Firms must embrace digital disruption

ALIBABA'S chairman Jack Ma, in a speech to entrepreneurs earlier this year, extolled the virtue of business agility and adaptability in today's fast-changing markets and highlighted several trends revolving around technology that would impact businesses of the future: from leveraging big data and cloud computing as core tenets in the age of creation to always embracing new digital technology to stay ahead.

Mr Ma cited Hong Kong as an example of a city-state that can capitalise on technology to remain competitive. "Hong Kong needs to use its IT infrastructure well. In the past, the city relied on real estate. But in 20 years, if the city still relies on real estate, then it isn't real estate's fault - it's because young people haven't taken action to change that by first changing themselves," he said.

Mr Ma - who takes his inspiration from successful tech contemporaries like Bill Gates, Mark Zuckerberg and Jerry Yang - is no stranger to embracing digital disruption to create new business models, being China's most successful Internet entrepreneur.

As we approach the end of 2015, we ask ourselves: Are we evolving fast enough to stay ahead of, let alone keep up with, the competition?

Can we ignore the new digital economy that has spawned the likes of companies like Facebook, Alibaba or Uber that are thriving as businesses but ironically do not own their content, inventory or assets?

Connectivity: a catalyst to trigger greater innovation

In his Pulitzer Prize-winning book Guns, Germs and Steel, scientist Jared Diamond argued that geography has dictated how different cultures have developed. The reason why some populations thrive and are able to build sophisticated civilisations and why others remained primitive can be attributed to their view on connectivity or isolation. It is only with connectivity that populations have access to larger resources and greater opportunity to innovate.

The number of connected devices has skyrocketed in recent years, breaking much of the geographic barriers we face. With those barriers broken, there will be an exponential increase in the sharing of ideas and innovation.

The expectation to be able to connect to the Internet is also growing rapidly as users in Singapore make the Internet a part of their daily lives for all sorts of activities and interactions. This reliance on connectivity will increase as interest and demand for new connected services such as wearable technology, interactive cars and the connected home start to take off.

Gone are the days where devices were used for the single purpose they were originally made for. Companies must start thinking beyond the conventional approaches of using connectivity and instead tap disruptive technologies to make their business about the consumer and end-user.

As Singapore celebrates its 50th year in 2015, it can attribute most of its success to early efforts to connect and position the city-state as a digital hub for businesses. The country is already one of the world's most connected places, with broadband, Internet and smartphone penetration being one of the highest in the world. The need to continue to innovate and internationalise is reflected in the country's vision of a "smart nation" ecosystem and infrastructure.

Winners in creative destruction

While connectivity may be the trigger for innovation, creative destruction comes in other forms. In fact, companies across various industries are living proof that it is possible for companies to continue to make waves when they welcome technological revolution.

Take, for example, a Shanghai-based company named WinSun Decoration Design. After constructing 10 houses in under 24 hours last year, it expanded the capabilities of 3D printing and returned with the world's tallest 3D-printed building - a five-storey apartment block - and a 1,100 square-metre mansion with internal and external decorations to boot.

The WinSun example shows the closer link between innovation and the end-consumer, and is a harbinger of the collapse of the supply chain. The potential impact that 3D printing has on the economics of the entire supply chain is significant. With 3D printing, manufacturing will be less reliant on scale, and the logistics of transporting finished goods from factory to customer could potentially be further reduced.

Design and innovation will be of greater importance as smaller, independent manufacturers will be less limited by the need for scale in production.

The music industry is another example of the continuous evolution of digital disruption. Changing consumer preferences from media ownership through the purchase of music to streaming services may have resulted in this second wave of disruption.

The result of complacency and inability to adapt to the abruptness and enormity of changes that digital business offers is seen in the hospitality and passenger transport industries. Airbnb and Uber, for example, have taken consumer mindshare and wallet share away from the competition, and these organisations do not even own anything other than the service provided to the consumers.

Make the commitment to a digital transformation

A global business survey published earlier this year by IT analyst Gartner surmises that in every market CEOs must assume that business model changes will be forced by new digital entrants or an adjacent competitor within the next two years. To forge ahead, CEOs must realise the transformative impact and value of going digital. They also play a critical role by championing its use.

In his speech, Jack Ma described problems that businesses face today as opportunities to find new solutions. According to him, we usually think of an idea for a product and service, and then bring it to market. But this is changing to a new C2B (consumer-to-business) model where the business produces what the customer wants and personalises the product or service to fit each customer's needs.

While many businesses fear change and postpone technological innovation through creative destruction, it is this ability to put the customer first that has led WinSun, AirBnb and Uber to enjoy the fruits of their innovation and pioneering spirit. They are now forces to be reckoned with, and giving their intransigent competitors a good run for their money.

To survive, businesses must change their attitude and unfold their arms, embrace digital disruption and embark on the adventure of creative destruction. They need to destroy today to secure the future of their business tomorrow.

The writer is CEO of Logicalis Asia