This is Part 1 of a series, "How to Navigate in the Era of Disruptive Change."
You are the chief sentinel
As a company leader, one of your most critical jobs is to constantly scan the horizon for the threats, challenges or opportunities heading your way and to guide your organization towards appropriate action. As one industry after another experiences various degrees of disruption (e.g., Netflix disrupted Blockbuster; Uber disrupted taxis; Babble and Duolingo disrupted Rosetta Stone). You have to be vigilant about identifying the disruptors in your own environment, predicting the timing of the disruption (there is a big difference between one, five and ten years) and adjusting your strategy to deal with them.
Eyewitnesses to the deadliest tsunami on record recall the morning of December 26, 2004. The weather was beautiful and the Indian Ocean was calm, with no evidence of the deadly surge heading their way. By the time they saw the wave, it was too late to escape. In business, too, an organization might be enjoying great success and steady growth, blissfully unaware of a wave of disruption gaining strength and barreling towards it. Change can come seemingly overnight, but hindsight almost always reveals warning signs that were not heeded.
Success can be a sedative
Rosabeth Moss Kanter, in her excellent book When Giants Learn to Dance, told of corporate giants like IBM who, after long periods of success and growth, had to change or face dire consequences. They had to learn to dance to new music played at a new pace with a new rhythm. Their need to change had been decades in the making, but today, that rate has rapidly accelerated until it’s now just two to three years or less in many industries. In “Reinvent Your Business Before It’s Too Late,” Paul Nunes and Tim Breene urge business leaders to build regular reassessment of their operating model into their strategic planning. Always be open to jumping “from the maturity stage of one business to the growth stage of the next. [This is] what separates high performers from those whose time at the top is all too brief. . . . Ultimately, strategy is a way of thinking, not a procedural exercise.”
Don’t let current success lull you into thinking you don’t need to embrace change. There are companies that have actually recognized a disruption on the horizon, but underestimated the potential impact on their company and miscalculated how fast it might happen. They were blind, overconfident or in denial right up until the critical mass happened.
Denial is not a viable business strategy.
Why change and disruption are inevitable
The Innovator’s Dilemma, published in 1997, is perhaps the most important book of the last 25 years in business management. Clay Christensen was the first to attempt to quantify and predict the process of disruption, and he made the compelling case that disruption will continue to happen and will apply to every single business in every single industry. If this was true when he wrote his book, it is much more so now. The acceleration of disruptive change will continue, driven mostly by dramatic advancements in automation, machine learning, and artificial intelligence (AI). Any repeatable process will be automated. Even physicians will see their roles change as AI and DNA analysis yield increasingly accurate diagnoses.
Another driver of this acceleration of disruptive change is globalization. Good ideas just fly. The internet has eliminated barriers and the historical delay in the dissemination of information. Visionaries get the ball rolling and bright minds expand, elaborate, and fine-tune their concepts with imaginative variations. This is happening at warp speed.
Beware of marketing myopia
Theodore Levitt, in 1960, coined the term “marketing myopia” to refer to the mindset of those who viewed marketing as merely a tool for selling products rather than satisfying consumer needs. The railroads famously declined because they clung to the notion they were in the railroad business when they were really in the transportation business. If you believe Tesla is just a car company, you don’t get it—it’s really an alternative energy company and the car is just the first of many applications of its core competence. Tesla has been a non-myopic company responsible for a series of innovations and disruptions.
Make sure to get regular vision check-ups.
What happens when you miss opportunities?
Even when disruptive sources are identified, older companies often fail to appreciate how quickly or powerfully they will be disrupted. Because of this, they may miss opportunities that could have changed the trajectory of their decline.
Many years ago, Motorola took a look at Android and could have done a disruptive partnership with Google. But the Razr was their pinnacle in hardware design and they didn’t appreciate the paradigm shift towards software’s critical importance in the user experience. Years later, software had become king. Google later ended up buying Motorola Mobility to protect the Android ecosystem (Kunur Patel and Edmund Lee), and later sold it to Lenovo (Roger Cheng).
Another classic example of a missed opportunity was when Blockbuster turned down the opportunity to buy Netflix. Their most profitable income was late fees, so they focused on a geography-based model and didn’t appreciate the online threat.
Exxon’s early research and innovation in developing alternative energy technology were met with resistance. As Neela Banjaree stated in her 2016 article, “A rising generation of top management wanted Exxon to return to its core oil and gas business, rather than fashion itself into a comprehensive energy company. Exxon sold its licenses for the battery division’s work and dismantled the electric drive team that built the hybrid Cressida.” When Toyota’s Prius was launched 16 years later, it was equipped with technology originally developed at Exxon.
Too often, experts on the old model disregard the new model . . . at their peril.
Business leaders should all become "intrapreneurs"
I am an intrapreneur—someone who operates effectively inside an organization with an entrepreneur’s mindset. In my years of work on innovative business development, I’ve learned that when you’re trying to drive change, you must ask yourself two questions:
- Can we drive innovation from within? This requires respect for the creative process and a culture that invites new ideas and supports “failing forward.” I’ll talk more about the importance of culture in future articles. Never be afraid to disrupt yourself. Amazon is a great example: they’ve created a habit around innovation and new product creation.
- Can we bring ideas in from without? When Microsoft was developing SharePoint, they had to look outside for a technology leader in content management. They added this expertise to heir portfolio, through acquisition and SharePoint became the next billion dollar play for Microsoft. When Mint threatened to upend Intuit's flagship product Quicken (Annual software license model), they put their customers’ experience first and bought Mint (Adverting-supported model). You should be asking yourself, “What is my company’s Mint?” Would you be bold enough to “buy your Mint” before it’s too late? Note: Intuit recently divested Quicken to focus on Mint and are looking to disrupt themselves again in the Tax category.
To survive and thrive today, our companies need to be agile and move quickly. There is a wave of change coming, and companies need to become good at reinventing themselves. Yes, it’s challenging and sometimes daunting, but disruptive change is not just a mysterious business bogie-man. As Christensen articulated so well, it is something we can identify, analyze, and manage.
