Performance, one of the dimensions of digital disruption

Digital technologies are opening new avenues for companies to disrupt competitors and markets. The prior post outlined three dimensions of disruption: access, enterprise economics and performance. This post focused on performance as a dimension of digital disruption.

Performance can be defined along a range of dimensions from price/performance, or technical measures, to operational and financial metrics among others. Performance is relative as specific measures are often tailored to a specific product, service or industry. For example, in automobiles performance is measured by MPG, safety, 0 – 6 mph time, etc. In technology its processor speed, storage capacity, communication speed, weight, power requirements, etc. Organizations define performance in ways that support their brand or self image.

Performance disruptions include concepts such as price/performance or value. This type of performance disruption is an important part of Clayton Christensen’s disruptive innovation as new entrants establish themselves at a low end and disruptively evolve toward the top of the market.

Outperforming the competition, regardless of price is another basis for disruption. In this case, performance can be thought of as …

Performance is the degree to which the organization exceeds customer needs. Performance disrupting firms have one goal to be the best and the belief that the rest will take care of itself. These firms seek customer premium with the intent of being the most profitable rather than the most market share. As one CEO said “what good is it to be the biggest, if you are not making the most money.”

Performance comes from the innate properties of its components and the emergent properties created from component interactions. Innovators disrupt markets by delivering better performance by changing the components and their combination. The new class of mirror-less SLR cameras or automated parking assist features coming out in new automobiles are examples.

Digitalization creates new levels of performance by extending the ability and capacity of products and services to deliver more against customer needs. The notion of being digital and the value of replacing physical assets is well understood. However, new properties and combinations are enabling digital disruption to go beyond traditional notions of electronic or digital commerce.

Digital technology is expanding the potential performance profile for products and services. Besides mobile, social, analytics, big data and the other technologies related to the Internet of things. New combinations of information, interaction, and context are expanding the range of digital value. At the same time advances in material sciences are giving products, facilities and equipment new physical and information-based properties. Digital signage, 3D printing, touch sensitivity are just a few advances in material sciences that create performance based disruption opportunities.

Behavioral science is another area where technology is making new levels of performance addressable. This is transforming the notion of a customer experience, customer control and context. Value comes not just from knowing how to get things done – the right way to use the tool – but increasingly from your ability to adapt and apply what you have to meet your needs at the right place, the right point in time and to the right level of performance.

Creating a performance-based disruption can define customer and market expectations. The reward for disruption is nothing less than an asymmetric share of profits and market clout. Apple’s use of performance as a means of disrupting markets is often used, but cannot be under-estimated. Consider that Digitaltrends reported that 30% of people purchasing an iPhone 4S surrendered their iPhone 4’s paying the early termination fee. That is an example of a performance premium

Performance represents one of the three dimensions of digital disruption. New digital technologies expand the performance potential of products and services with new physical, informational and digital properties and combinations. This establishes a new basis for disrupting markets and incumbents – sheer performance. Firms like BMW, Porsche, Nordstrom, Nike, and Apple among others are pursuing performance based strategies.

Digital technologies are creating new forms of disruption discussed in this and the prior posts below. What are you seeing? Will digital strategies mimic their Internet and analog predecessors? If not, then what is emerging?

Look for this space for additional posts on digitalizing business.

Recent columns by Mark McDonald

• Digitalization creates new dimensions for disruption
• Access, one of the dimensions of digital disruption
• A week and counting with the iPad 3
• Lightweight technologies create an Incumbents’ Dilemma for CIOs