The Next Digital Disruption

Do you understand the three waves of digital disruption? How can you stay ahead of the curve?  Read on to learn how…

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The Next Digital Disruption

The Next Digital Disruption

The digital disruption of the U.S. economy will continue unabated, though in new and potentially more disruptive ways, so argues Thales Teixeira, a Harvard professor, in his new book “Unlocking the Customer Value Chain: How Decoupling Drives Customer Disruption.”

Rolling Disruption

In his book, Teixeira suggests that the U.S. economy has already undergone two distinct waves of digital disruption:

  1. Unbundling—This wave primarily impacted conventional media, as news articles were unbundled from newspapers by Google, classified ads gravitated to Craigslist, and restaurant reviews and information migrated to Yelp. The music industry is another example of early disruption, as Apple unbundled songs from albums.
  2. Disintermediation—Digital technologies next moved to take out the middleman. For instance, travel agents, who once put together comprehensive vacation plans, were disintermediated by the likes of Orbitz, Priceline.com and Expedia. Online brokerage had a similar impact on full-service brokers.

The Third Wave—Decoupling

The third wave of digital disruption is underway and involves companies that are decoupling companies’ value chains. The decoupling of the customer value chain occurs when consumers migrate to new opportunities to save time, money or effort.

One example Teixeira provides is Sephora, an established beauty-products, brick-and-mortar retailer. Sephora, until recently, controlled the customer value chain (i.e., all the activities that satisfy customers’ needs and wants) by being present with a customer throughout the trial, purchase and replenish process.

With the emergence of Birchbox, a subscription-based beauty retailer, members receive monthly, curated samples of new products to try out, with the option to buy larger sizes of the products they like. This trial subscription mail service has effectively decoupled Sephora’s value chain that helped it attract and retain customers.

It’s All About the Customer

While it’s tempting to view this disruption as the consequence of some revolution in technology, it is important to remember that it is customers that disrupt markets, not start-ups with newfangled technology.

In fact, the disruption is really centered on business model innovation rather than technology. That said, old-line companies are not fated to fade away as they find their value chain being delinked. They simply need to find new ways to create value that meet the relentless demand of customers to purchase products and services in less time, with less effort and more cheaply.

See referenced disclosure (2) at http://blog.americanportfolios.com/disclosures/ 

About The Author

Cliff Walsh, CFA

 

Vice President of Asset Management 
631.439.4600 ext. 277 

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