Are you safe? Or are you on the edge of irrelevance? Companies disappear all the time without a word, due to changing cultural values, changing technology, or changing audience demographics. People simply move on and leave the past behind. That’s precisely what you have to do if you want your company to survive.
It’s really not as hard as you think to read the signs of a rapidly approaching upheaval in your industry. When disruption came for the taxi industry, the music industry, the retail industry, and others, there were usually four flashing lights that just about anyone could see.
- One, these companies operated in highly regulated markets.
- Two, a few key players had consolidated all the power.
- Three, customers were price sensitive and acutely aware of what value these companies provided in their busy lives.
- And four, customers were not happy with their options.
If any of this hits close to home for your company and your industry, the bell tolls for you and your industry.
It is difficult to feel that level of urgency when your company is profitable and growing, but without that kind of panic, you may not have enough of a driving force to change the way your company operates before it’s too late.
There’s a solution, but whatever you do, don’t head for perceived safety. When disruption is barreling down on you, the worst place to stand is the middle of the road. That’s the time to start running and jump on board with the changes. Those who don’t will be left behind, watching a train full of customers disappear into the far horizon.
If you don’t look ahead, you won’t change. But even when companies can see what’s coming, they are often too paralyzed or too comfortable to adapt. Let’s take a closer look at a few companies that could have woken up to see a new day dawning, but instead they rolled over and hit the snooze button.
Taxis, Records, and Toys: A tale of three industries
Yellow cabs are iconic and cinematic around the world, and the Yellow Cab Company, founded in 1907 in Chicago, was a central fixture of the American Century. In 2015, they filed for bankruptcy, finally ceding their throne to mobile rideshares like Uber and Lyft.
It wasn’t the tech startups alone that brought them down. A series of expensive liability suits were a proximate cause, but the new competitors used technology to pry open a crack in the system. At the heart of it all was a lack of attention to how customers’ lives had changed into a faster, more tech-savvy world. Customers grabbed the first chance they could to escape from an inconvenient, unpredictable, expensive service that seemed indifferent to their needs.
Even a beloved brand, however, can instantly lose its charm when the industry’s structure is irrational. From its launch in the 1960s, California’s Tower Records was the master of cool and the place where musicians wanted to be.
Customers loved browsing there and celebrities endorsed them, but their massive growth in the 1990s proved to be their last gasp. They took on 110 million dollars US in debt in 1998 for their global expansion, just as streaming and peer-to-peer music sharing was finding their footing. At the same time, big box retailers started selling CDs at massive discounts to hold onto customers that were disappearing into ecommerce.
In 2006, the massive Tower fell, going from profitability to bankruptcy in a few years. It’s not a coincidence that Stockholm’s Spotify suddenly sprouted up in 2008, among the ruins of music industry giants. Customers wanted to listen to specific combinations of songs that they arranged themselves and packed up in a way that allowed them to play it on the go.
Pay attention to how technology and society are changing and use anthropology techniques to find out what people care most about, but that’s not enough. Even when a company sells items that people really want and the physical inventory is massive enough to rival ecommerce competitors, a company can be starved to death by disinterest. Customer experience always wins.
Let’s return for a closer look at the story of Toys R Us. The giraffe that was the Toys R Us mascot had a long neck, which should have allowed them to see approaching predators from far away. Sadly, what they couldn’t get a good look at was their own business model.
The 70-year-old business, based in a suburb of New York City, grew to be the go-to store for childhood happiness for decades. It survived the onslaught of ecommerce competitors by buying more and more toys, so many that their stores started to look like a toddler’s closet.
They were killed by their success, because shopping in a maze of chattering toys in neon-colors overloaded their senses, and began to induce tears instead of smiles, certainly among frustrated parents. Amazon’s clean, clear, inviting search bar, along with AI-driven personalized recommendations offered a far more empowering toy shopping experience. In 2018, Toys R Us announced they were moving to the only thing worse than bankruptcy: Liquidation of assets.
Structure in the chaos
Taxis, music, and physical retail stores. Those are three frequently cited examples of industries disrupted by new technology, but they are just the tip of the innovation iceberg. Disruption is the new normal in the global, mobile, digital world. New technologies can be deployed with a swipe of a finger, appearing across billions of devices all over the world, changing market dynamics in a heartbeat, while competition from emerging markets isn’t just producing cheaper goods and copycat products, but radically redefining the terms of production and distribution. Consumers want the latest and greatest, and they aren’t necessarily loyal to a brand or even a concept. At the same time, they are demanding more from brands—from quality to accountability, and they are very vocal and social about it.
Innovation is the creative destruction of innovation where entrepreneurs combine exiting elements ins new ways, as the economist Joseph Schumpeter defined it, has never been more clear than it is right now. Tiny startups are restructuring of entire industries when they exploiting existing market failures to serve new customer needs. Sometimes, the startups even generate these new needs before they exploit them, as in the case of Dropbox.
Since its founding in 2007, this file storage startup from Silicon Valley has ballooned up to a 12 billion dollar US valuation in a little over a decade. They did it by giving people not what they wanted but what they needed, which is a place for their stuff. They saw the world going digital and staked out a claim early with servers big enough to hold all the files. By doing so, they created a space in the coming digital platform wars, where they will go head to head against enterprise cloud providers like Microsoft, IBM, Google, Apple, and Amazon.
What isn’t always clear is that this seemingly chaotic disruption didn’t happen by accident. Many people view innovation as spontaneous, unorganized and unpredictable. This couldn’t be further from the truth. While the results of innovation can seem unpredictable, the process isn’t. Master innovators aren’t just throwing everything at the wall to see what will stick, even though there is a time and place for this kind of experimentation.
Successful innovators are structured, methodical, and systematic in organizing their innovation projects. This structure is essential in times like ours of sudden, explosive market churning, where both possibility and uncertainty can spike to nearly infinite levels. Once an innovation project or a series of projects has begun, things move quickly, so it’s important to have the correct framework in place for making decisions at each step from initial ideation to final commercialization.
In 2018, our team analyzed, under the leadership of Magnus Penker and Dr Soo Beng Khoh, survey data from 2,900 companies in 105 countries, collected over a 52-month period. At the conclusion of the study, we published our findings as Cultivating Growth and Radical Innovation Success in the Fourth Industrial Revolution with Big Data Analytics, presented at the 2018 IEEE International Conference on Engineering, Technology and Innovation in Bangkok, Thailand. In the study it was shown that disruptive innovators are better equipped to handle large scale problems like these because they systematically divide their work among innovation horizons: immediate gains, core business adjacent ideas and experimental concepts for the future.
So, what is the biggest risk you can take?
Recreating yesterday in a changing world or build you processes and operational models, capabilities, culture and leadership for risk mitigating by understanding future possibilities, experiment and piloting based on the insights, fail and learn, iterate and refine, and finally go-ahead making decisions based on validated experiments, piloting and prototyping?
Think about it.