By Sander van 't Noordende
Remember the big box that was called a mobile phone about 20 years ago? I waited to join the cell phone club until I bought my first Nokia, which was much more affordable and a lot easier to handle. Then, about 10 years ago, I felt really cool with my HTC smartphone on Windows, and I eventually made the transition to a “Blackberry-style” Samsung. About four years ago, I bought my first iPhone, and I’ve stuck with Apple since. But who knows what the future holds?
Whenever products with more advanced, smarter or faster technology are introduced, consumers are given new opportunities to purchase the things they believe will best serve their needs. As that decision-making process plays out around the world, brands that are caught off guard may find themselves struggling for survival. Every day, it seems, we hear another story about the emergence of a new technology or product powerful enough to disrupt the most vaunted companies – or even an entire industry. At Accenture, we call this “Big Bang Disruption” because of the seismic changes such disruptions bring to their markets. Think of how digital cameras impaled film companies; how Netflix shuttered video stores; how streaming videos have, in turn, challenged Netflix. While these disruptions seem to affect the tech industry above all others, every industry is at risk.
The most interesting thing to me about this phenomenon is how quickly such disruptions can capsize a company or even an industry. In a recently published article in Business Week, author Leonard Fuld notes that the average industry disruption to an industry takes about 25 years, roughly the same amount of time it took Mt. St. Helens to erupt again in 2004 after its famous explosion in 1980. But a 25-year time frame seems luxurious to me. Within 18 months of Google launching its beta app, Google Maps Navigation, the GPS device market lost as much as 85 percent of its market cap. Digital technology gives industry disrupters virtually instant access to critical information that they can use to hone their offerings, modify their business plans and move markets.
With the prospect of future disruptions evolving into Big Bang events, today’s incumbent companies need to sharpen their ability to identify the beginnings of a disruption and determine how to best deal with new competitive threats.
My colleagues Paul Nunes and Larry Downes have an interesting perspective on Big Bang Disruption. Where Clayton Christensen famously termed this disruption as the Innovator’s Dilemma back in 1997, they see it as the Innovator’s Disaster, thanks to the speed and impact of new technology. And they point to three actions that companies need to take in order to remain competitive in a disruptive business environment:
- Find a truth teller: Even though we are all on the lookout for disrupters, it’s easy to dismiss the failures of early versions of new products since it usually takes a long time for a single innovation to become a true breakthrough. To avoid being blindsided by a disrupter, find and seek the counsel of truth tellers – industry experts with profound insights who can predict, earlier than anyone else, when small tremors indicate imminent earthquakes. Often, the best truth tellers are found outside the organization, and business leaders need to find them, carefully consider their unvarnished perspective and take advantage of their expertise – before it’s too late to stave off the effects of the next Big Bang.
- Diversify: When the Big Bang hits, incumbent companies lose market share. The companies that do survive are able to move their expertise, brand and intellectual properties into other industries where change is happening more slowly. However, industry leaders – with their big workforces, fixed assets and long-term partnerships – are often committed to a single business model and one industry perspective, making it extremely difficult to move quickly. So, prepare by diversifying the company’s assets and transforming their operation into a more flexible and easier-to-manage enterprise. Consider that when the film-based photo industry collapsed, it was Kodak – not Fujifilm Corp. – that went bankrupt. Fujifilm had already diversified its business by channeling some of its expertise into new areas, thereby allowing it to stay relevant in an industry that was undergoing dramatic change.
- Make tough decisions: Some incumbents do survive, and in many cases, they emerge in the new version of the industry in a position of greater leverage and profitability. That requires management to be tough-minded and make difficult decisions that may result in an emotional response from stakeholders, especially as the traumatic change may include shedding assets, retiring products and closing out business models. Once the tough decisions are made, business leaders must focus on making the changeover as smooth as possible to ensure that the organization emerges with the ability to capitalize on the company’s core, often intangible assets – including brands, expertise and intellectual capital – and that it’s poised to shift into a new and profitable direction.
Being in touch with the changes that are sure to come, preparing for them and building the capability to responding quickly and effectively will enable big organizations to embrace change and thrive in a new environment.
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BASIL VENITIS
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