Homepage / Technology / How companies are fighting off threats from Amazon and digital disruption
Amazon says this Prime Day was its biggest shopping event ever Kudlow says President Trump is 'so dissatisfied' with China trade talks that he is keeping the pressure on As stocks regain their footing, an ominous warning looms Goldman Sachs downgrades Clorox to sell, says valuation is 'unsustainably high' How Satya Nadella has spurred a tripling of Microsoft's stock price in just over four years Kudlow says economic growth could top 4% for 'a quarter or two,' more tax cuts could be coming The one chart that explains Netflix’s stunning comeback US housing starts plunge 12% in June to a nine-month low Aerospace titans Boeing and Airbus top $110 billion in orders at Farnborough Target uses Prime Day to its advantage, logging its 'biggest online shopping day' so far this year Billionaire Marc Lasry sees bitcoin reaching up to $40,000 as it becomes more mainstream and easier to trade These are the 10 US airports where you're most likely to be hacked Amazon shares slightly higher as investors await Prime Day results Wreck of Russian warship found, believed to hold gold worth $130 billion A bullish ‘phenomenon’ in bond market is weeks away from fading, top credit strategist says Stocks making the biggest moves premarket: MS, GOOGL, TXN, UAL, NFLX & more Twitter shares up 50% since late April means most upside priced in, analyst says in downgrade EU fines Google $5 billion over Android antitrust abuse Mortgage applications fall 2.5% as buyers struggle to find affordable homes America may not have the tools to counter the next financial crisis, warn Bernanke, Geithner and Paulson Investors are getting spooked as the risk of a no-deal Brexit rises EU expected to fine Google $5 billion over Android antitrust abuse Ex-FBI chief James Comey urges Americans to vote for Democrats in midterm elections Elon Musk apologizes to British cave diver following baseless 'pedo guy' claim Disney, Comcast and Fox: All you need to know about one of the biggest media battles ever Xiaomi shares notch new high after Hong Kong, mainland China stock exchanges reach agreement The trade war is complicating China's efforts to fix its economy European markets set for a strong open amid earnings; Google in focus Hedge fund billionaire Einhorn places sixth in major poker tournament The biggest spender of political ads on Facebook? President Trump Asian stocks poised to gain after Fed's Powell gives upbeat comments; dollar firmer Stocks are setting up to break to new highs Not all FAANG stocks are created equal EU ruling may be too little, too late to stop Google's mobile dominance Cramer explains how Netflix's stock managed to taper its drop after disappointing on earnings Airbnb condemns New York City's 'bellhop politics,' threatens legal retaliation Amazon sellers say they were unfairly suspended right before Prime Day, and now have two bad choices Investor explains why 'duller' tech stocks can have better returns than 'high-flying' tech names Elon Musk is 'thin-skinned and short-tempered,' says tech VC Texas Instruments CEO Brian Crutcher resigns for violating code of conduct Google Cloud Platform fixes issues that took down Spotify, Snapchat and other popular sites Uber exec: We want to become the 'one stop' transportation app 'What a dumb hearing,' says Democrat as Congress grills tech companies on conservative bias Amazon shares rebound, report says Prime Day sales jumped 89 percent in first 12 hours of the event How to put your medical history on your iPhone in less than 5 minutes Investment chief: Watch these two big events in 2018 Even with Netflix slowing, the market rally is likely not over Cramer: Netflix subscriber weakness debunks the 'sky's the limit' theory on the stock Netflix is looking at watch time as a new area of growth, but the competition is stiff Why Nobel laureate