Editor's note: The following is a guest article from Shriram Natarajan, director, digital strategy and solutions, Americas at ISG.
There's an old adage on digital disruption; The more consumer-facing and weightless the product, the more at risk it is for disruption. Weightlessness, the ability to have a digital counterpart to a traditional product, makes it easy to see why consumer-facing products with electronic counterparts (like music and books) were the first markets to face disruption.
For the most part, this observation held true throughout the 2010s because it was aligned with the mechanics of digitization and the nature of the businesses being disrupted.
Since then, demographic shifts, the "AI Spring," legislative and regulatory changes and the current pandemic have all contributed to alter the underlying physics of the industries that are digitally disrupted.
In certain industries, the pace has accelerated, while in other industries, the need for digital differentiation has dissipated, or was put on the back burner while organizations dealt with the immediate fallout of the pandemic.
Every day, 10,000 people in the U.S. turn 65, while a similar number of millennials grow in their career and Gen-Z'ers enter the workforce.
Workers at retirement age are highly experienced and knowledgeable in the traditional, costly infrastructure of non-digitized industries, and they take important organizational intelligence with them when they leave.
This phenomenon, known as the "silver tsunami," has forced industries like manufacturing, utilities and energy exploration to rapidly digitize their knowledge base. They also have to use strategies like the use of mixed reality for maintenance and repair, with experienced technicians in the back office directing and orchestrating repairs by less-trained operatives.
The changing demographics favor workers who are much more open to gig work and who place greater trust in digital platforms to create marketplaces. This has opened the door to changes in typically cohesive industries, such as higher education.
The increased demand for digital skills has led many students to decouple academic interest and professional credentialing. This will lead to an exodus from costlier schools in favor of boutique schools that cater to narrower interests.
Students will earn digital credentials from specific, technology-heavy institutions like Lambda School in their early career, and pursue further growth and learning throughout their career from organizations such as Coursera or LinkedIn Learning.
Generation Z has grown up with democratized value creation, like YouTube channels or Twitch streamers that organically found their base and built their audience using digital techniques.
These new, digital entities can see the most valuable part of a business process and align themselves to those while sourcing out the other aspects with great velocity.
Tesla, for example, has done away with its PR department and is relying on its outspoken CEO to directly message the market. While Tesla might be an outlier, digital channels have made it easier to get unfiltered messages out and facilitate direct conversations like no other time in history.
Data science, machine learning and overall adoption of AI has exploded in recent years. This has greatly enabled digitization of industries traditionally considered "heavy," such as healthcare and life sciences.
Many university graduate projects can use these technologies to outperform highly qualified experts in diagnosing disease from samples, images or video. We are seeing models for specific diagnoses being adopted to augment human decision-making in prestigious hospitals.
With improvements in connectivity and robotics, many inpatient procedures will be able to be done remotely, allowing doctors to be more effective with their time and cover a larger population.
In drug discovery, many "what if" scenarios for molecules could be uncovered from the use of technology to search existing literature and associated data instead of spending money on research and discovery.
Rapid strides in natural language and domain-specific language understanding, combined with the ability to replicate results using study data, have enabled the elimination of many false positives during the drug development process.
Legislative and regulatory changes
The adoption of the General Data Protection Regulation in Europe has been followed by similar regulations to protect user privacy in some U.S. states, including the California Consumer Privacy Act.
To meet these regulations, many companies have had to invest in their data platforms sooner than planned, which has been a shot in the arm for digital and data initiatives.
Unification of customer data has led to great insights, better quality and increased efficiencies in numerous industries, including banking and insurance, where companies can get a comprehensive view of their clientele. In retail and e-commerce, it's helped create a composite picture of the buyer that helps companies up-sell and cross-sell based on new intelligence.
More than anything else, the pandemic has completely upended 2020.
Most industries faced an immediate crunch to save cash and preserve capital, and all industries have had operations and profitability impacted.
The industries that were least disrupted in terms of short-term liquidity and that maintain a largely positive outlook on future profitability are the ones that have the means to further digitize their operations.
As seen in the graph below, digital propensity is highest for the industries in quadrant three. This potential for future profitability, combined with new social norms and consumer expectations, points to a greater need for industries like higher education, agriculture, travel and tourism and others, to become more adept at handling the new future.
Companies across industries must consider how their business will change in the years ahead. For example, food distribution companies should reexamine supply chains, retail stores should continue to explore contactless commerce, and travel and hospitality firms should implement programs to win back wary customers.
The key to all this change, and to the new operating models that will drive success, is harnessing disruption and infusing organizations, technology platforms and decision-making processes with a new, digital approach.