DIGITAL DAR… WHAT?
Contrary to Urban Dictionary’s definition, with “Digital Darwinism” I’m not talking about natural selection removing those who text and drive from the gene pool. I’m borrowing an analogy others have used when comparing the failure of non evolving businesses in the digital age to the extinction of similar old world species due to natural selection.
During periods such as the Cambrian explosion, evolution accelerated rapidly. With the advent of the internet and the search engine, digital is doing the same thing for the evolution of business. New ideas, products, businesses, and industries are emerging at an unprecedented pace while old ones are dying.
The analogy also works as an alternative to the competition model which is often used to explain the rise and fall of corporations. It’s not always the brilliant or cut-throat companies that survive, but those who can adapt to new environments. The hard reality is that if your dinosaur of a company can’t handle the new and constantly changing environment of the digital world, it will disappear.
DIGITAL SELECTION AT WORK
PROOF IN THE FOSSIL RECORD
You don’t have to look back very far to find evidence of digital Darwinism.
Fifteen years ago Palm PDA’s were just heating up, but in 2015 that technological flame has clearly fizzled. Blackberry, a rival to the Palm PDA, proved it had the ability to adapt as smartphones rendered the PDA irrelevant. Unfortunately, with the advent of the iPhone and touch-screen devices, Blackberry’s gig was (more or less) up.
Those who can’t keep up with the pack are always the first to be eaten. Just trying to keep up with competitors like blackberry did isn’t enough, because as others fall, you might find yourself at the back of the pack. You need to adapt to your environment — so that as it changes and makes life hard for your competition, your business can thrive.
The Washington Post cites the rapid change of world’s top companies in recent decades as evidence of digital Darwinism. Forty-five percent of companies were new between 1983 and 1993, and sixty percent were new between 1993 and 2003. These new companies dethroned formerly powerful industry leaders. Over 40 percent of the companies topping the Fortune 500 in 2000 disappeared from the list in 2010.
THE THEORY OF EVOLUTION… IN BUSINESS
While statistics and history prove that digital Darwinism is happening, they don’t easily explain how the process forces companies out of the market or explain how your company can navigate the changing environment.
Theories aren’t proof about how things work. They’re an explanation that helps you understand how the facts work. The best theories help you predict the future.
Disruptive innovation, a theory developed by Clayton Christensen from HBS, explains how digital Darwinism picks winners and losers. It explains how evolutionary ideas, products or businesses pop out of nowhere and decimate established businesses or industries.
The Formula for Disruptive Innovation
Step 1: Make Something Available to More People
Disruptive innovation happens when new players in a market adapt products or services that were previously only available to a few people or companies. These new players make a new version of the product or service that lots of people can use and enjoy.
The digital environment itself is actually a product of a disruptive innovation. Without PCs no one would be online. Before the PC the best technology was a mainframe computer. These technological beasts were massive, filled entire rooms and also cost an arm and a leg. Personal computers came on the scene and made computing possible for individuals, unlike mainframes which were pretty much only accessible to huge corporations or universities.
Step 2: Go After Different Customers than the Big Guys
In disruptive innovation the initial products and services that new players offer are lower quality than those offered by the big players. These new players are still able to sell their products, because they go after people who couldn’t afford the big players products or services in the first place.
Initially, PCs didn’t provide the functionality that large companies or universities needed. PC’s couldn’t process large sets of numbers or store the enormous databases that Companies wanted digitized. For everyday individuals PCs opened new possibilities, like going online or typing a document. The PC was perfect for the small guy’s needs.
Step 3: Improve and Start Moving in on the Big Guys
As time goes on the new players continue to improve and go after more and more customers. Buyers paying top dollar to the large, established players usually realize at some point that the new player’s version is good enough and is either better suited to their needs or at least priced lower.
This is what happened with computers. At some point it didn’t make sense for most companies to invest in a mainframe, when personal computers were good enough to do most of the tasks they needed. Better yet, the PC offered new opportunities to make individual employees more productive at work.
Step 4: Go in for the Kill
Eventually the new player’s products or services are good enough for pretty much everyone. In many cases the new players products or services may even outpace those of the dominant players. At this point the new player will take control of the market, and the big, established player will either be eliminated or will become a niche player for those who demand luxury.
Again, this is exactly what happened with PCs and mainframes. Huge corporations and universities still employ mainframes when they need to compute or analyze enormous data sets. Mainframes are now used only for tasks so large that most of us can’t even imagine, like generating data for an entire financial markets. For the rest of us, we use PCs.
The Innovator’s Dilemma
Disruption creates a serious corporate dilemma. Companies can stick to business as usual and continue catering to their current customers or invest in the unknown by serving customers that can’t afford their current products or services. Established companies often have customers with big wallets, and going after the everyday consumer means smaller profit margins on individual sales. Because adaptation demands going after more customers with smaller wallets, many companies choose to stick with what’s working.
In the short term sticking with what works is a good bet. The problem is that new players will inevitably target the customers that established players don’t want. In the process these new players will come up with products and services that meet the needs of most of the market either at a lower price point or in a way that better meets the needs of the ordinary consumer.
If you pay attention, you’ll see what I’m talking about happening right now in online marketing. The big, established players have been doing TV commercials, direct mail campaigns, and telemarketing campaigns for years, and until the environment changed, they’ve been doing it really well. They figured out how many people were watching TV, got a loose understanding of a show’s audience size and demographic and adjusted their advertising budget and positioning accordingly.
Just watch the world news. All the commercials are for the older demographic. It’s all Viagra, reverse mortgages and life insurance. The established marketers have been bombarding us with ads for decades, and they’ve been doing it more and more effectively… until now.
While traditional marketers have been making better and better outbound ads, the environment has shifted. The advent of the internet and the search engine allowed new players to promote products and services through inbound marketing. As we’ve talked about before, inbound marketing is cheaper than traditional marketing and now it works better too. Inbound marketing uses content to earn a potential lead’s attention rather than forcing your brand down their throat. Anyone can develop content (not always good content) and inbound marketers like Launch Tower have now developed amazing methods for using this content to promote products, services and brands. This means lead generation for your business.
We’re now at the point when companies who used to use traditional marketing methods have realized that inbound is actually a better investment than traditional marketing methods. Inbound cannot only meet the online marketing needs of a company, but it doesn’t leave a bad taste in your customers’ mouths. Disruptive marketing is catching on rapidly, and it’s important to make sure that it doesn’t remove your company from the metaphorical gene pool.