Analyzing Your Risk of Disruptive Digital Innovation

Any attempt to demystify how disruptive innovation works is a welcome addition to any strategist’s toolkit. McKinsey offers a useful road map for potential digital disruptions with some smart questions that can help associations anticipate risk and create new value for members.

McKinsey proposes a 2x2 matrix to explore the fundamentals of supply, demand and market dynamics to clarify the sources of disruption. Digital technology changes the demand side by providing consumers with more complete information and access to unbundled products and services. On the supply side, businesses can expose new sources of supply that were previously impossible or too costly to acquire.

As association membership is almost always a discretionary purchasing decision, associations need to pay close attention to demand. Here are four good questions McKinsey proposes to reveal demand-side vulnerabilities:

  • Your customers have to cross-subsidize other customers.
  • Your customers have to buy the whole thing for the one bit they want.
  • Your customers can’t get what they want where and when they want it.
  • Your customers get a user experience that doesn’t match global best practice.

Ouch. That pretty much describes the typical association member experience.  Or as McKinsey sums up: “people are growing accustomed to having their needs fulfilled at places of their own choosing, on their own schedules, and often gratis. Can’t match that? There’s a good chance another company will figure out how.”

At the extreme side of supply and demand, businesses are creating new value propositions, using hyperscale platforms to compete, and reimagining business systems. Much of this builds off the increasing ability to capitalize on hyperconnectivity, a topic this blog has also explored. McKinsey says, “These factors indicate opportunities for improving the connectivity of physical devices, layering social media on top of products and services, and extending those products and services through digital features, digital or automated distribution approaches, and new delivery and distribution models."

It’s hard to say how powerful this McKinsey strategy tool really is without applying it to the programs, services and business models of specific associations. The business examples cited are persuasive. If nothing else, this tool and the related questions can put association decision makers on notice that disruptive innovation could happen here—either to your association or by your association.