Preparing for disruption
In the business world, the term “disruption” is frequently used when referring to companies like Uber that upended the way consumers hail cabs, or even Airbnb that is presenting a sharp kick in the shin for staid hotel chains. Contrary to popular opinion, industry disruption does not happen overnight; it is a gradual and insidious process—one that companies are increasingly learning to strategize around.
It’s important to remember that disruption offers efficiencies—along with a new, profitable business model—over time. In the manufacturing industry, for example, technologies such as artificial intelligence and the Internet of Things (IoT) are powering advances in robotics and delivering enormous efficiencies at scale. Manufacturing companies, like Samsung, understand how to leverage these technologies to gain a leg up over the competition while keeping an eye on additional disruptions on the horizon.
Today’s globalized corporate world, connected by digital networks, means disruption can come from anywhere. The key for executives to recognize is that disruption is an unavoidable part of doing business. No industry or company is truly disruption-proof. Instead, there are steps that companies can follow—and CEOs can lead the charge on this—so that disruptions don’t shear the business completely off course.
Understand that it’s not just about the technology.
Too often, CEOs and companies focus wide-eyed on the wonders that cutting-edge technologies can deliver, but technologies alone are rarely disruptive; it’s more about how they are deployed. Process, whereby the technology is coupled with a reboot of the business delivery model, is what might make the new kid on the block potentially disruptive.
Smart manufacturing, for example, becomes an especially potent disruptor when coupled with processes, such as supply chain management, which have been in place for decades. Internet-enabled devices support predictive machine maintenance and data-powered engineering that compresses the life cycles of product design and manufacturing so companies can be more nimble and react to market demand changes much faster.
How do you spot and take advantage of disruption? In his recent book “Unlocking the Customer Value Chain: How Decoupling Drives Consumer Disruption”, Harvard Business School professor Thales S. Teixeira posits that disruption is not driven by technology but by evolving customer needs and behaviors. The good news is that any company tuned to their customers should be able to detect these changes and adapt accordingly. Frequently incumbents are beaten in this race by startups better able to detect and rapidly serve emerging trends; indeed, change first happens in small increments, or in micro-segment. As William Gibson famously said, “The future is already here; it’s just not evenly distributed”. Such emerging changes can be overlooked by large incumbents focused on operating at scale in large markets.
Make room for innovation.
Companies that constantly rethink their own processes and make room for innovation are less likely to veer off course in the face of disruption. CEOs that encourage creative, out-of-the-box thinking—and let these values percolate into the company’s ecosystem—will nurture the kind of workforce that absorbs disruptions better. Who does not want to innovate?
The challenge is: how do you simultaneously scan your consumer and competitive landscape to identify disruption and operate the core business that delivers the business results you need to invest in the first place? To solve this quandary, our colleagues from Innosight, Scott D. Anthony, Clark G. Gilbert, and Mark W. Johnson developed an approach they call “dual transformation”, explained in their book by the same title. They advise companies that are eager to address or leverage disruption to lead a double transformation: one to reposition their traditional core organization, and one to launch and nurture a new team dedicated to embracing and leveraging the disruptive wave that would otherwise endanger their entire organization.
Anthony, Gilbert, and Johnson are clear-eyed about the challenges and tensions that come from a business strategy that embraces disruption and innovation. Leading two largely distinct groups under the same roof is hard, especially when they compete for resources and leadership attention.
Align your people strategy with your business strategy.
How do you simultaneously detect and embrace disruption while protecting your core business? As our SVP of Product and one of the leading minds in talent optimization, Matt Poepsel, puts it, “All business problems are essentially people problems.” It makes logical sense that you need different types of people to actively pursue innovation on one side, and to operate your core business as efficiently as possible on the other side.
“All business problems are essentially people problems.” – Matt Poepsel, leader in talent optimization
If you can be explicit about your business strategy, especially when you simultaneously pursue radical innovation and operate your core business, then you can hire and inspire the types of people best suited for each objective. “Best suited” does not mean having the right expertise and experience, for these are table stakes. Best suited means finding employees who are exhibiting behaviors naturally suited for the task at hand; people who will spontaneously adapt to and support the unique strategy each part of your business is pursuing. On the innovation side, you want risk-takers, those who are eager to experiment, able to develop and follow a long-term vision, and can inspire others to follow it. On the core side, you want people passionate about efficiency and results, who are laser-focused on extracting every ounce of value from repeatable processes and scalable systems.
More broadly, you need a different design of your organization to be successful on both sides. By “design” we mean a different organization structure, different leadership teams, different cultures, and different dynamics within teams. The common factor to these design elements is that they should all align with the business strategy of their respective units. For example, the leadership should be naturally suited, from a behavioral standpoint, with their strategic intent. Not everyone, even among senior executives, can transform into a risk-taking innovator if they have built their career in an environment that valued their attention to quality and reliability, attentive risk management, and pursuit of efficiencies.
Adopt the position of continual disruption.
When Netflix first got its start, it was simply a DVD mailing service which is why Blockbuster did not flinch much (Netflix’ name should have alerted them, though). After all, instant gratification is a real thing. But Netflix did not rest there. When Internet streaming became a reality, Netflix hopped on board, undercutting that instant gratification model and acquiring a significant chunk of Blockbuster’s customers. Netflix continues to innovate, disrupting its own ways of doing business. CEOs and companies can learn an important lesson here: your business model should be malleable enough to course correct and adopt new pathways to growth.
Today’s fast-paced ways of doing business demand C-Suite leadership that is visionary, forward-thinking, and understands the tradeoffs and risks of being early adopters of new technologies. While it’s impossible for any company to be totally disruption-proof, quality leadership can make the difference between a business being completely railroaded by disruption or one can take it in stride and grow as a result. In the face of disruption, the difference between success (becoming the disrupter yourself) and failure (being disrupted and unable to respond) comes down to two factors: self-awareness and the willingness to grow—both as individuals and as organizations. Leaders recognize that their talent strategy needs to align with their business strategy. Both strategies must be intentional, both can and should evolve nimbly over time based on circumstances, and their alignment is what ensures that leaders can deliver business results that express the full potential of their organization.