Digital disruption (1)

Tuesday, 1 September 2015

by: Qurius

Digital disruption is not new but the opportunities and risks it presents shift over time. From the BCG 'Navigating a world of digital disruption' publication.

We are entering the third, and most consequential, wave of digital disruption:

  • In the first wave of the commercial internet, the dot-com era, falling transaction costs altered the traditional trade-off between richness and reach.
  • In the second wave, Web 2.0, the important strategic insight was that economies of mass1 evaporated for many activities. Small became beautiful.
  • Now we are on the cusp of the third wave: hyperscaling. Big - really big - is becoming beautiful.

To seize the strategic opportunities of digital disruption, concider a business architecture as a strategic variable, not a given. Do not harness technology to the imperatives of the business model, but adapt the business model to the possibilities - and the imperatives - of technology.

  • Ubiquitous sensing
  • Ubiquitous connectivity
  • Convergent data
BCG Exhibit 1 Ubiquitous sensing and connectivity.PNG

Technologies can be extended infinitely and are all converging on the instantaneous. They are built in layers, mixing real and virtual. A sensor is built into a parking space and another sensor is built into a car: one network enables the municipality to charge the motorist for parking, another allows the motorist to find an empty parking space.

Richer networks will eventually enable an autonomous car to navigate and park itself. Still richer networks will enable cars to self-organise into 'platoons', lines of cars like a train that are given high-speed priority by smart traffic lights.

Physical cars swarm on an infrastructure of roads, virtual agents swarm on an infrastructure of data: each is a layered system, but there is a one-to-one correspondence between them, and they continuously modify one another.

Modularity and layering, granularity and extensibility, the symbiosis of the very large with very small.

  1. Economies of mass captures increasing returns to the volume of current activities (economies of scale), the breadth of current activities (economies of scope) and the cumulative volume of past activities (economies of experience, a proxy for organisational learning).