In an Age of Digital Disruption, how one Company is Staying Ahead of the Game

"What would you do if you are an industry leader and disruptive technology threatens to overturn your business model? Although bearings and seals are in little danger of being displaced in the near future, one company is taking no chances in an age of digital disruption.“For SKF, digital transformation and the Industrial Internet of Things (IIoT) make this time right now arguably the most exciting time in our 100-plus years of history,” John Schmidt, president of SKF USA Inc., said during the SKF Technical Press Day in Philadelphia, PA.The company is not merely integrating digital technologies into its products and services but is taking a forward-looking, strategic approach. “To be successful, legacy companies have to undertake a process called digital transformation. It’s not just an IT initiative but is really about upgrading the strategic thinking,” explained Michael D’Argenio, vice president of digital transformation and customer experience at SKF Americas.Learning from those who went beforeD’Argenio cited the examples of two companies that saw entirely different outcomes in the face of digital disruption. The well-known case is that of Kodak, one of the storied brands in history, whose business was disrupted by the advent of digital photography. Although it invented digital photography, Kodak decided to box it up and put it on the shelf because it was scared of disrupting its business in photographic fim. Instead, it was disastrously disrupted from the outside.Less well known is the case of Encyclopedia Brittanica Inc., publisher of the longest-running English-language, general-knowledge encyclopedia in the world. Sales peaked at 120,000 sets in 1990, plunging to 8,000 sets in 2012. In 20 short years, it saw not one but two massive digital disruptions. The first was in 1993, when Microsoft published the first digital interactive encyclopedia on a CD-ROM, called Encarta, priced at just $99. The second was in 2001, when a communitycurated, free website called Wikipedia launched. Taking the opposite approach from Kodak, Encyclopedia Brittanica looked at its industry, its company and its customers through the lens of the new technologies, made a prediction about the future and, based on that prediction, took a bold move. Having identified its core value proposition as the delivery of reliable, high-value, verifiable knowledge, Encyclopedia Brittanica replanned, restructured and rebuilt its company from the ground up to deliver that same value proposition, only in a different way. It stopped producing the only product that it had known for 244 years and began producing digital products that it sold to educational institutions.“There is a lot to learn from the Encyclopedia Brittanica case,” said D’Argenio. “The company embraced its market change, it embraced its customer change, and it rethought what it needed to do to be successful. Because it owned that disruption internally, it was never disrupted from the outside. It continues to operate today and is as profitable as it has ever been.”"