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GLOBIS Deputy Dean Jorge Calvo urges business leaders to look to the 6 Ds of tech disruption to navigate the uncharted era of Industry 4.0.
What is tech disruption?
Tech disruption occurs when a new business model, product, service, or process supported by digital innovation breaks into the status quo of a traditional industry—an occurrence that is bound to happen sooner or later as the world becomes more digitized. Traditional industry tends to develop a kind of tunnel vision for overtaking competitors and gaining market share for incremental growth, rather than embracing outside disruptions that bring exponential impact.
Consider what happened to Kodak, inventor of the digital camera. Despite this achievement, the company still chose to remain focused on film, believing the quality of a digital photograph would never surpass its predecessor. What Kodak failed to consider was that there was an infinitely larger market of customers who valued immediate image accessibility over quality. This market fueled the evolution of digital photography and drove pricing to an accessible standard for everyday customers. Digital cameras were even integrated into our mobile phones. Everyone stopped buying film cameras, leading to the bankruptcy of the Kodak giant.
What are the 6 Ds of tech disruption, and why are they important?
At the moment, a large part of emerging technologies and sciences are supported by disruptive digitization—a trend that is likely to spread. Computational power is surging without cost increases, while electronic integration tends to be commoditized. This allows disruptions to cross industries and break down barriers. Our new digital society and economy can be described by the following 6 Ds.
Digitized. Anything that can be digitized will have exponential growth, offering twice the performance and capacity every eighteen months (an observation known as Moore’s Law).
Deceptive. The early stages of digitization can be deceptive because, like all exponential curves, the quality and market price start out flat. This makes it hard to truly perceive the power of disruption and its exponential growth.
Disruptive. When new technologies outperform traditional ones in function and customer value, they reach new markets that are both larger and beyond the reach of incumbents, inevitably taking clients with them.
Demonetized. The price of technology falls at incredible speed, often reaching a point at which money is no longer part of the equation. Take the music market: an almost infinite number of songs can now be downloaded per month for less than the cost of a CD even ten years ago.
Dematerialized. Physical products and services are being replaced with non-physical alternatives. Think about how smartphones incorporate more and more technology for the same price, replacing music or video players, GPS devices or maps, libraries... Soon, they will be able to take our temperature and blood pressure, and someday perhaps even diagnose diseases.
Democratized. Once something is digitized, more people can access it. This includes people with less purchasing power in remote places that may otherwise have been insignificant to the market.
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How can leaders use the 6 Ds?
The 6 Ds represent the new context in which executives must lead and companies compete. If leaders do not understand their competition, they won’t be able to maintain themselves or their business. It’s no coincidence that the top five largest companies in the world—Apple, Alphabet (Google), Microsoft, Facebook, Amazon, and Alibaba—are digital, disrupting industries, breaking barriers, and seeing double-digit market value growth.
We can think of the 6 Ds as coordinates on a new map or a guide to the future. They are the opportunities that will help us reach our goal, but also the challenges that we must overcome along the way. We must embrace them to find the right path.
What do the 6 Ds mean for Japan?
As in other countries, we must consider the characteristics of culture and society, such as politics and regulations. This is especially true in a market such as Japan, where disruptions are slower to start due to the protection of keiretsus and domestic regulations. However, when the disruption phase does arrive, it is more virulent. What may seem like a problem becomes an opportunity.
The key is adapting to the rhythm and expectations of growth. In the case of Japan, the change that will undoubtedly accelerate disruption is the 2020 Tokyo Olympic Games. Countries often use the Olympics to leverage change—think of the developments in Spain, China, etc. The Japanese government plans 2020 to be no exception.
Are these 6 Ds likely to change in the future?
The 6 Ds are related to the new paradigm of digitization and the Fourth Industrial Revolution, so they are sure to change as the world continues to evolve. We will eventually stop talking about digitization, in the same way we no longer talk about the novelty of electricity, and will probably turn our attention to the “smartization” of business models, products, services, and processes as they become autonomous through AI. Recognizing the 6 Ds can help business leaders navigate exponential growth in this uncharted new era of digitization.