Deloitte research shows that 32% of the $1.4 trillion Australian economy faces significant disruption in the short term.
Deloitte’s report entitled Digital disruption: Short fuse, big bang? was launched today and warns that mastering digital disruption will be vital to Australia’s prosperity and the living standards of all Australians.
Launching the report Dr Ric Simes, director of Deloitte Access Economics, told journalists “this is not just about technology, this is about business.”
Simes says the changes are large; they are moving through the economy and they are lowering barriers to entry in most industries.
“All parts of the economy are going to be affected quite profoundly. It’s happening quite quickly and it’s being driven by individuals as both consumers and employees.”
The report identifies one-third of Australia’s economy as subject to “a short fuse and a big bang” from digital disruption.
This proportion includes sectors such as financial services, IT retail trade, arts and recreation, professional services, and information, media and telecommunications.
Simes says while these sectors have already changed considerably due to digital technologies, there is plenty more disruption ahead.
Conversely, sectors like mining and manufacturing have relatively low levels of total digital potential and they have already implemented many of the digital innovations available to them.
Combined, these two factors mean Deloitte expects to see less digital disruption in those sectors and so identifies them as “long fuse, smaller bang”.
Simes says many businesses have already started to respond.
“Over the past few years we have seen a wave of IT coming through that began a few years ago when we had smartphones and faster speeds leading to an acceleration in mobile broadband and this big wave of social networking,” he says
“This was embraced by the young and tech savvy to begin with but increasingly embraced by a range of consumer groups.”
Simes says today one-in-five medium to large businesses have their own mobile app and, in a few years, it is going to be one-in-two.
“This is a new way of engaging with a wide consumer base; it’s a revenue stream and increasingly it’s the way businesses are engaging,”
It’s clear that the impact is not going to be even. You have seen in the recent past some major corporate announcements whether it’s in media like Fairfax or retail like Harvey Norman, where digital disruption has come to the fore.
The report warns some businesses will emerge stronger while others will encounter heavier weather.
“The injection of competition rivals what we saw in the 80s and 90s when we had tariffs being removed,” says Simes.
“Barriers to entry are coming right down, barriers to entry into new markets are coming down and barriers to entry into your market are coming down.”
For example, Simes says it is now easier to target groups when marketing whereas in the past mass marketing was the norm.
“Going forward you can be a lot more specific about how you target certain segments,” he says.
To be a “digital survivor”, Deloitte identifies three broad responses: recalibrating cost structures; replenishing revenue streams; and reshaping corporate strategies.
“Look at your cost structure compared to that of your new digital competitor; get more competitive by streamlining supply chain or save on people costs by automating training and recruitment,” says Sime.
“There are new risks in the digital landscape but the risk of inaction could be even greater.”