Richard Thaler follows Warren Buffett's advice to avoid bitcoin Rolls-Royce is developing tiny 'cockroach' robots to crawl in and fix airplane engines After Netflix plunge, Wall Street analysts forecast just tame returns ahead for the once high-flying FANG group Roku shares rise after analyst raises streaming video company's price target due to customer growth China is investing 9 times more into Europe than into North America, report reveals Amazon says US Prime Day sales 'so far bigger than ever' as glitch is resolved Netflix is on pace for its worst day in two years US lumber producers see huge opportunity, rush to expand San Francisco to consider tax on companies to help homeless Homebuilder sentiment, still high, stalls as tariffs, labor and land drive up costs Powell backs more rate hikes as economy growing 'considerably stronger' Netflix history is filled with big stock declines – like today – followed by bigger rebounds Intel shares get downgraded by Evercore ISI due to rising competition from Nvidia, AMD Petco aims to reinvent the pet store with something you can't buy online Genetic testing is coming of age, but for consumers it's buyer beware Tech 'FAANG' was the most-crowded trade in the world heading into the Netflix implosion, survey shows Netflix weak subscriber growth may indicate a 'maturity wall' that could whack the stock even more: Analyst This chart may be predicting the bull market's demise Wall Street says Netflix's stock plunge is a ‘compelling’ buying opportunity because the streaming giant ‘never misses twice’ Tesla sinks after Musk tweets, again Boeing announces new division devoted to flying taxis Stocks making the biggest move premarket: NFLX, UNH, GS, AMZN, WMT & more Deutsche Bank downgrades Netflix, but says big subscriber miss is not 'thesis changing' IBM is experimenting with a cryptocurrency that’s pegged to the US dollar North Korea and Zimbabwe: A friendship explained Virgin Galactic spinoff Orbit to launch rockets from the UK with space deal Artificial intelligence will create more jobs than it destroys? That’s what PwC says ‘Treasonous’ Trump and ‘Putin’s poodle:' Scathing headlines follow the Trump-Putin summit China’s fintech companies offer ‘enormous’ opportunity, investment manager says Trump's performance at summit with Putin was 'unprecedented,' experts say Walmart and Microsoft link up on cloud technology as they both battle Amazon European stocks seen mixed amid earnings; Fed’s Powell to address Congress How I knew I should quit my day job and run my start-up full-time: Viral website founder China's stocks have been trounced, but the trade war may ultimately be good news for those shares Billionaire tech investor Peter Thiel bets on crypto start-up Block.one Asian shares subdued open after mixed close on Wall Street; energy stocks under pressure Amazon cloud hits snags after Amazon Prime Day downtime Netflix isn't doomed by one quarter unless people start questioning the long-term investor thesis Tech stocks set to sink on Tuesday after rough evening for ‘FANG’ Netflix plummets after missing big on subscriber growth This wristband lets humans control machines with their minds The U.S. has a rocky history convincing Russia to extradite computer criminals Amazon suffers glitches at the start of Prime Day Jeff Bezos is now the richest man in modern history 'The United States has been foolish': Read Trump and Putin's full exchange Goldman Sachs recommends these 5 highly profitable companies — including Nvidia — to combat rising inflation Goldman Sachs releases 'tactical' stock picks for this earnings season Three red flags for Netflix ahead of its earnings report The bond market may be raising recession fears, but don't expect one anytime soon Cramer: Banks are 'making fortunes' but are still as hated as they were during the financial crisis Putin told Trump at summit: Russia never meddled in US election


