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According to a new report, one-third of the Australian economy faces major digital disruption in the near future and companies face watching 50% of their business perish if they don’t adapt to the digital changes quickly and efficiently.

The report by Deloitte titled ‘Digital disruption: Short fuse, big bang?’ looks at the impact of digital innovation on individual industries, analysing how much additional change they can expect to experience in the years to come. The report also speculates what time frame each industry has to adapt and how they should pull together the right strategic response to cope with these changes. 

In a video summary of the report, Deloitte says that every single industry faces digital disruption, just not in the same way, and while some businesses will emerge stronger, others will encounter much heavy weather.

The trick, they say, is knowing how you’ll be impacted and being thoughtful with your response. 

What is ‘digital disruption’?

According to the Director of Deloitte Access Economics, Dr Ric Simes, ‘digital disruption’ is simply a term used to describe the changes - both positive and threatening - that are occurring in our world due to advancements in technology. 

Disruptions are a regular part of the business world and we only need to look at how large supermarkets have displaced local, family-owned grocery stores or how big, specialist retailers have challenged smaller independents, to see examples of this in action. But digital technology is currently presenting another major upheaval. 

Digital innovations are transforming the economic landscape far more profoundly than any other big shifts, such as deregulation, oil shocks or mining booms and the way companies operate and engage with their customers is already so significantly different to how it was only a few years ago. But, even though major disruptions have already occurred, Deloitte says there is still plenty more ahead.  

Digital disruption explodes the status quo, rewrites economics, scrambles supply chains and blurs category boundaries. It also pushes a business into new dimensions while questioning its very survival.  

For some, digital disruption will be explosive and immediate - a force that rocks the foundation of their business. For other less vulnerable to digital trends, the changes will be slower and more subtle. For others again, digital innovation will be the cornerstone for future value creation. 

The digital economy isn’t just about speeding up communication across borders or changing the skills workers need. It’s about changing the very nature of consumption, competition and how markets work.

What are the ‘bangs’? 

Screen Shot 2012-10-22 at 10.10.20 AM

In an effort to understand the way digital technology will impact individual sectors of the business world, Deloitte created four different categories which refer to the level of disruption (the bang) and the time in which these disruptions will occur (fuse). 

Short fuse, big bang

Six industries were singled out as ones that will experience a 'short fuse, big bang' in the way of digital disruption. These include finance, retail, professional services, arts and recreation, real estate and media, information and communication technology.

These areas account for 32% of the Australian economy and Simes suggests that the individual sectors have less than three years to adapt and transform themselves, or they face watching up to 50% of their business perish. 

Short fuse, small bang

Falling into this category is construction, wholesale trade and the hospitality industry, which accounts for around 17% of the Australian economy. These areas apparently have a lot less to lose in the way of digital disruption, but there is still a limited window in which they can act to mitigate potential damage. 

Long fuse, big bang

The four main sectors that fall into this category are transport, government, education and health, making up 33% of the Australian economy. Deloitte says that some of the most profound changes will be felt in this area, and each sector can expect to lose a lot if they don’t undergo a metamorphosis. 

Simes points out that while there have already been significant changes in these areas, like bringing technology into schools, moving to electronic health records and conducting remote diagnoses, over time we will see each area being delivered in fundamentally different ways. 

Long fuse, small bang

The final category includes manufacturing and mining, which accounts for 18% of the Australian economy, and is the category which Deloitte says has the least potential for digital technologies.

How to respond to the pending digital bang 

Deloitte presents three different ways that policy makers and corporate leaders can adapt and emerge as ‘digital survivors'.

  1. Recalibrate cost structures - Companies need to radically rethink the costs of people, material and overheads in order to compete with digitally powered, low-cost newcomers. Deloitte suggests that businesses should consider streamlining their supply chains, replacing bricks and mortar stores with e-tail, automating training and recruitment and putting administration in the cloud to create a more mobile, flexible workforce. 
  2. Replenish revenue streams - Advancements in digital means that new sectors and customers can be targeted and new geographies can be accessed. As traditional revenue streams are hit by digital disruptions, companies need to use these new markets to find different sources of revenue, and at the same time fundamentally change business models in order to succeed.
  3. Reshape corporate strategies - Companies need to reconsider assets, risk and corporate agility in order to position the organisation for success in the increasingly digital world. 

Screen Shot 2012-10-22 at 10.10.03 AM 

Going forward

For some, operating in the digital world can be both confronting and confusing. Recent innovations have reduced barriers to entry, blurred category boundaries and opened the doors for a new generation of entrepreneurs, but change is a necessary element of business. 

Ultimately, digital disruption will affect every corner of Australian business and society. The issue for companies now will be whether they are prepared for the worst, and ready for the best. 

In the digital age, being prepared for the worst and being agile and ready for the best will determine our future. This is a big issue that requires big thinking. 

There are new risks in the digital landscape but the risk of inaction could be even greater. Engaging in new, innovative and maybe even disruptive approaches to market is, and will be, an absolute necessity.  

Claire Brinkley

Published 22 October, 2012 by Claire Brinkley

Claire Brinkley is Econsultancy Australia's news and insight reporter. Follow her on Twitter, Google+ or connect with her on LinkedIn

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Comments (2)

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Laurienc

digital technology is currently presenting another major upheaval all over the world and in many areas.

almost 4 years ago

Bel Plews

Bel Plews, Digital Marketing Manager at OfficeMax AustraliaEnterprise

I dont comprehend why manufacturing is placed in the long fuse-small bang quadrant? Most could be easily considered heavily reliant on retail which has short fuse-big bang.

Is there any further correlation or research on relationships between industries?

almost 4 years ago

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