Making sense of digital disruption using a conceptual two-order model

The ability of digital technology to substantially alter how organisations operate has been amply evidenced over the past several decades. Digitisation is now moving beyond improving how organisations work, to challenging why organisations exist and what fundamental value they provide. This phenomenon of “digital disruption” is accelerating and becoming a real threat facing most organisations, forcing business leaders to gain a critical understanding of digital disruption to ensure organisational survival. This paper reviews some of the characteristics of digital disruption. Listing existing barriers to exit and entry and recent industrial disruptions, we determine that low complexity industries with low levels of digitisation are likely to be the initial targets for disruption. In addition, digital disruption can be categorised into stages where initial sustaining productivity gains are subsequently undermined by continued digitisation that destabilises the pre-existing value proposition and thereby establishes a new product or service. These we term as fi rst-order and second-order disruptions. The paper concludes with a proposed model to assess digital disruptions, and while conceding that digital disruption is a disaggregated force with no clear unifying theory currently available, we build on existing business planning theories and tools to provide additional insights into potentially destabilising disruptions.