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The digital disruption of tobacco. Part 1: all CEOs must learn from this.

by Mark Raskino  |  August 4, 2014  |  1 Comment

My son is currently reading “Being Digital” by Nicholas Negroponte. He’s already impressed by how well it predicted the digital disruption of the media and music industries. But that is now a very old story (the book was published in 1995) and it’s a story mostly limited to things that were always inherently information goods. News is data – bits not atoms. A more recent and  tangible business history example – the disruption to Kodak and the other old chemical photography kings – has already been analysed to death.  Mention it and people’s eyes glaze over. The problem is that old stories of disruption are easily ignored or marginalized. That doesn’t help you get your people alter, thinking and acting.

So If you are trying to understand and explain what the future of digital business disruption might look like for your own industry – where should you look for examples?  There are several good ones, but my current  top recommendation is that you keep a close eye the tobacco industry. It’s an example that is providing a great deal of learning opportunity as it gets disrupted at astonishing speed.

Here are 7 key learning points so far. Over the next few blog posts, I’ll expand each one.

1)  A physical goods industry can be digitally disrupted.
If it can happen to tobacco – it can happen to anything

2) Product digitalization can be hard to believe and easy to deny and ignore.
It’s just an ‘electronic’ cigarette right? So where’s the digital?

3) Digitalization can progress at breakneck speed by sidestepping regulation.
Evading existing regulation, at least for a while, is turning out to be one of the biggest strategic plays in digital business disruptions.

4) Digitalization can kill an existing industry model within a decade.
The growth rate of e-cigarettes is huge; the tobacco cigarette is flat. The forward projection is easily calculated.

5) Disruption can come absolutely anywhere. Adaptability beats prescience.
The e-cigarette arrived suddenly, from China. What matters most is how existing tobacco companies react – not whether they predicted it.

6) Disruption creates great opportunities for incumbents, not just the entrants.
For example, the tobacco companies can use e-cigarettes to reinvent distribution channels, revenue models and customer relationships.

7)  Existing old industry players can end up winning  if they move smart and learn fast.
Book publishers didn’t learn from the iTunes case, so they got ‘Kindled’. The tobacco industry isn’t making the same mistake.







Mark Raskino
VP & Gartner Fellow
15 years at Gartner
30 years IT industry

Mark Raskino is a vice president and Gartner Fellow in the CEO Research group. Mark creates advice and analysis for CEOs on technology related and digital business strategy and change Read Full Bio

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