In a room full of top industry executives who gathered in Kuala Lumpur for the Leap Summit in November 2019, a key question on the minds of business and IT leaders was: how can they implement a more coherent and cohesive digital transformation strategy rather than take a scattershot approach?
The answer could lie in tapping the power of creative disruption, a term coined by advertising professionals in the early 1990s to describe the changes in their industry arising from technological advancement and new ways of doing things.
A similar phenomenon is playing out across industries and cities today. In his keynote address on creative disruption at the event, Dan Cobley, managing partner at UK venture builder Blenheim Chalcot and former managing director of Google UK and Ireland, compared the cityscapes of Shanghai and Kuala Lumpur from 30 years ago to the present day.
“All of this amazing transformation is driven by a series of technology platforms evolving at an increasingly rapid pace. The adoption curve of new technologies by people is becoming steeper and we can see this by how long it takes for new technologies to reach a quarter of the population. Take the US as an example – it took 50 years for electricity to reach a quarter of the population – but the iPhone took just two years.”
The results are inevitable, he added. “If you believe, as I do, that disruption comes from the people who most effectively adopt new technology, then it is obvious that as technology adoption gets faster, the displacement of companies that are not adopting new technologies will also happen more quickly.”
Cobley underscored the increasing speed of displacement of companies by comparing their corporate lifespans. Noting that Fortune 500 companies held on to their status for about 60 years in the 1960s, their tenure in the elite group is just 20 years today and might be cut to 15 years in the next decade.
In a hard-hitting presentation, Cobley went on to emphasise that all sectors were affected.
“You should all worry – healthcare, telco, entertainment, banking and finance, agriculture, Energy will all be disrupted,” he said. “So, the clear imperative is to disrupt or be disrupted.”
But how should leaders kickstart the process of creative disruption and rapid transformation, and what should they be looking for?
To pave the way for creative disruption, Cobley called for businesses to first define the problem that they want to fix clearly. This could be a hugely inefficient process, or customers who have been badly served by a crisis, for example.
“Then develop an innovative solution, something enabled by some recent change. Lastly, we must have a motivated team, often with a crazy zeal and a mission to fix the problem.”
Among many examples, Cobley pointed to Google’s two founders, Larry Page and Sergey Brin, who gave up their PhDs to tackle the world’s information, the problem of a rapidly growing internet with sites numbering in the millions based on the old directory structure floundering under a basic keyword matching search engine.
“These two people set to work in a garage and tapped a new system to tackle the world’s information, made possible by powerful computers capable of analysing enormous datasets, and developed a site navigation search engine that looks at the authority of a site based on the sites linked to it.”
Cobley also shared recent examples of disruptive ideas from his own work, which include two financial technology companies he founded.
One of these companies, Salary Finance, sought to answer a widespread consumer finance problem in the UK, where about 70% of people applying for loans from a high street bank are declined due to fears of poor repayment.
“The solution was to work through the employer motivated by a growing awareness of employee well-being. There is a growing body of data linking mental well-being and financial stress. This startup offered an innovative structure, which reduced cost items such as customer acquisition, and so forth, borne by the bank,” said Cobley.
He said these examples demonstrate that a successful blueprint of creative disruption is driven by one or more of three factors: recent changes in regulation; a change in or a new technology; and a change in behaviour and expectations of customers.
“The reason is that most of what has been possible for centuries or decades has already been done,” he said. “But if there’s been a new change in regulation, technology or behaviour then that creates a new playing field. You have a chance to create something special.”
The next stage a company faces is the problem of scaling up, he said, noting that many companies have failed because of their inability to scale. However, scaling a disruptive idea needs to address three things: unit economics, the distribution challenge and execution.
“Distribution is key,” Cobley said. “Trusted partner collaboration underpins all of these three areas and accelerates growth.”
Cobley also shared the story of China’s Luckin Coffee, which has established 2,000 stores in eight months. With a new one opening every four hours, it has disrupted Starbucks in the country.
“Luckin’s business model delivers quality coffee which is 25% to 30% cheaper. The company uses mobile payments and has tapped new behaviour in China – the rising passion for coffee. It has made unit economics work by providing high-quality coffee through a take-and-go store.”
Cobley said to generate a disruptive business or enterprise unit, what is needed is something new and better (innovation), put in the hands of lots of people (distribution) and built on a platform.
Achieving all of that is a question of mindset, he added. While innovators seek change to solve a problem, achieve minimum price, take risks and have a long-term vision, he said incumbents prioritise stability to sell a product, maximise margins, avoid risks and look for short-term results.
“To shift to a disruptive mindset, you could reward people who dare, and not punish those who tried and failed. Incumbents are short term, and fixated on costs and shareholder pressure to maximise margins. As leaders, tackle the fear of failure, fail fast, make it very cheap and learn. Then, move on.
“If I am a leader in my organisation, am I removing the barriers to innovation and change? Do you have a percentage of your talent working on crazy stuff? Google, to avoid the incumbency trap, set up Google X to come up with radical new technologies to solve some of the biggest problems in the world,” Cobley said.
To remove innovation barriers, Cobley said organisations could set up an incubation unit like Google X, with non-financial metrics to encourage managed failure. He also stressed the importance of partnerships as most organisations don’t have the people to do the innovation.
In her keynote, Nora A Manaf, group chief human capital officer at Maybank, Malaysia’s largest bank by market capitalisation, talked about the importance of transforming people policies to keep up with the digital era.
“People and jobs are being disrupted and our workforce, our society, must be reskilled and upskilled. The wonders of technological disruption need to be complemented by getting the people factor in tandem with this digital transformation journey.”
With 375 million workers expected to change their occupational categories and learn new skills by 2030 to adapt to automation and digital transformation, going by McKinsey estimates, Manaf said it is necessary for companies to create a people-centric environment for employees to thrive.
“Letting people go is done by mediocre management, not by real leaders,” she said. “Leaders are risk takers – we have reimagined policies in Maybank and our thrust is about humanising financial services.”
For example, she said Maybank’s flexible work arrangements have bolstered the productivity of its staff. “Other work in free time is encouraged, provided there is no conflict of interest. Making staff independent is part of making a future-ready workforce.”
In his closing remarks, Ahmad Taufek Omar, executive vice-president and CEO of TM One, the digital arm of Telekom Malaysia and organiser of the Leap Summit, said while digital disruption is often perceived negatively, positive creative disruption is about reinventing continually.
“Every disruption pivots on creativity,” he said. “A new vision, a new insight of how technology can uplift people and their goals onto a more agile, faster path.”
This article first appeared in ComputerWeekly.com
