Digital Disruption Is A Major Concern

A clear warning was issued by a speaker at the Australian Technology Showcase for Accountants (ATSA) Conference in Melbourne, held on 20-21 October 2014, that the ‘digital disruption’ is starting to affect many industry groups. Two years ago, Deloitte Chartered Accountants produced a report, ‘Digital disruption – short-fuse, big bang?’ This report predicted that six different industry groups would encounter 24% to 43% of revenue becoming ‘disrupted’ over time. Jason Bender of Deloitte indicated that ‘disruption’ doesn’t mean revenue is gone. However, there would be a need for the affected industries to develop strategies on how to respond to changing market conditions.

Mr Bender referred to the changes that have occurred, over recent years, to businesses such as video stores and the flow-on effects that were then felt by property investors and shopping centres where other tenants missed the customer drawing power that the video stores used to generate. Mr Bender indicated that there’s a flow-on effect from one business closing down to others in the location. The ‘digital disruption’ forecast highlighted significant changes that will occur.

What’s causing these changes?

Accountants, acting as a ‘trusted adviser’ to small/medium enterprises, can help clients to understand the trends and attempt to introduce new strategies for clients’ businesses, to overcome the changes which are occurring in the marketplace. Mr Bender said, “These changes can creep up on you.” He indicated that “it’s the same as the ‘rear vision mirror’ of your car – it doesn’t show you how close the vehicle behind you is to your car.” The market forces that are going to require changed strategies within the six affected industries are a lot closer than what they appear to be. He then commented on the four trends that are driving changes in the marketplace. He summarised these as:

• Cloud
• Mobile
• Social
• Data

Cloud

The emergence of cloud technology has enabled many businesses to change from very expensive information technology capital expenditure programs to operating expenditure programs, by being able to rent the software a business requires, either on an ongoing monthly basis, or even as they require it. It’s now possible to buy ‘unbundled’ services, whereby you can rent or buy the component you need. Cloud technology has enabled businesses to recruit help from the ‘crowd’. This could be via ‘technical support’ or, the new trend that has started in America, using ‘crowd’ support to raise capital for business ventures.

Mobile

Mobile is the new desktop for customers and businesses. You are now able to access information wherever you are, whether you’re at the railway station, bus depot or shopping centre. This ability of being able to access something wherever you are is one of the most important technology achievements for businesses.

Social

This new technology enables business operators to have ongoing conversations or better relationships with customers, staff, and their peers. This will enable a deeper level of understanding of relationships with your clients, understanding what they truly want. “Companies don’t buy services from companies – people buy services from other people,” Mr Bender said. Utilising LinkedIn will enable you to tell people where you stand. Prior to having a meeting with a customer, a business operator could read the customer’s profile on LinkedIn, so you have a better understanding of the customer’s philosophies. By the same token, your customer or prospect can read your profile on LinkedIn to see where you stand.

• Is your profile up to date?
• Has it got relevant information for a customer or would-be customer, to form an opinion on you?

Social media is being used more and more in the community, especially by younger people.

Data

There have been tremendous improvements in data availability. Accountants are now able to utilise technology in many different ways, to give you an overall view of your business’ performance. Benchmarking is an important tool that accountants are able to utilise, to show you, as their client, what the data is saying. Figures can be converted into an information presentation for you to understand, to show the effects on the business’ cashflow by lowering the debtors’ days outstanding and improving stock turn rates. Accountants can also prepare scenario-based presentations to highlight the benefits of different processes.

Adapt or be left behind

Accountants, offering a wider range of services, are able to utilise mobile devices to enable them to leave their offices and show their clients how all of the industry trends can work together, to assist you to improve the value-add to your business. Jason Bender said that “one of the prime examples of what can happen, if a business does not respond to changing technology is what happened to Kodak.” He indicated that “Kodak had the first patent of digital technologies, but were happy with their existing model. The business went into bankruptcy.” “Wise businesspeople concluded that it was best not to hurry to switch from making 70 cents on the dollar on film to maybe five cents at most in digital.” - Larry Matteson, a former Kodak executive “This was a perfect illustration of what happens when a business fails to understand that their clients want to move away to a new technology,” Jason Bender said. This type of problem can confront individual businesses, as well as the businesses that operate within the six industry groups defined in the Deloitte’s ‘digital disruption’ report.

Accountants can assist

Accountants, who are offering business advisory services and other non-compliance services, can assist their small/medium enterprise clients to navigate the ‘digital disruption’ that is going to affect many operators and small/medium enterprises. If you are interested in having a discussion with your accountant on the development of strategies to offset the effects of ‘digital disruption’, please make an appointment to talk to your accountant and discuss the issue with him/her. If your accountant is unable to assist you in the development of strategy to combat the ‘digital disruption’, please don’t hesitate to send an email to peter@essbiztools.com.au, with your location and postcode, and we will send you the names of accountants, within your area, who are able to provide you with this service. If you wish to receive future episodes of Survival Hints for Small Business series, you can visit our iTunes – Podcasts - Survival Hints for Small Business page and subscribe to our podcasts. If you have any questions or suggestions on future items to be covered in Survival Hints for Small Business, please don’t hesitate to contact us.