How to Disrupt Your Own Business: 5 Key Principles of Reinvention
Ann-Kristin Mackensen from Forward31 by Porsche Digital explains five key principles of reinvention in the business world.
The automotive industry has been disrupted multiple times. Today, we witness a shift from product to service offerings: automakers are evolving from being car manufacturers only to mobility providers as well. The industry is driven by four ACES trends — autonomous driving, connected cars, electrified vehicles, and smart mobility. A study by McKinsey estimates that securing a strong position across all four areas would cost an individual OEM up to $70 billion through 2030. That’s why partnerships, investments, and the development of new products, even beyond mobility, become crucial to stay successful.
Is disruption the key to success?
We have to ask ourselves: Is the disruption of core businesses the key to success? At least the aspects mentioned above indicate that disruption is unavoidable. The more important question, though, is how to foster a culture of reinvention?
Forward31, is one way to face this challenge. As the new company builder by Porsche Digital, we explore strategic opportunities beyond the core business. We focus on new business models. In doing so, we build and subsequently spin-off new ventures with keen entrepreneurs to ensure a fast go-to-market and scaling potential. If you want to get a better idea of Forward31, I recommend reading a blog post by my colleague and our Head of Company Building Christian.
Thinking about developing new business models leads me to 5 key principles of reinvention that I’d like to present to you, accompanied by some digital examples:
1. Go back to Square one
In the innovation process, it’s normal to look into new markets and product ideas with a mind full of technical and business expertise. This, however, will automatically bias the outcome of innovations because we don’t approach the world with a fresh mind and minimal judgment. To prevent distortion, we need to use the beginner’s mind and leave the corporate mindset behind — to think in opportunities, not in challenges. The concept of the beginner’s mind is originally from Zen Buddhism and refers to having an attitude of openness, eagerness, and a lack of preconceptions when studying a subject. Indeed, developing new products is similar to studying the subject. Thinking and developing with a beginner’s mind will keep you closer to data, to your users, and ultimately to better decision making in your product roadmap.
2. Attack to protect
In 1975, Kodak decided to not invest in digital cameras because they were afraid it would harm their film business. They decided to protect their existing business rather than invest in new innovations. In 2012, the year when Kodak announced its insolvency, a start-up called Instagram was bought for 760 million Euro by Facebook. Today, Instagram offers a photo-filter that makes your photo look like an old Kodak picture. This example shows well that companies have to make risky investments and pursue innovation in order to protect their core business in the long-term. They have to anticipate and encourage re-invention and disruption, or they get disrupted themselves.
3. Never rest
Facebook, Instagram and YouTube have an immense user base delivering strong entry barriers for new companies in social media. The China-based company ByteDance, however, challenged these barriers and launched a new social media app in 2016. TikTok is a short-form, video-sharing app. The founder understood that users have less time and demand fast consumable content. The app had an immense growth with more than 800 million estimated active users worldwide and the most downloads in the App Store in 2018.
TikTok is more a combination of social media channels, but it is disrupting the marketing business in China. Chinese companies adapt their marketing campaigns to TikTok and companies in the EU and USA will follow. TikTok became a global player and a serious competitor to current tech giants. This example shows that we should never overestimate the value of our product because the possibility of new players outperforming us is always there.
4. Keep it simple
Already Albert Einstein said: “Everything should be made as simple as possible, but not simpler”
Let’s switch from Einstein to Tinder — an app that has totally disrupted the online dating market. In the 60ies, two young Harvard students created the first computer-based matchmaking service in the U.S., with a survey of 75 questions for love-hungry applicants to fill out. Afterwards, the singles would receive a list of computer-generated matches in return. A pragmatic approach, but it was time-consuming and complex.
Today, Tinder offers a matchmaking service that relies mainly on just a few pictures, the name and age of a person. One can swipe left or right, yes or no. It’s that easy. The app can be used everywhere and anytime. The founders understood that customers don’t want complexity and time-consuming products but rather usability and simplicity of a product.
5. Churn, baby, churn
Constant adaption to market and customer needs and even disruption of the own business model is crucial to stay competitive. Netflix and Airbnb are perfect examples of successful adaption. But let’s rather talk about trash cans.
Bigbelly, a company with a fleet of smart trash cans, completely changed how cities and citizens manage their waste collection with their adapted product. The founder, Jim Poss, was fed up with overflowing trash and idle trucks burning billions. His response is a solar-powered trash compactor with five times the carrying capacity than traditional trash cans. Each trash can has a sensor, which is tracking the filling status so that the recycle management operates only on demand — this saves time and costs. All trash cans worldwide are connected in a smart grid to see where stations have to be installed across public spaces. Trash cans are not the most attractive business, but this example underscores how important constant adaption and innovation are to meet today’s customer needs.
Let’s summarize the outcome of the upper examples:
- Use the beginner’s mind,
- Tackle innovation in order to protect your core business,
- Never underestimate new players
- Focus on usability and simplicity of your product
- And last but not least even consider disrupting your own business model.
Incorporating these five key principles in our personal day-to-day business activities is a good start to foster reinvention. At Forward 31, we are living these principles, exploring strategic opportunities beyond our core business to contribute to success.
Ann-Kristin Mackensen works for Forward31, the company builder by Porsche Digital.
About this publication: Where innovation meets tradition. There’s more to Porsche than sports cars — we’re tackling new challenges, develop digital products and think digital with a focus on the customer. On our Medium blog, we tell these stories. It’s about our #nextvisions, smart technologies and the people that drive our digital journey.