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Digitalization creates new dimensions for disruption

Disruption is the interruption of normal work or practice according to Wikipedia. In business disruption is the result of deliberate strategies and practices as companies seek to exploit differences and create competitive asymmetry where competitor strengths become comparative weaknesses.

Clayton Christensen detailed the principles, strategies and drivers of disruption in a series of insightful books that define the standard for business research. Christensen’s initial publication in 1997 concentrates on how differences in price and performance can cause incumbents to take the right actions for the right reasons but produce the wrong result – disruption.

Technology is a significant source of disruption. New technologies such as mobility, analytics, big data, social and cloud are creating dimensions of disruption that go beyond traditional tradeoffs between price and performance. The Internet defined new terms of price and performance in terms of eCommerce models that concentrated on ‘being digital’ by transforming atoms into bits.

Digitalization reflects the business side of digital technologies. Digitalization focuses on the application of digital resources to create value and revenue. This is a different focus from eCommerce’s concentration on the technical transformation of analog assets into information-based resources. One based on changing business terms rather than transactional technologies. I believe there are three dimensions that provide a way framework for emerging digitalized business strategies and disruptions. These are shown in the figure below.

Viewing digitalization from this perspective creates new dimensions of disruption – digital disruption that drive company and product strategy.
  • Access disruptions change how customers, suppliers, intermediaries and others interact and the way in which they create value. Amazon can be seen as pursuing successive strategies of access disruption, starting with internet based disintermediation but quickly advancing to deeper disruptions through digital distribution (Kindle) including an access based approach to cloud services.
  • Disrupting enterprise economics involves understanding how digitalization changes how value is assigned, attributed and earned in ways that go beyond normal thoughts about revenue, cost and margins. This appears to be one of the games being played between freemium/service based offers and traditional product purchase offers (i.e.: Google and Microsoft)
  • Performance disruptions created by the way in which digitalized technologies deliver a greater level of value with more effectiveness. While Apple is the obvious example here, viewed from a performance perspective brings another view on their strategies and moves from the recent upgrades to the iPad 3 to investments in PCs and its apps/content ecosystem.
These dimensions provide a way to analyze and assess your strategy, the strategy of competitors and how to think about future moves.

Close readers of business books will recognize that access, economics and performance bear some similarities to Treacy and Wiersema’s Discipline of Market Leaders value disciplines of customer intimacy, operational efficiency and product leadership. There is some relationship, but I believe that digitalization has changed the nature of competition from the single discipline focus to one based on combinations of access, economics and performance that puts together new disruption strategies.
Digitalization and digital technology has transformed the terms of competitive disruption creating new dimensions of access, economics and performance that will define strategic moves, the distribution of value, and future terms of competition.

Latter blog posts will focus on each dimension and as always appreciate your thoughts and observations.

Recent columns by Mark McDonald

Mark McDonald is a group vice president and head of research for Gartner Executive Programs. He is the co-Author of the The Social Organization: how to use social media to tap the collective genius of your customers and employees. He also writes a blog on the Gartner Blog Network.

The opinions expressed herein or statements made in the above column are solely those of the author, and do not necessarily reflect the views of WTN Media, LLC. WTN accepts no legal liability or responsibility for any claims made or opinions expressed herein.

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