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Digital disruption: It’s all about the length of the fuse and the size of the bang says Deloitte


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10 September 2012:  Responding to the ‘length of the fuse and the size of the bang’ is set to become a new measure of success, and failure, for business and public sector organisations across Australia as they grapple with the transformative reality of digital disruption.  

Professional services firm and leading online and mobile consultancy, Deloitte, has singled out six industries, representing about one third of the $1.4 trillion Australian economy, predicting they will be subject to significant digital disruption (a big bang) in the near future (the short fuse).

This new digital reality is the subject of a ground breaking report by Deloitte – Digital disruption – Short fuse, big bang?, the second in its series of papers on national issues, Building the Lucky Country – Business imperatives for a prosperous Australia.

Studies to date have either focused on the technologies involved and the potentially exciting changes that some parts of the economy face, or on analysis of new business models spawned by disruption. But there has not yet been a comprehensive attempt to meld the projected magnitude of disruption in various industry sectors with the likely timeline of this disruption and then offer practical advice to leaders on how to pull together the right strategic responses.

Leading digital economist and Deloitte Access Economics Director, Dr Ric Simes, said digital disruption exploded the status quo and presented unprecedented challenges, while creating a range of opportunities for the innovative.

“As we saw in the recent company reporting season, digital innovations are transforming the economic landscape, far more profoundly than other big shifts in our economic history such as deregulation, oil shocks or mining booms,” he said.

“Digital innovations and disruptors are powerful, pervasive and have multiple indirect impacts. They reduce barriers to entry, blur category boundaries, and open doors for a new generation of entrepreneurs and smart thinkers.

“At the same time, incumbent market leaders face substantial pressures which they need to manage if they are to thrive, let alone survive.”

Changing workforce
Dr Simes pointed out that digital disruptions will affect the workforce. “Some jobs will disappear, while others will be created, and many workers, whether they are in sales, finance, teaching or trades, will need to be able to adapt to a future workplace that includes social media, apps, the cloud and other technologies.”

Deloitte Chief Executive Officer, Giam Swiegers, said mastering digital disruption would be vital to Australia’s future prosperity. “We have to use technology intelligently to get the most out of our people and our unique assets,” he said. “Certainly at Deloitte internal social media has been a powerful digital tool, driving collaboration and knowledge sharing.

“In the digital age, being prepared for the worst and being agile and ready for the best will determine our future. This is a big issue that requires big thinking, and Digital disruption – Short fuse, big bang? will enhance the capacity of business and public sectors and policy makers to act in the most timely and effective way.”

Responding to digital disruption
“In Digital disruption – Short fuse, big bang? we present three primary responses, and actionable levers in each response, that leaders can consider, both to minimise threats posed by digital disruption and, to maximise their organisation’s digital potential. It is about ensuring they are digital survivors,” Dr Simes said.

  • Recalibrating cost structures – making changes in terms of people, supply chain and overheads to radically re-think costs and compete with digitally-powered, low-cost newcomers
  • Replenishing revenue streams – building new sources of revenue across segments, geographies and business models as legacy streams dry up in the wake of digital disruption
  • Reshaping corporate strategies – reconsidering assets, risk and corporate agility to position the organisation for success in the increasingly digital world.

Driving the efficiency dividend
The report also highlights that, at a time when the public sector is being asked to do more with less, there is a real opportunity to make better use of digital innovation, to improve service delivery and customer engagement as well as deliver the Federal Government’s efficiency dividend.

Deloitte’s Digital Disruption Map
Central to Digital disruption – Short fuse, big bang? is a digital disruption map which looks at 18 industries and compares their vulnerability to disruption from two perspectives: the size of the impact (the bang) and the imminence of change (the fuse).

Using hard data across 13 factors and 26 indicators that determine the intensity and timing of digital disruption, as well as expert insights and opinions from across Deloitte, this is the first time industries and the organisations operating within them, have been mapped to identify digital impacts and timeframes.

To put the Deloitte results into perspective, the sectors that fall within the most pressing short fuse, big bang quadrant comprise about one third of the Australian economy, with those facing an equally big bang, but within a longer time frame comprising another third.

In summary:

  • Short fuse, big bang – industries expected to face both significant and imminent digital disruption include finance, retail trade, professional services, and information, media and telecommunications
  • Long fuse, big bang – industries that can expect significant disruption, but over a longer timeframe, include those where government and large business play a greater role, such as education, health, transport and government services
  • Long fuse, smaller bang – industries that have lower levels of total digital potential and that can expect to see the least additional disruption compared to the changes of recent years, such as manufacturing and mining.

Digitla disruption map

Disruption as an opportunity
Deloitte Technology leader, Robert Hillard, said the biggest risk for any organisation was inaction in the face of new digital realities.

“The digital age is a confusing and confronting one,” he said. “What were reasonably defined boundaries for both private and public sector organisations and industries will change, if they haven’t already.

“What used to feel like strengths can become weaknesses if leaders are not prepared to constantly disrupt and innovate and have the customer or client at the centre of everything they do.

“Defending past business models is not the mentality of the digital survivor, and engaging in new, innovative and maybe even disruptive approaches to market is, and will be, an absolute necessity.

“For some, digital disruption will be explosive and immediate – a force that rocks the foundations of their business. For others less vulnerable to digital trends, the changes will be slower and more subtle. For others again, digital innovation will be the cornerstone for future value creation.

Mr Hillard said it was critical for organisations to take a granular view and that digital innovation would not affect every industry in the same way.

“Even within industries, companies with different business models face very different issues,” he said.

“And even within one enterprise, different business units may find themselves more or less exposed, both in terms of threats, and opportunities.

“In Digital disruption – Short fuse, big bang? we therefore consider industries, sub-sectors, companies of varying sizes and even differences between business units within companies.

“Ultimately, the key questions for leaders are: how is digital disruption affecting their organisation? And how well are they responding to minimise the threats and maximise the opportunities presented by this change?”

Digital disruption – Short fuse, big bang? is the second paper in Deloitte’s Building the Lucky Country – Business imperatives for a prosperous Australia series which has been developed to prompt debate and conversations, and focus minds across business, industry associations, government and the media on the ‘big picture’ issues facing the Australian economy.

The first in the series, Where is your next worker?, focused on the country’s skill shortage and was released in 2011.

For further information, visit the Digital disruption – Short fuse, big bang? site at deloitte.com.au

NB: See our media releases and research at www.deloitte.com.au

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