When I take a moment to step back and look at what is happening in the business world today, it seems to me that “exponential disruption” may be an understatement. Every day I read either of an established, respected industry giant falling into administration, or of a new startup suddenly worth billions on the stock exchange.
And there is less and less room for the “steady as she goes” companies that sit between these two extremes. If you are not actively disrupting your industry (or someone else’s), firstly why not — but more importantly, you may already be a casualty of your competitors.
So, what has caused this incredible change of pace?
Unsurprisingly, technology sits front and center, delivering layer upon layer of revolution and evolution in a way that is impacting the commercial landscape like nothing before it.
Never has it been so cheap to run a business so well. Open-source software, cloud-based infrastructure, the falling price of hardware, and — through social media channels — the highly democratized nature of marketing mean companies don’t need the huge Capex investment to set themselves up to run efficiently, manage customers well or to go to market in a big way, leading to an influx in technology startups.
Next there is the sheer volume of data and information that is now freely available at our fingertips through both public and private sector organizations. This has impacted in two ways. It has led to significant industry disruption, as content and information that used to be a cost became free — consider the impact for example on the fleet street newspapers, many of which are financially struggling as newspaper circulation plummets. As we’ll see later, this is an ongoing pattern.
But it has also facilitated startups. Understanding and predicting the market used to be very expensive; now predictions are far more affordable and indeed more accurate, because of the breadth and wealth of information available. And where previously businesses may have suffered from “analysis paralysis” because of the sheer volume of information, AI allows us to make sense of the noise. Informed strategic decision making is no longer the domain of the cash rich incumbents.
Finally, there is the way that disparate technologies are converging to create their own breakthroughs. The smartphone is a great example. It started by combining a number of key legacy technologies — camera, telephone, typewriter, maps. But it didn’t stop there: the successful convergence then accelerated to the point where now it is the dominant technology platform — essential in everyday life and offering every possible capability from heart rate monitors to tape measures to blood oxygen sensors. Each of these was a thriving industry in its own right: think of Kodak and Garmin, for example — all disrupted by a free app on the smartphone.
It seems the scales are firmly weighted against the legacy firms, yet there is little preventing them from exploiting these same advantages — indeed they have faster access to expertise and cash so can actually invest sooner. Yet even companies once noted as “innovators” — such as IBM — are struggling.
It isn’t that simple. Legacy companies have a number of weighty responsibilities: they must continue to service and deliver for existing customers; to drive large revenues from their existing cash cows; and of course to provide a return for their investors, who will watch any investment into “risky” R&D with trepidation.
But the simple fact is that the market is changing rapidly: competition is fiercer, customer tastes are more fluid and the speed at which businesses can fail has accelerated. Innovation is key to survival.
How can legacy companies focus their own transformation?
1. Understand that innovation can and will come from any direction: take inspiration from that to look outside your own sphere: innovation as a business platform will triumph over a single innovative product
2. Agility is key: move away from hyper-rigid hierarchies to structures that enable fluidity so they can bring the diverse people together quickly to solve challenges collectively
3. Move quickly: Companies that adopt technology sooner and more successfully gain an exponentially increasing advantage. Those that don’t lead the disruptions become their casualty.
4. Offer more value: with all of the information now available, there has been a shift in power from seller to buyer; intellectual capital and brand no longer lock in the customer. You must build loyalty via value and innovation — or perish.
5. Protect your brand: a company’s reputation rests on what an individual or community thinks of it, and ratings and reviews have become more important than advertising.
Finally, don’t stop, even for a second. Innovation is ceaseless — your company must also be in its pursuit.
