Sep 9, 2013
I recently came across a couple of lists of disruptive technologies that are forcing businesses to ‘adapt or die’. Disruptive technologies have been around since fire and the wheel, and more recently, the mainframe/minicomputer/PC/tablet and smartphone, or tape/disk and flash. While there are always casualties when markets are disrupted, how is that different from the normal ebb and flow of capitalism with its constantly changing lineup of winners and losers?
According to Forrester Research, digital disruption “will do to you what the Chinese did to manufacturers.” The Chinese manufacturers’ formula was: cheap workers + infrastructure = disruption. “The high labor costs and rigid structures of American companies couldn’t adjust, and most of them were toast.”
Fast forward to today, and innovators attempting to compete with your business have access to lots of free or cheap tools, and while many of them are going to fail, that’s not your problem, says the research company. Lots and lots of innovators are your problems: “They’re not all going fail — some of them are going to succeed, and they will disrupt your business.”
There are at least ten times as many innovators gunning for your business compared to before, claims Forrester. The costs of entry are less than one-tenth what they were, so you have to expect to be competing with 100 times the innovation power.
Regardless of size, or success, companies need to embrace disruptive innovations that will likely have a major impact in their industry, and they need to do so with an entrepreneurial approach — at least, so says Citigroup advisor Irving Wladawsky-Berger, a former vice-president of technical strategy and innovation at IBM. Wladawysky-Berger goes on to say that since IT is often an enabler — or barrier (think Shadow IT) — the CIO can play a major role in the success or failure of innovation.
“With few exceptions, the assets that have made a company successful over the years are invaluable if properly deployed – from their products, services and loyal customer base to their brand reputation and financial strength. Those companies that can properly leverage their assets and integrate them with up-and-coming innovations stand the best chance to be around for many years to come.”
In case you’re interested, the top disruptive technologies I mentioned at the start of this column, according to Goldman Sachs’ The Search for Creative Destruction, are Software-Defined Networking and Big Data — two disruptive themes that, through product or business innovation, are poised to transform addressable markets or open up entirely new ones, offering growth insulated from the broader macro environment.
SDN catches up with all the advances that have been made in cloud computing. The size of the current market where SDN could make an impact is $51 billion, and that should soon change. “Offsetting the likely declines and commoditization of the hardware, we expect to see the emergence of a new networking software segment, though it is too early to size it given we’re still in the stage of nascent start-up activity,” said the Goldman Sachs analysts.
Goldman Sachs’ second Creative Destroyer for the IT industry is Big Data, with the overall market currently standing at $11 billion, with a projected 32% compound annual growth rate over the next five years. The company segments the market as:
Another ‘disruptor’ study from analysts at investment bank Citi is a little more dated, but it also named SDN and added and SaaS to the list of their top disruptive innovations.
According to Citi, SDN is “too cheap to resist.” Using IDC numbers, it said the market is expected to grow from just under $360 million in 2013 to $3.7 billion in 2016. Revenues are likely to be split between startups, traditional network vendors like Cisco, and big IT vendors like IBM, HP, and Dell.
“Everyone is going to double down on SaaS.” Or at least, that’s the claim from Citi analysts. In 2012, the SaaS market grew 26% to become an $18 billion market (IDC). According to Citi’s survey, SaaS has already captured 8% of their software wallets so far and firms expect to increase spending to 70% of their budget over time — a 9-fold increase.
The bottom line is that your business is going to be disrupted sooner or later, and if you’re not doing the disrupting, somebody else will.
Image credit: Pascal (flickr)