Andrew Birmingham, “For company directors, change is the new main game“, Australian Financial Review, 6th February, 2014 – Digital disruption follows a Hobbesian arch: it is nasty, short and unforgiving.
Apple, for instance, took only seven years to dominate the music industry only to find itself battling the shift from paid downloads to advertising-supported music streaming.
But incumbency is not a death sentence. Large industrial companies, such as General Electric and ABM AMRO Group, have embraced Marc Andreessen’s entreaty that “software is eating the world” and have started reinventing themselves to more closely resemble technology companies, according to research company Gartner.
In Australia, however, there was little sense of urgency until deep into the second decade of these days of disruption.
Only last year a study by consulting firm Frost & Sullivan revealed that local executives were among the most complacent in the world about the impact of digital technology.
And yet the evidence was mounting that the forces of digital disruption were already hard at work Down Under.
A Deloitte paper released in 2014, called Harnessing the “Bang”: Stories from the Digital Frontline, suggested that disruption is actually accelerating in Australia.
Executive attitude shift
Lately, though, evidence is starting to emerge of a change in attitude at the very top of Australia’s biggest companies, says Malcolm Alder, the founder of digital strategy company Orchestrate and a former partner for digital economy at KPMG.
“You can see evidence now of some very tangible things happening,” he says.
“Companies like Telstra and Westpac are investing in their own start-up funds, while a little earlier we saw Woolworths buying the analytics business Quantium.”
According to Steve Vamos, a non-executive director on the Telstra board, “Whether you are a director, a manager or an employee, change is the main game right now. Innovation is not the main game, sustainability is not the main game, diversity and inclusion is not the main game.
“The main game is how do we change, because those other issues are all elements of the things we want to do better as our environment and circumstances demand it.”
Vamos says this calls for change-oriented mindsets, which is not always the natural order for boards, or companies generally.
“We have all been brought up and conditioned in environments where your expectation is that you are in control, you don’t make mistakes and you know the answer,” he says.
Digital talent in demand
Those companies whose job is to source talent have also noted a change in recent times.
Bridget Gray, managing director of executive recruitment company Harvey Nash, says: “Over the last five years we’ve seen a big step up in Australian companies wanting digital experience.
“In fact, for board appointments, it is now the norm for clients to want to see at least some element of digital on their CV.
“In the beginning, ‘digital experience’ was a rather wide-reaching term, and involved anything from successfully setting up online commerce through to rolling out the technical underpinnings of online.
“Nowadays the digital experience required at board level is very much focused on business transformation.”
That’s a sentiment echoed but with qualification by Sandra Hook, a member of a number of boards.
“What I’ve seen is companies responding by seeking to improve efficiency with incremental nips and tucks – and sometimes swathes of cost-cutting – rather than address the underlying issues of structural change,” she says.
“Change is hard, really hard, and many organisations seem to deal with change as if it’s a project rather than a continuous agenda of transformation that addresses structural renewal and breeds new thinking into every corner of the organisation.
“And I see many impediments, including the need for companies to bite the bullet on new organisational structure and budget realignments.”
Snapping at incumbents’ heels
When incumbents are unwilling to change, there are plenty of insurgents ready to take their place.
Ruslan Kogan, founder of e-commerce company Kogan, has carved out a strong niche in the local retail sector with an online play that uses world-class technology infrastructure and the latest digital marketing techniques to deliver prices at a significant discount to incumbents such as Harvey Norman Holdings and JB Hi-Fi.
“They are falling behind the technology loop when it comes to using that technology to solve business problems,” Kogan says.
“One of the things that makes Kogan a price leader isn’t the fact that we are happy to have lower margins. We are not interested in being in a race to the bottom because there’s always someone willing to make less money than you.”
Instead, the company developed unique proprietary solutions such as the system that allows its distributors to bid in real time for the right to supply product.
Kogan contrasts that with traditional retail incumbents who are still anchored to business processes and models built around long-term exclusive distribution agreements.
He says the company doesn’t just innovate with technology – it also approaches the issue of talent very differently to incumbents.
“I can’t think of a single person in our business who comes from a retail background,” Kogan says.