The Dangers of Disruptive Technology
A recent Harvard Business Review report on disruption found that while 72% of businesses believe their industry is susceptible to disruption, only 14% of those businesses feel prepared to act quickly enough with disruptive technology to combat those disruptions.
Like many industries, manufacturing and distribution are primed for disruptive innovation in the next several years. As you read this, someone is out there looking for a way to crunch data to optimize their business (if not the entire industry). If you aren’t already incorporating digital intelligence into your operational strategy, you are likely behind the curve. In other words, you’re either a digital innovator or you an analog. In our increasingly digitized world, analogs are quickly becoming a thing of the past.
Detecting or anticipating market change is essential to managing disruption. This requires collecting and analyzing digital trends—not only inside your own operation but also in the larger market you are hoping to serve. That market includes your current customers, but it should also include potential customers and those who are in play just outside your current offering.
That data exists in many places, from your own records (order history, etc.) to online databanks. Many trade associations collect data and share it with their members as well. There is even info to be gleaned from keeping an eye on your competitors’ social media marketing.
Once you are tapped in to that data, you’re a digital innovator and you can respond to market change quickly. Digital innovators are three times more likely to detect and respond to changes in their own operations. Being able to adapt to new realities, opportunities, and challenges is critical. Digital innovators use data intelligence as the means to gain an advantage.
How to Become a Digital Innovator?
The journey from analog to digital innovator starts with three steps. You must:
- Invest in the data and analytics tools that will make a difference to your business.
- Make data accessible to and improve the analytic skills of all your employees.
- Create a culture that embraces intelligent risk-taking.
Fifty-six percent of Digital Innovators say they are extremely well positioned to use their DI capabilities as a differentiator, while 77 percent of Analogs say they are poorly positioned to do so.
Invest in the tools
Data can be collected and analyzed using something as simple as Excel or QuickBooks, more advanced software like Microsoft Power BI, all the way up to ERP solutions. The system you use to organize that data will determine the level of digital intelligence said data can provide. In the Harvard report, 92 percent of respondents said that to compete in the future, their organization must be able to exploit information much more quickly than it can today. More sophisticated systems (ERP, Power BI) can extrapolate and apply learnings from the data, and provide much more in-depth and accurate analysis than Excel can .
Data can be accessed directly from your own, internal systems, like QuickBooks or a more advanced accounting system like Acumatica ERP, while the tools to conduct the analysis are normally analytics tools like Excel, Microsoft Power BI, or Tableau.
Make Data Accessible
Simply having the data isn’t enough. Everyone affected by digital intelligence—which is everyone—needs access to it. According to the Harvard report, people who work for digital innovators are more than twice as likely to have access to the data and analytics tools. That means field salespeople can see the same information on their mobile phones that anyone sitting in HQ can. Cloud-based systems allow for that kind of access. Seeing data in real time allows companies to adjust quickly, meet shifting market demands, and anticipate challenges. But too much information can be overwhelming, and analysis paralysis can become an issue. You can mitigate against this by creating an internal feedback loop to evaluate recommendations, and determine winning hypothesis from the losers.
Create a DI Culture
A digital intelligence culture is curious about the Why of the data. They are interested in what is selling today versus last week, last month, or last year, and then extrapolating. It’s not good enough to simply notice a trend—you need to figure out why the trend is happening.
A manufacturing company had been selling a fully assembled product consistently for years, but they began to notice their customers only ordering parts of the full assembly. Once they realized this, they had to dig into why it was happening. Was it cheaper to order the individual components and repair the assembly themselves? Were they getting other parts of the assembly from another supplier for less cost? When they had answers to those questions, they could adapt their product strategy to avoid losing that customer altogether.
But how do you shift your culture toward digital innovation? You start by empowering your people, which means training current employees and augmenting existing teams with new data scientist roles. Those data scientists are not solely responsible for making sense of the numbers, however. That responsibility falls to everyone in your organization. Seeing the big picture, connecting the dots, and creating sound hypotheses should be encouraged and promoted throughout the entire company.
Make Friends with the Competition
Implementing new practices and shifting a culture at an established business can be challenging, to say the least, but incumbents have advantages over new entrants too. You have capital, inventory, and relationships that a new company doesn’t. That said, many incumbents are partnering with newer companies with access to the technology that can make this transition easier and faster. For instance, companies that evolved into digital innovators were twice as likely to use cloud-based platforms. In the Harvard report, 70 percent of respondents said the ability to operationalize insight quickly is crucial, but only 14 percent said they are extremely good at this today. Those 70 percent claimed this speed is only possible with the use of the cloud.
Embrace the Future
While it’s impossible to predict the future, digital disruption is a threat to almost every industry. Digital innovators are more likely to survive disruption because they will have the ability to experiment, analyze and adapt quickly. Companies that embrace a data-driven culture and allow for experimentation empower their employees to drive the success of the overall organization. But it starts at the top, and it doesn’t happen overnight. Many digital innovators claim it took upwards of three years to get the tools in place and shift their culture sufficiently. One immediate step you can take is to consolidate the data you already have today. Fragmented data is an obstacle you must overcome. Tools and resources (e.g. inventory and finance) that don’t feed into each other make the problem even worse. Once all departments and systems are integrated, you can gather and analyze the data you need to start down the path toward becoming a digital innovator.