to digital disruption
• Explanation of the new skills needed by leaders in the digital age
Theoretical knowledge will be enriched by the use of case studies.
By the end of this workbook, you should be able to:
• Understand the concepts of disruptive innovation and digital disruption, and why they are
important nowadays
• Analyse the threats that digital disruption poses to all industries
• Understand which strategies companies have to develop to respond to digital disruption, and
disrupt themselves
• Recall key case studies that help understand how the above presented concepts apply to
reality
• Understand what the key leadership skills and capabilities are for effectively responding to
digital disruption
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Learning outcomes
By the end of this topic, you should be able to:
• Critically assess what disruption and digital disruption are
• Analyse the threats that digital disruption poses to all industries
• Explore the strategies and approaches leaders can take to respond to this disruption
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Chapter summary
In this topic, we will address the following questions:
• What is disruption?
• What is digital disruption? What are the challenges and opportunities that it poses to
companies?
• Which strategies can companies implement to respond to digital disruption?
• Which set of skills and capabilities do leaders need to be successful in the digital age?
When we talk about disruption, we tend to talk about disruptive innovation, a term coined by
Harvard Professor Clayton Christensen in the 90s to describe a process by which a new company
(ie the disruption) develops a product or service that takes root, initially in simple applications, at
the bottom of a market, and then relentlessly moves up the market, eventually displacing
established competitors (ie incumbents).
The concept of disruption is nothing new and does not only apply to the digital. However, today,
digital technologies (eg data, connected devices, increased computing power) are advancing at
such a rate that they are causing disruptive change on an unprecedented scale. These pose
several challenges and opportunities to businesses that must, in turn, respond and adapt to a
pace of technology evolution and adoption that is constantly accelerating. A 2018 Accenture
study found that 63% of companies are experiencing digital disruption, and 44% of companies
are highly susceptible to future disruption. This means that this is not a niche phenomenon.
Adapting for survival must now become a core business function in all industries and sectors.
To respond to this quick digital disruption, companies have to disrupt themselves and develop new
strategies. In this chapter, we will look at the Leap approach in detail, developed by McKinsey and
Co. What this approach says is that, to survive, incumbents have to leverage new technologies to
transform the core business and build a new business (separate to the core business). To build a
new business, five steps have to be followed:
(a) Define the strategic framework
(b) Build an MVP and pilot it
(c) Build the team
(d) Scale the business
(e) Do a strategic assessment.
However, to build this new business, the incumbent will face governance, cultural, and
professional challenges.
As digital disruption sweeps across every major industry, organisations do not just need more
strong leaders, they need a completely different kind of leader that is younger, more agile, and
“digital-ready”. Research on digital leadership, carried out by Deloitte and MIT, has shown that, in
order to succeed in this digital transformation, organisations need leaders that think, act, and
react differently. In order to develop those capabilities, new leaders need three key skills: hope,
optimism, and resiliency.
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Context section
Digital technologies, such as virtual and augmented reality, cloud-based systems, and artificial
intelligence, are disrupting the world we work and live in, profoundly changing it at an
unprecedented pace.
This digital disruption will become even faster after the Covid-19 pandemic, and will create
unprecedented volatility, uncertainty, complexity, and ambiguity for all businesses and
industries.
In this topic, we explore what digital disruption is, how it is affecting businesses today, and how
and why it is important for organisations to react quickly in order to survive.
However, in order to survive this disruption, organisations do not only have to leverage processes,
strategies, and technologies, but also, and mainly, human capital. In particular, having the right
leaders with the right set of capabilities and skills will become a big differentiator between the
companies that survive and/or control digital disruption, and the companies that don’t.
This topic will help you perform the first task of your assessment. Read the content in this book
carefully and go through the learning material composed by a mix of reading, videos, and case
studies. The case studies are important as they will help you understand how the theoretical
concepts are applied in the real life.
Specifically, he believes that disruptive innovation happens when a company with fewer resources
targets the customers at the bottom end of the existing company market.