How companies are fighting off threats from Amazon and digital disruption

The specter of digital disruption has quickly become one of the most concerning issues for business leaders around the world. In 2015, less than one percent of executives believed digital disruption could have a transformative impact on their industry. Now, Airbnb is more valuable than Hilton, Tesla is more valuable than Ford, General Motors and BMW, and Amazon‘s takeover of Whole Foods just put tremendous pressure on competing grocery chains’ stocks.

These tangible examples have moved digital disruption from a secondary concern to a top-of-mind issue at the board level. According to new research from the Global Center for Digital Business Transformation, a joint IMD and Cisco initiative, more than three-quarters of executives now believe the impact of disruption on their industries will be “major” or “transformative.” What a difference two years can make.

Which industries are most vulnerable?

Executives who thought – or still think – they are safe from disruption will face a rude awakening. No industry is safe.

The media and entertainment industry is seeing the greatest disruption as the level of competition among industry incumbents intensifies thanks to inroads from Amazon, Facebook, Snapchat and Netflix.

Only slightly behind media are technology products and services, retail, financial services and telecommunications. The businesses in these markets share several characteristics that make them particularly exposed to digital disruption. For one, their core products and services are highly information-centric and can be readily digitized.

How can companies respond to the forces of disruption?

Despite the increased awareness about digital disruption, 40 percent of survey respondents still feel their leaders do not understand the threat, or are responding inappropriately. There is still a large gap between acknowledging the need to transform and actually achieving transformation.

When faced with a disruptive competitive threat, it can be hard to know what to do because you are on unfamiliar terrain. However, four distinct strategies can provide a framework to conceptualize your options.

1. Harvest

This is a defensive strategy designed to maximize gains from a declining business or market. Domino’s has been employing this tactic by driving greater efficiencies through digital technologies. Despite strong performance through the 1990s, Domino’s struggled in the early to mid 2000s. However, the company’s leadership determined an online presence that was both user friendly and efficient could improve the customer experience and yield more sales. By 2015, the company was processing approximately half of all orders online, sales were 30 percent more than in store purchases, and labor costs decreased due to efficiencies created by the technology.

2. Retreat

The Harvest strategy is about maximizing value in threatened segments. However, when the costs of maintaining a business clearly outstrip the benefits, companies should focus on strategic retreat. This strategy emphasizes withdrawal into a market niche that serves a small subset of existing customers with specialized needs. For example, when General Electric faced intense competition in its consumer appliances business, it shed GE Capital’s assets and sold its appliances division – exiting a business that brought in $19.6 billion in 2015, or nearly 17 percent of GE’s total revenue. GE is now using the proceeds of these sales to focus on its industrial internet strategy.

3. Disrupt

While Harvest and Retreat are defensive strategies, incumbents can go on the offensive and become disruptors themselves. When a market opportunity that can be profitably exploited is detected, companies should focus on creating new value for customers using digital technologies and business models. Look no further than Otto for an example of a disruptive strategy. The company, which was recently acquired by UBER, disrupts the freight industry by automating trucking. Currently, labor represents 40 – 75 percent of operational costs for the industry. If Otto can completely automate its trucks, it will be able to offer its services at a drastically reduced price and cut out the competition.

4. Occupy

Although the disrupt strategy represents catalytic activities that introduce market disruption, the Occupy strategy focuses on sustaining the competitive gains associated with that disruption. Occupy rejects the “build it and they will come” approach, and is premised on the reality that the company that introduces a disruption may not end up winning in the end. Walmart has employed this strategy to succeed in retail. Over the past few years, Walmart has invested billions in multi-channel capabilities to combat ecommerce competitors like Amazon. In executing this strategy, Walmart’s stores become a key asset as nearly ninety percent of Americans live within ten miles of one.

The pace of disruption is accelerating across industries as a result of faster digital technology innovation cycles, an explosion of well-funded start-ups and the emergence of Chinese giants such as Alibaba, Tencent and Baidu. Digital transformation requires action. Just talking about digital change, hiring a chief digital officer or starting an “innovation hub” won’t save your business. A true, holistic change to your business model is needed to survive and thrive in the digital era. The time for strategic action is now – because no one knows what the next two years will bring.

Commentary by Andy Noronha, a visiting scholar for the Global Center for Digital Business Transformation, director in the Cisco Digitization Office and co-author of Digital Vortex: How Today’s Market Leaders Can Beat Disruptive Competitors at Their Own Game. Follow him on LinkedIn.

Disclosure: Domino’s, GE, Uber and Wal-Mart are clients of Cisco, however, Andy Noronha has not worked with them in any capacity.

Follow CNBC’s Opinion section on Twitter @CNBCopinion.

Source: Tech CNBC
How companies are fighting off threats from Amazon and digital disruption

Comments are closed.