Disruption: How to spot it in time
The competition game between traditional companies is fierce but fair. Each player respects the others. Sometimes you win the battle, sometimes you lose it, just like in a chess game. Then suddenly, a new player enters the game. Quite young, acting a bit like a rascal. He usually improvises and works out problems on the fly, but with his own way of playing he wins the game easily, leaving the other players dumbfounded. Had the other guys not noticed anything the whole time?
Actually not. A major feature of disruption is that it is very easy to explain afterwards, hindsight is 20/20. Still, the million dollar question remains: can you see disruption coming in advance?
Traditional way of determining competitive power isn’t adequate anymore
Companies have their ways of determining their competitive position. Sales reports, benchmarking, competitive analyses, you name it. Consult the strategy books of Porter and you will come across all kinds of beautiful models which map the area, markets and the own competitive power. Based on these kind of analyses companies acquires the latest technology and the R&D-department keeps on patenting freely. There doesn’t seem to be a problem…does there?
The power of disruptors lies precisely in the fact that they compete in a completely different way. Ways that are not explicitly captured by Porter’s models. Before you even know, disruptors are too advanced to keep in pace with, let alone be overtaken.
How do you make sure that you get track of the disruptor in time? Below are 5 tips that may help you!
1. Keep an eye on atypical investments
Converging markets become the rule rather than the exception. By smartly combining technology with other sectors suddenly new solutions arise. Combine the construction industry with Internet of Things, and all of a sudden smart houses arise. Combine Artificial Intelligence with sensor-technology and Robotics, and you get autonomous cars. Combine machine learning with data, and suddenly insurances become algorithms.
Some companies are far ahead with this. So think of logical explanations for investments. Why does Samsung invest in the pharmaceutical industry? Why does Apple invest in ride-hailing via Didi? And Google in smart homes via Nest? And Facebook in 5G? You will find the real story beyond the publications. Even if it looks as if a market isn’t the disruptor’s business, take him seriously.
2. Monitor Startup funds
Large venture capitalists such as KPCB and UPS want to realise high returns through investments in high-potential startups. To achieve this, they do not look at the existing markets, but at potential markets instead. This is the perfect way to look into the future, they are always ahead. Go and look for the next disruptor.
To get to know the Next Big Thing, look at where their money flows towards. Check their portfolio and how the startups threaten your industry with it. Is a lot of investment money flowing towards your industry? That should be your wake-up call.
3. Search for companies that are solving the same problem
Stop defining competition based on the product category in which you operate. Start defining your competitors based on the problem you are solving. For example, in the Netherlands, if you look at Albert Heijn from the product category or market perspective, you probably end up with Jumbo, Plus, Lidl and Aldi as main competitors. If you observe it from the solution that they are solving, you end up with quite another set of competitors like Marley Spoon and HelloFresh. Although startups like HelloFresh are not supermarkets, they are competitors, as they are solving the exact same problem (daily nutrition), in a totally new way.
4. Look whether the market longs for a disruptor
A few years ago the Millennial Disruption Index was published. It contained a significant quote on the relation between Millennials and banks: “I’d rather go to the dentist than to the bank”. Perhaps your relation with your customer is not that bad, but ask yourself a question: are your customers actually still happy with you, or are they sticking with your product due to a lack of better ones? And don´t compare yourself with your current competitors, but with best-in-class digital disruptors. So ask them:
If Google/Uber/Amazon would offer you “our” services, would you switch to them?
Once your customers are ready for a better solution for their problem, opportunities arise for the entry of a disruptor.
5. Do not underestimate ‘simple and cheap’
Good is enough. People are willing to settle for less, as long as it is simple and cheap. This is the result of new lifestyles, which have changed customer expectations and created new technological ecosystems. When was the last time you read a printed encyclopedia? Probably a week before you discovered Wikipedia...
The basis of the disruption principle, as defines by Clayton Christensen, is the following: the fact that companies keep innovating in order to offer their customers a better solution, creates a chance for new entrants that just provide the basic need in a very cheap way. What do you think of discounters like Lidl, Aldi and Action? Simple and cheap offers opportunities for disruptors.
In rapidly changing markets, looking aside is more important than looking ahead!
Strategic planning in an era of disruption is not only about looking ahead of you. It is mainly about looking around you. Not once a year, but constantly. And not in your close surroundings, but in a far away area you´ve never visited even. Actively search for disruptors. Learn from them. Work with them. Make yourself a part of their way of thinking. Try to disrupt yourself from the way of thinking of a startup rather than just filling out the Porter models. You might be surprised. Better now than later!
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