Don’t be an animal in business

Don’t be an animal in business

by Marc Dowd, April 29, 2015

Mammals were lucky.  There was a natural disruption at the end of the Cretaceous period, 66 million years ago, which is widely thought to have brought with it a mass extinction that killed off over half the species on the planet. The ones that survived flourished.

Boo for the dinosaurs; yay for us!

In businesses you won’t need to wait anything like that long for cataclysmic disruption. As of 2014, only 61 of the original Fortune 500 companies are still influential enough to be on the list. These are huge organizations with enormous resources and skill.

So what went wrong? What went wrong is that we live in a truly disruptive age.

We are not animals, of course, so businesses evolve differently in that the disruption is caused by the businesses’ participants.  This means that the people in these companies were to blame (at least partially) for their own disruption.

So why don’t companies manage the disruption that happens around them?

One school of thought is that they don’t notice it coming, or are in denial. They dismiss potential disruptors because they are so focused on perfecting their own products and business models. Kodak were offered a digital camera back in 1975. They turned it down because they were busy focused on perfecting the photographic process that digital cameras were destined to destroy. Thus started their decline towards bankruptcy protection in 2012.

Henry Ford famously fired his son-in-law for pointing out that the business model for cars had been disrupted. Cars had been “repositioned the philosophy that the car “takes you there, and it brings you back” was no longer enough.   Alfred P. Sloan Jr. had disrupted the Ford business model, in which the price was intentionally reduced from $850 to $250, leaving only $2 per unit, by changing the business model to capitalise on the intangible “augmented value” of colour and status.

Of course some industries do indeed see disruption coming but don’t know what to do about it. Often management is set up to maximise profit from the current competitive advantage it enjoys, and has little or no understanding that competitive advantage is now transient. Taxi firms the world over are being disrupted – I’d bet that most of them are not yet considering new business models.

Managing disruption is all about understanding that today, more than ever, you need to be disrupting yourself and your own company in order to survive.

Some companies do get it, of course. I have worked with companies large and small which know that their competitive advantage is running out. They need to learn a slew of new skills in order to survive but that of itself is not the hard part. It’s all about the mind-set.

Managing disruption is about changing the mind-set, up and down the organization. Having a “Know Your Customer” program in place is not going to cut it. Developing a Customer Experience Program that mirrors the needs of your customer today is better, but will fail tomorrow: undoubtedly, their needs are going to change. Would it not be better to be offering them a different experience with a different value, than struggling to incrementally improve the interactions of today? This results in disruption… and makes you into a disruptor not only to yourself but potentially to your industry as well!

It is all about mind set; even companies and industries that have themselves been disrupted are nevertheless all too willing to hope that the worst is over. A good model of a disruption process is one proposed by Steven Sinofsky, a former Microsoft President and Andreeson Horowitz board partner and investor.

It can be applied to different industries which have already been disrupted, such as publishing and music. The trick is to foster the mind set to think your way through the four stages of disruption and come up with Convergence and Reimagination, right now! Don’t get lazy and bury your head in the sand;  rather, get out and re-imagine an entire category like  Lars Rasmussen Leaving Facebook To Co-Found A Music Startup is going to do.

Think of the launch of the Apple Watch last week. Between that and other Smart watches we may have a disruptive innovation. Already we are seeing innovation  rapidly occurring along this new trajectory: think of a disruptor to payments.

We have not seen the new business models or innovative competitive advantages afforded by this platform play themselves out as yet, but they are not too hard to imagine. What everyone is expecting is that Apple have reinvented the entire watch category. And I don’t mean making a smart watch a fashion item.

So why Apple (originally a computer manufacturer)… and not you? Because they have done it before with the iTunes platform which transformed the music industry?

They also did with the iPhone platform that arguably killed Nokia? Actually this makes it harder in some ways; it is really tough to disrupt when you are already successful.

I think being a disruptor is a mind-set well ingrained in their people. As an Apple employee would I be concerned about rumours of an Apple car? I doubt it – I believe Apple employees have confidence in the ability of the company to disrupt.

Now think about the people in your company. Do they see your company as lasting without significant change for the foreseeable future? Will they resist internal change despite the fact that disruption, done badly or from outside, will probably harm them? Are you even searching for new competitive advantage before your existing one is whittled away?

Do you know who is going to eat your lunch?

I believe that there is something that you can do to ensure your survival, and that of your company. You may need to re-invent or re-imagine your future but this is not crystal ball gazing stuff – there is a process to it. The fundamental elements of disruptive change are well understood technologies. Their impact can be estimated. Options can be secured. Business models can be evaluated. Competition can be assessed.

Disruption can be managed – I just suggest you start now.

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