By Louis Hernandez Jr., CEO, Black Dragon Capital
We’re all used to the idea of tech-driven disruption – brick-and-mortar retailers having their lunch eaten by Amazon, traditional studios threatened by Netflix and other streaming upstarts, or digital direct payment providers replacing traditional banks.
But what happens when disruption happens so fast, and so severely, that it’s the technologists – the disruptors – that get disrupted themselves?
That’s what’s happening now. We call it Disruption 2.0. It’s a digital tsunami that will radically alter the business landscape. The time to prepare is now.
Why is this a new kind of disruption? In earlier stages, innovation destroyed the barriers between industries. New competitors emerged from unexpected directions. Amazon entered the market as a book retailer, then applied its retail model to other kinds of merchandise… then started creating its own content through Amazon Studios… then leveraged its excellence and excess capacity in analytics to launch Amazon Web Services and become a formidable competitor to such tech giants as Microsoft, Google, IBM, and Oracle.
But what’s happening today is a dimension beyond all that. The pace of innovation has accelerated so radically that now it’s the technologies themselves – and the companies founded on them – that are being disrupted. An entirely new business ecosystem is resulting.
A case in point: new intelligent image technology is rapidly emerging as the next major force in the commercialization of TV and film. Producers are currently able to insert different products or ads into the same scene based upon the profile of the user – so you might see a character drink a Diet Coke and I might see her drink a Diet Pepsi. Up until now, putting brands into entertainment has been a manual process, or it has involved costly and lengthy post-production techniques. But now, a company called RYFF has utterly transformed this workflow. For new productions, instead of shooting and indexing multiple scenes, RYFF makes it possible to record a single scene with a placeholder object – then insert the desired product “on the fly” as the video is streamed. For existing inventory of films and TV, RYFF scans the back catalogue and, using machine learning and artificial intelligence, ‘maps’ scenes for potential placement opportunities.
In theory, in RYFF’s solution, there’s no limit to the number or kind of products that can be included – everything from drinks to snacks to apparel – customized for each individual buyer. There are far fewer steps involved – a threat to established players – and an exponentially greater number of opportunities for consumer product companies, which can not only target individual consumers but, with just one or two easy steps, also sell to them while viewers watch the content. We’ve finally arrived at the vision laid out by Nicholas Negroponte in his 1996 book Being Digital, of a world where every product and service is just a click away.
Another example – online retailers have to pay significant fees to banks and credit card companies for payment processing, perhaps as much as 50% of their profit margin. Another company, Payveris, has created a real-time intelligent, peer-to-peer “guaranteed funds model” payment processing system – which will allow the retailers to use traditional banks and credit unions, bypass the merchant fee charged by credit card and PayPal-like companies, and facilitate a simple and easy payment for the general public in this new model, banks and credit unions continue to fulfill their role; merchants eliminate payment processing fees, thus lowering costs, increasing margins and passing the savings on to consumers, and consumers get a simple and easy buying experience.
What’s really going on in these examples – and in the rest of the digital landscape – is that the world is being collapsed into a single ecosystem. In the end, there will be nothing – no process and no company – separating a business from its customer. The business environment is being transformed into an operating system where applications unite the business with its customers, who are the only end-users.
If you lead a business – or invest in the tech industry – the digital tsunami is both a threat and an opportunity. To capitalize, it’s essential to:
- Understand the singularity. The tech-driven creation of a single collapsed ecosystem drives all the developments – new companies, new methods, competitive responses – that will sit on top of it. Knowing what’s behind the apparent chaos is the key to better decision-making.
- Time your moves. The digital tsunami, like past transformation waves, won’t hit all at once, and the old ways and old businesses aren’t going to disappear overnight. Check processors were profitable for 30 years after they were declared dead. You can lose out on profits and returns by being too early to the market – the key is to watch the trends and know where you are on the transition timescale.
- Be imaginative. Visualize what might emerge within the new ecosystem. You might foresee the emergence of a new kind of company that becomes the sole steward of your identity, both online and off. Something like that wouldn’t have been possible in the old, siloed world – but is a natural consequence of the new world in which boundaries have collapsed.
If your initial reaction to all of this is skepticism, you’re not alone. This isn’t the first time fundamental transformation has been proclaimed. But the digital tsunami isn’t something that’s arriving out of nowhere – it’s the logical endpoint of decades of digital evolution.
Follow the trend lines and be ready to capitalize. The time to start your planning is today.