Two recent examples show how digital disruption is having a huge impact on traditional businesses and business models and how rapidly innovation as a practice and process will need to change to keep up with the impact.
Over the last two years, one of Australia’s largest publicly owned talent management organizations has seen one of its major client’s spend fall from A$30million per annum to $15million per annum, with expectations the total spend year ending 2012 will be around $5million. For any company this is a huge drop in revenue and as the Managing Director said “It is not only a huge drop in revenue for us, it is a huge drop in revenue for the total HR industry in Australia.”
This contraction has come about because of the disruption and emergence of digital technology in the HR market, specifically LinkedIn. Launched 8 years ago, LinkedIn is now firmly established as a reliable digital platform aggregating and connecting the largest collective pool of talent globally, accessible from a single desktop computer. HR Departments are now beginning to realise they can bring all their traditional hiring and outsourcing needs back in house saving literally millions of dollars in fees. In addition, there is no longer any need for any middleman as the LinkedIn platform acts as the middleman and more.
The real challenge for talent management organizations going ahead is to re-invent themselves, to make their organizations relevant because the HR industry as it is now will be dead within a decade.
My prediction is the HR industry will be subsumed and metamorphose into part of the learning industry. However the digital technology platforms currently delivering content are functional at best. Have a look at Skillshare and Storify as different examples of early stage prototypes.
The second example of digital disruption has huge implications for the very heart of Western capitalism, the financial services and insurance industry. Financial planners produce 90% of all revenue for one of the UK’s largest insurance companies, yet they focus their sales efforts on the top 10% of private wealth. Consumers resent paying inflated prices to an outsourced sales force they know operates on commission only and who they see essentially do nothing more than take their money. Information on financial products and services including options and pricing is now readily available on the internet; many consumers have experienced the fact they can be purchased reliably on it, too.
What financial services organizations are suddenly discovering is consumers no longer have any reason to talk to them directly. One company in Australia is reported to be losing 4000 policyholders a month because of their neglect of the digital domain.
The implications of these industry trends for the financial services industry are still uncertain. However, I am aware there are concerted innovation endeavours occurring in major financial services and insurance companies in the US, UK, Australia, the Netherlands and Germany, some at a national level, others at a global level of operation.
What I am certain of is the emergence of digital platforms and more and more sophisticated technology is disrupting business models in dramatic ways and no industry or business is now immune from this revolution. The tsunami is on its way!!
Digital platforms are only as good though as the human input that goes into creating them. The problem is coders, developers and technicians do not often interact with other departments let alone external stakeholders or customers.
Where I am seeing real winners emerging with very purposeful innovation is where senior leaders have initiated and supported the coming together of a cross disciplinary middle management team made up of future organizational leaders with representatives from every single aspect of the business tasked with the responsibility of envisioning and framing the digital future of the organization.
When that occurs, the initial questions they must ask are
- How do we currently collect data?
- What way do we collect it?
- Is the way we collect it commercially useful?
- How do we interpret the data we collect?
- What does it tell us about our market, our clients and our stakeholders?
- What can we discover from it that enables us to seek new opportunities and new potentialities?
Answers to these questions provide the basis for the commencement of a creative journey into the new world of digital innovation and the emerging future.