Take company A (ie the incumbent), who is already well-established in the market. Since they
have been around for a while, they create premium products for high-end customers. Company B
(ie the disruptor) sees that company A is neglecting low-end customers, and capitalises on this
opportunity to target low-end customers with a low-cost product just for them.
As shown in the figure below, at the beginning, company A does not mind; it’s just their low-end
customers. But, company B grows, develops new products or improves existing ones, and, before
you know it, the majority of company A’s customers have adapted to the offer of company B. This
is disruptive innovation!
At first, new companies (disruptors) struggle with uncertainty, but are agile and willing to
experiment until they develop a validated business model. The new model then needs to reach
some critical mass to become a going concern. As they mature—that is, become incumbents—
mindsets and realities change. The established companies lock in routines and processes. They
iron out and standardise variability amid growing organisational complexity. In the quest for
efficiency, they weed out strategic options and reward executives for steady results. The measure
of success is now a delivery of consistent, growing cash flows in the here and now. The option-rich
expectancy of future gain is replaced by the treadmill of continually escalating performance
expectations.
In a disruption, the company heading toward the top of the old S-curve confronts a new business
model at the bottom of a new S-curve. The circle of creative destruction is renewed, but this time,
the shoe is on the other foot. Two primary challenges emerge. The first is to recognise the new S-
curve, which starts with a small slope and often-unimpressive profitability, and, at first, does not
demand attention. After all, most companies have shown they are very good at dealing with
obvious emergencies, rapidly corralling resources and acting decisively. However, they struggle to
deal with the slow, quiet rise of an uncertain threat that does not announce itself. Second, the
same factors that help companies operate strongly toward the top of an S-curve often hinder
Link
Moazed, A., Johnson, N. 2016. Why Clayton Christensen Is Wrong About Uber and Disruptive
Innovation. Available at: https://techcrunch.com/2016/02/27/why-clayton-christensen-is-wrong-
about-uber-and-disruptive-innovation/ [Date accessed: 28 February 2023] - Estimated time 30
minutes
“The change that occurs when new digital technologies and business models affect the value
proposition of existing goods and services.”
• Unprecedented advances in technology are driving digital disruption, including:
- Data
Customer data offers companies valuable insights to inform products and services, and
feeds customer expectations for personalisation (eg tailored viewing recommendations on
Netflix).
- Computing power
Advances in supercomputing power enable the application of artificial intelligence and
machine learning, which can be applied in data analytics, automation, and
personalisation, as well as innovative products and services.
- Connectivity
Advances in mobile technology mean that the global population continues to become
connected to the Internet, breaking down language and geographic barriers. With more
people connected to mobile devices, there are also more devices per person, and devices
are getting smarter through machine learning.
This graph shows how wide digital technologies reach, and how it took the telephone 75 years to
reach 100 million users worldwide, in comparison with WhatsApp and Instagram which took less
than three years. This helps to understand that the pace of technology evolution and adoption is
constantly accelerating!
• Everett Rogers, author of “Diffusion of Innovations”, theorised five stages in the spread of a
new idea. However, we are now seeing “Big Bang Disruption”, in which mass adoption of a new
idea or technology rises and falls much more quickly.
(LinkedIn, 2016)
As shown in the graph above, Big Bang Disruption collapses Everett Rogers’ classic bell curve of
five distinct customer segments (innovators, early adopters, early majority, late majority, and
(Accenture, 2018)
In addition, Accenture produced the disruptability Index and positioned different industries
according to present/future levels of disruption:
(Accenture, 2018)
in order to build a new business, McKinsey has developed the Leap approach, composed by five
steps as shown in the graph below:
Link
McKinsey & Company. 2023. Leap by McKinsey. [website] Available at:
https://www.mckinsey.com/business-functions/mckinsey-digital/leap/overview [Date accessed 28
February 2023]
However, McKinsey & Co. affirms that developing new businesses for incumbents is not an easy
journey and there are a lot of challenges that they have to face. See details below:
Leaders need to think, act, and react differently to make their organisations
succeed in a digital world
Cognitive Behavioural Emotional
transformation transformation transformation
(THINK differently) (ACT differently) (REACT differently)
Conceptualising possibilities Adapting to constantly Tolerating an environment of
in a virtual world shifting power and influence risk and ambiguity
Making decisions quickly Investing huge amounts of Having the confidence to take
without all of the information energy into getting things the lead in driving change
right: try, fail, try again
In order to develop these capabilities, new leaders need to have hope, be optimistic, and be
resilient.
