John Sheridan

John is CEO of Digital Business insights!

So who is being disrupted? - Part 1

Just about everybody. There are too many companies to name, so let us just look at the main sectors under threat.

The music industry, video, postal, books, newspapers, printing, real estate, travel and accommodation are well documented.

The establishment music publishing industry is still fighting back and the main music publishers are again looking at technology solutions like watermarks to stop peer to peer sharing, but this is unlikely to succeed, even if and when they win a few high profile court cases.

The musicians themselves are being far more creative about production and engagement, and continually explore new ways to create, produce, share and distribute their material. Promotion and marketing is difficult in a world of multiple channels, but imagination and social media offer collaborative options.

Apple understood the new game in 2001 and stole the high ground with iTunes.

Apple didn't try to protect an existing business changed it. It let customers become the publishers themselves and never looked back. That apparently "simple" solution actually required completely understanding that the customer had changed. The power had shifted. iTunes was then simply a smart response to the new customer perspective.

That understanding alone is something that vendors in many sectors still struggle with.

For the power shift to the customer has to be properly, completely and thoroughly understood before vendors can begin to create strategies to stay engaged. Most vendors just pay lip service to it, think that social media is customer engagement...then move on.

Video publishing has been hit the same way as music.

And video production has also been impacted by the availability of low price, high quality video and editing equipment that is now freely accessible and easy to use. The gap between broadcast quality and home video is extremely small and now anybody can be a video producer, or even a video publisher and distributor through YouTube.

Goodbye to all the video production companies that used to be found across Australia. Those that still exist have transformed dramatically in focus, to becoming equipment and studio hire companies. The volume of corporate work dried up.

The postal industry has been disrupted by email and electronic distribution undermining traditional mail, and has refocused on parcels and ecommerce fulfillment and delivery. Threat and opportunity arrived at the same time.

Disruption always knocks incumbents off balance and it has taken postal services worldwide too long to respond positively to the new condition. Without government support it was debatable whether any would survive. In Australia, the final outcome is still in doubt.

Printing is now digital and production costs have dropped dramatically. Digital printing presses are more flexible, easier to use and allow print on demand, small production runs and quick turnaround, local creation and distribution.

Many traditional printers closed the door as a result of the change. Big run print services were also aggregated and delivered from huge subsidised, printing operations in China and other low cost countries across the world.

So some industries are being disrupted by digital hardware and associated software, such as printing presses, digital cameras and editing suites.

Others are being disrupted by the fast exchange of digital information across networks coupled with logistics and delivery. Amazon took advantage of centralised warehousing and efficient fulfillment and delivery services to compete with every bookshop in the world. Once established, Amazon expanded upon the warehousing and delivery capability to sell other products, and they haven't stopped thinking creatively yet.

The traditional newspaper and magazine industries got a double whammy and have been hit by both forces.

Digital printing should have been a boon to the industry, but leadership at the top failed.

CEOs, editors and publishing boardrooms were stuck in a physical distribution mindset and didn't recognise the opportunity when it came knocking on the door.

They learned nothing from iTunes. They could have become the broker for delivering packets of information organised around customer demand. They could have become the ultimate personal magazine and newspaper distributor. But they insisted and still insist on aggregating "pages" of information and articles, under their "banners" and their "columnists" to suit their view not the customer view.

Big mistake.

Meanwhile, the real newspaper business of selling advertising space was stolen by agile, new world usurpers under the very noses of the newspaper empires who had the power and position to do it themselves. But didn't.

When they realised, too late, what had happened the game was over. Their skills and capabilities were not aligned to the new world and still aren't. All newspaper empires are in decline and still very much under threat.

Businesses in the real estate industry were early adopters of new technology. Every new technology from mobile phones, to websites, digital cameras, smart phones, iPads, and real estate management software has been adopted and incorporated swiftly as agencies look for a competitive edge. It is an egocentric industry with individual salespeople promoting themselves to sellers and buyers alike, and this is their strength and their downfall. should have been created and jointly owned by the major real estate industry groups as collaborative partners. They should now be enjoying the income streams that go to News Corp (and McGrath).

This is a good example of the failing of an industry to take control of its own destiny, because of the inability of key vendor groups to collaborate. The real estate industry association should have led the way, but failed its members badly, though the giant egos of the main players were mostly to blame.

As it is, all the major work on the content of the portal is conducted by thousands of real estate agents themselves every day, who update the content regularly and pay for the privilege.

However the game isn't over yet. There are rumblings of dissatisfaction in the industry as prices for listings continue to rise. Will the industry finally collaborate and take back control? It could still be done, it is on the cards, and sooner rather than later it will be.

The travel industry was an early adopter of IT with airline electronic booking systems back in the 1960s. The industry led the way for many years and when electronic booking expanded into other areas of the travel industry with cars, buses, trains and accommodation, most travel related businesses were early adopters. So the travel market is now more sophisticated than many others.

They understood connection but didn't really understand the power of collaboration, and the industry is still disrupted by the tourism boards, wholesalers and large travel companies hanging onto the past and not being able to collaborate effectively with the myriad of small but very important providers of "things to do, things to see and places to stay and eat".

Many travel agents have adapted to the threats of pure online competition and have leveraged their personal relationship and advisory role to fight back against the pure play online competition. But the industry is still in flux.

So in the travel industry, the fight goes on with some areas, such as commodity ticket and accommodation booking largely in the hands of internet based booking agencies and the more complex travel relationship still in the hands of the agencies.

The industry demonstrates that the revolution often first causes major impact and disruption, followed by rearrangement of the surviving players, with some traditional players replaced completely and some reinventing themselves to compete in the new digital environment.

But the real opportunity remains. Applying the iTunes principle to the industry as a whole.

Sooner or later somebody will finally approach travel totally from the customer perspective, not just partially and then we will see real disruption.

As we have seen both in real estate and in travel, collaboration is a precondition for achieving the next major step. More value can be leveraged through collaboration than without it. 1 + 1 can equal eleven not just two.

That has nothing directly to do with technology but is a by-product of the major digital currents driving everybody towards more connection, more collaboration and more integration.

And that requires another paradigm shift in thinking and business practice, the appreciation and understanding of shared value as a model for creating and maintaining sustainable business relationships.

Not every sector is agile enough, fast enough or has deep enough pockets to move successfully.

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Wednesday, 21 March 2018