Fusion 2014: Don’t dismiss disruptive business models

Thanks to information technology, that ever-present enabler of speed and agility, traditional business models are under attack from a bevy of online services, and any business organization that presumes immunity will be in for a big, fat surprise.

This new and pervasive worry of C-Suite executives will be examined in depth at the 2014 Fusion CEO-CIO Symposium produced by WTN Media.

In discussing the forthcoming conference, organizers considered several key trends —mobile, social, analytics and business intelligence, and the cloud — and tried not to place them in different silos. The reality is that when combined, these trends cause disruption in business — enough disruption to permanently alter established business models.

“With all this new technology, you have to take those five fingers, close them, and make a fist to make the whole thing work together,” noted Mike Klein, editorial director for WTN Media. “They especially must work together with this new term ‘shadow IT,’ with marketing and sales and HR departments spending more money on information technology than the IT department.”

Conference organizers considered the “digitization of business” and “the digital enterprise,” but while those topics will be explored during Fusion, they aren’t being talked about in Wisconsin boardrooms. What CEOs and CIOs are worried about is the competition that doesn’t yet exist, but that thanks to technology can emerge in a New York minute. Klein cited the example of National Mortgage Insurance Corp., which went from a PowerPoint concept to “live” in 35 states in only 12 months, raising $550 million in venture capital and securing a place on the New York Stock Exchange within 18 months.

“That’s what people in the boardroom are talking about,” Klein says. “That insurance, food — name a product or service — if you have all this legacy technology in the data center, all this old equipment and software to support, you’re going out of your mind from salesforce.com, Workday, and all these online services that allow you to be up and running in about 60 to 90 days, maybe less.”

According to Klein, there is not a market today, from education being challenged by online courses to government being challenged to be more efficient and customer- friendly, that is not going through some kind of a disruptive business model change. In the health care industry, the Affordable Care Act is shredding business models, altering reimbursement models, creating a wave of consolidation, and causing hospital administrators to “tear their hair out,” he stated.

Coffee mate

Transformational pressures, combined with regulatory compliance burdens, have nine out of 10 American companies changing business models to meet customer demands, according to research from KPMG, an audit and tax advisory firm. The same study says companies are being forced to get ahead of the curve by embracing disruptive technologies, and the various ways they are attempting to accomplish this will be explored at Fusion.

One of the keynote speakers is Peter Coffee, vice president and head of platform research for salesforce.com. Coffee will outline several technological trends in a March 5 keynote, and he offered an opinion on why it’s difficult for established companies to anticipate disruptive change.

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“A technology is disruptive when it is technologically straightforward, simpler than prior approaches, and initially less capable than what an established market requires,” Coffee explained. “But it’s attractive in new ways to an emerging market, with initial focus on these low-profit customers who are tolerant of a rapid pace of innovation that would not be accepted by longstanding customers who have less ability to assimilate change.

“What happens then is that the legacy technology is eaten from the bottom up as the capability of the disrupter grows, while the relative advantages of the incumbent start to pale in comparison to its higher costs.”

To put up a fight against insurgent competition, they might have to battle what the McKinsey Global Institute calls “next new thing fatigue.” With technology moving so quickly and in so many directions, ignoring the “new thing” is not an option.

“If you’re being fatigued by the next new thing, it probably means that you’re letting mechanism get more attention than outcome,” Coffee said. “I heard the CIO of one company say that they have a rule against any project being named for the technology it acquires and deploys, that you’d never be allowed to seek funding, for example, for an ERP upgrade when what you should be seeking is approval for a supply-chain modernization or a production waste reduction initiative.

“An ongoing process of asking, ‘How could our supply chain be made a greater source of competitive advantage?’ is never a new thing but a process of constant improvement in which the occasional punctuation of a big-step technology adoption is just another milestone along the way.”

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