There appears to be a business revolution going on. Traditional businesses that have been the staple of competitive markets are being overtaken by new business models that break all the rules. The key? Disruption!
Your business could fall into one of three categories: 1) You are a disrupter; 2) Your business or market is being disrupted; 3) The status quo is being maintained.
Let’s start by understanding what disruption is.
Disruption is an approach to business that analyses what is going on in a particular market or niche. It then sets about changing something fundamental that impacts the status quo. That something could be the way the business is funded, a change in the distribution model, the fusing together of different businesses or models, or something else yet to be thought of. The point is that whatever disrupts the status quo may be harmful to traditional business. And you either have to (eventually) be a disrupter or be prepared to be disrupted.
The Status Quo
I remember (at the age of 17) being told that a technical apprenticeship with British Telecom would lead to a job for life. Security, good training, great pension, and lots of opportunities to progress. Five years later I left, took a pay cut, and moved to Ericsson, where I spent the next sixteen years (although, I never spent more than a couple of years in any one position as I zig-zagged up the organisation to reach director level positions in United Kingdom and Sweden, managing international commercial and business development teams).
The simple fact is that you can’t stand still. You just need to keep moving. Because if you don’t you will get “Netflixed” or “Uber’d” eventually. Moving targets are harder to hit. If you don’t keep moving, innovating, iterating, disrupting, then someone is going to come along and change the rules of the game you’re playing and you’ll be putting the pieces back in the box. You’ll have seen it happen over and over if you think about it. Netflix Vs. Blockbuster… Uber Vs. Taxi Companies… Airbnb Vs. Hotel chains… Social Media Vs. Newspapers.
If your business is suffering, if sales are declining, if you can’t compete on a level playing field, then the chances are that some smart cookie has worked out a way to disrupt your business. You have two choices. Become a disrupter (in which case you need refer to point 3 below) or consider getting a proper job working for a business that is in pole position when it comes to innovation and business design. Go ahead, there are loads to choose from.
Being a disrupter
Being a disrupter means making a conscious decision to change the rules of the game you are playing. It means understanding the business model of your own business and that of your competitors and identifying ways of creating competitive advantage by changing certain parameters within the processes, product or people that are core to your business. Perhaps you change the way you develop your products or services to be first to market with value adding features. Or it could be that your distribution model delivers the same product at a lower price in shorter period of time. It could even be that you find a way to undermine the competition by merging two or more business models to dramatically increase customer value.
According to Clayton M. Christensen , Michael E. Raynor and Rory McDonald (Harvard Business Review: December 2015) disruptive innovations are made possible because they get started in two types of markets that incumbents overlook. Low-end footholds exist because incumbents typically try to provide their most profitable and demanding customers with ever-improving products and services, and they pay less attention to less-demanding customers. In fact, incumbents’ offerings often overshoot the performance requirements of the latter. This opens the door to a disrupter focused (at first) on providing those low-end customers with a “good enough” product.
Take Amazon, for example. Jeff Bezos’ initial decision was to take the traditional business model of bookshops and disrupt it in such a way so as to cause a decline in traditional bookselling. People might complain about the demise of the bricks & mortar bookseller, but Bezos has caused so much disruption that thousands of bookshops around the world have been forced to close. There’s a new way of buying books. He then applied the same principles to DVDs, music, and other volume products. The simple fact is that he found a new way of selling and delivering consumer goods – more cheaper, more quickly, more efficiently. The real secret is that Amazon has built a warehousing and logistics network that now serves other retailers, wholsesalers, manufacturers and dropshippers.
And the Amazon effect happens in all types of markets, be it consumer or B2B. You might think you’ve got a great business model, but it’s only a matter of time before someone comes along and disrupts it.
So what are you going to do?