A checklist: who is ripe for disruption?
This is something that’s been rattling round my brain. Not complete – but it follows on from some of the work in my book, and might form part of my possible new project.
What’s a given here is that a disruption has happened – ie a shift in technology or regulation has enabled a new way for their market to be served. The question is – will company X be able to deal with it as opposed to company Y.
Your thoughts very welcome…
1. The core of the business [ie 80% or more of profit] comes from a single, high-margin product
This makes decision making incredibly difficult. Any decision to disrupt yourself is potentially an all or nothing gamble. Any disruptive play here will cause enormous ‘cannibalisation anxiety’. Combined with a ‘Killer P’s’ culture [see point 6], it will take years before there is any decisive action.
2. The history of innovations brought to market is always within a very narrow band – designed to sustain the core.
This is the crucial qualifier to number one. All ‘innovation brought to market’ is essentially done to make the core product grow and/or operate more efficiently. There may be lots of smart R&D happening within the business, but there is no real focus on discovering the next big business [this relates to Clayton Christensen's terminology of 'sustaining' technology vs disruptive'] . Amazon, Google, Apple are all proving to be masters of this kind of inbuilt renewal.
3. The market they operate in is fiercely competitive – there is a constant fight for share
Newspapers, music retailers, book publishers etc are all used to operating in a market with a lot of businesses that are essentially clones of each other [in terms of overall cost and revenue structure]. This is what ‘competition’ means to them. It is a world away from the sort of asymmetric warfare involved in dealing with a new, disruptive force – which will initially seem too small to even bother with compared to your traditional rivals. [eg: Craigslist vs Big Newspaper Co/ Play.com vs HMV/ Netflix vs Blockbuster]
4. There is a long and proud habit of promoting from within – senior executives will almost always have worked their way up through the business
Kodak. IBM. Regional newspapers. Corporate success is the result of being able to run the business as it was 10 years ago.
5. There is a ‘here and now’ crisis
More distraction – albeit of the very important kind. An economic downturn. A price war [Kodak vs Fuji in the late 90s]. Newspaper format changes [UK broadsheets c. 2005]. This kind of old-school challenge galvinises management, but a focus on the urgent and important
6. There is a killer P’s culture: Politics, Powerpoint, Procrastination
Do I really need to add anything to this? The result is corporate sclerosis: bureaucracy and bloat. Half the business knows exactly what needs to be done. The other half is hell bent on stopping the doing it.