Essential reading
To help your learning journey, the material provided has been classified to show what is key for
giving you a basic, developed, and advanced knowledge of the topic.
Sub-topic: disruption
• Basic:
QUT IFB101 (2015) Disruptive Innovation. [online video] Available at:
https://www.youtube.com/watch?v=Cu6J6taqOSg [Date accessed: 28 February 2023] -
Estimated time 10 minutes
Further reading
You need to do your own research to apply the concepts presented above to the company you
are choosing for the assessment.
In addition, see below further readings, videos, and case studies that will help you gain a deeper
knowledge of this topic.
It is highly recommended that you consult the reading on how the Covid-19 pandemic is making
digital disruption even more disruptive and fast-paced, and what is expected from leaders of the
post-pandemic era.
• BCG. 2023. The Business Impact of COVID-19. Available at: https://www.bcg.com/featured-
insights/coronavirus.aspx [Date accessed: 28 February 2023]
• Kearney, M (2018) 7 Lessons for Resilient Leaders. Deloitte WSJ [online] Available at:
https://deloitte.wsj.com/cio/2018/08/01/7-lessons-for-resilient-leaders/ [Date accessed: 28
February 2023]
• Abbosh, O. et al. (2018) Disruptability Index. [online] Accenture. Available at:
https://www.accenture.com/_acnmedia/pdf-72/accenture-disruptability-index-pov-final.pdf
[Date accessed: 28 February 2023]
• 7 Skills for the Future (n.d.) The 7 skills you need right now. [online] Available at:
https://unimenta.com/ [Date accessed: 28 February 2023]
Videos
• TEDx Talks (2013) My Digital Stamp: Erik Qualman at TEDxNashville. [online video] Available at:
https://www.youtube.com/watch?v=cH4HOLwm0X0 [Date accessed: 28 February 2023]
• 7 Skills For the Future (2019) An Introduction to Optimism. [online video] Available at:
https://www.youtube.com/watch?v=ZvzJZNcbOF0&t=2s [Date accessed: 28 February 2023]
• 7 Skills For the Future (2019) An Introduction to Resilience. [online video] Available at:
https://www.youtube.com/watch?v=1df36na-RM4 [Date accessed: 28 February 2023]
Case studies
These are case studies that will give you an understanding of how the theoretical concepts
presented above are applied in the real world.
Sub-topic: digital disruption
• Lauchlan, S. (2018) McDonald’s digital delivery is a long game, not a fast food fix. Diginomica
[online] Available at: https://diginomica.com/mcdonalds-digital-delivery-long-game-not-fast-
food-fix [Date accessed: 28 February 2023]- Estimated time 15 minutes
• El Sawy, O. A. et al. (2016) How LEGO Built the Foundations and Enterprise Capabilities for
Digital Leadership. MIS Quarterly Exclusive, Vol. 15, Iss. 2, Article 5. Available at:
http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=115879197&site=eds-live
[Date accessed: 28 February 2023]- Estimated time 60 minutes
Sub-topic: strategy to respond to digital disruption
• Think with Google (2018) Digital transformation in 12 weeks: How Proximus and Digipolitans
made it happen. [online] Available at: https://www.thinkwithgoogle.com/intl/en-154/insights-
inspiration/case-studies/data-driven-transformation-12-weeks-how-proximus-and-digipolitans
-made-it-happen/ [Date accessed: 28 February 2023]- Estimated time 15 minutes
• See examples of companies that have used the Lead Approach by McKinsey & Co. to disrupt
themselves: McKinsey & Co. 2023. Leap by McKinsey. Available at:
https://www.mckinsey.com/business-functions/mckinsey-digital/leap/overview [Date
accessed: 28 February 2023]
Sup-topic: new needed leadership skills