The Survival Art of Counter-Digital-Disruption

In the 3^rd decade of the 21^st century we are already at the center of a hyper-disrupted global market where rolling waves of new digitally-disruptive entrants are landing at the beach everyday, expanding into the incumbents’ territories, eating away more and more of their revenue, and pushing those who are too slow to properly react, off the cliff.

These new digital-native and agile entrants know how to maximize their flexibility empowered by cloud computing to engage customers from the early stages of their market exploration, and onboard them through their journey upward and onward.

They use “digitalized” customer experience strategies to take on the market and their aggregate impact can pack a hefty punch for any well-rooted incumbent who has not yet rallied up its resources to respond and transform into a disruptor themselves.  

Change - as we can all testify – is never easy; but waiting for a burning platform as a motivational factor to start building and shifting is also too risky and chaotic and they would end up with too many hurried band-aid fixes and hasty workarounds that would now go deep inside the layers of their Digital transformation.

That growing newly bred and buried transformational debt will hamper their efforts in landing properly into the future state of the digital enterprise and would turn into an ongoing firefighting regime thereafter.

Incumbents need to understand how their digital competitors achieve market disruption, so they can adapt and disrupt the market and even disrupt the disruptors.

The most effective transformation strategies take roots from customer experience disruption, redefining the paradigm for their customers experience in interaction with their products and services.

Customer experience ultimately defines an organization’s reputation and business model and can make or break the profitability and continued growth in any market. For as long as it is enriched through continuous innovation and exploration and closely followed by ongoing improvement based on the collected feedback, it will serve as the underlying growth factor for the enterprise.

The new digitally disruptive entrants not only continuously reset customer expectations but also influence creation and amplification of new trends and demands to expand their market share and profitability. Recent global events – from seasonal hurricanes to the COVID19 pandemic – have also shown the incumbents that the market behaviour can change quickly and dramatically in a short period of time.

Starting with Self-Disruption

To be a true market challenger and paradigm changer, the incumbents need to step out of their reactive setup and start with a new self-challenging mindset of self-disruption, questioning their own status-quo, using the same strategies that the swarm of new entrants have been using against them.

This controlled crisis will allow them to explore new ideas against their existing ones before someone else does, and to seize the opportunities as they are discovered and as one idea’s market grows, they can shrink the other one and safely land in the new service offering.

It also saves them from the trouble of having to deal with the consequences of hasty and half-cooked decisions that they would need to hurriedly make in the middle of a battle with disruptors who have just punched their side.

Self-disruption is not always successfully done inside the incumbent that has been advocating and branding and selling the existing products and service. Not every good old well-rooted organization has the needed flexibility to bend backward like that without dislocating something! That is why many would carve out new child startups or buy them off the market as they are growing tooth and nail and would start posing a threat.

These child companies have the agility and maneuvering capability that can match other disruptors in the market and deliver multiple high-value products with lower pricing models (esp. that they can receive financial support from their mother organization to cover their operational costs for a while to push their competition into insolvency and drive them off the road).

They can deliver new services and products via a fresh and dynamic customer service experience that would deliver value faster and open new doors to areas that their mother company never had access to. They also understand that caring about customer experience needs to be enriched with visible differentiation for the  target customers.

Diversifying The Portfolio Services and Products

Some good examples over the past few years would be the famous US drugstore chain CVS, which in 2014 decided to stop selling cigarettes and incurred a loss of about $2B in revenue as a result. This was the initial part of a well elaborated self-disruption plan by CVS. Over the course of the next few months, they re-branded themselves to CVS Health, showing a major change – i.e., improvement – in their business model, moving away from being a chain of convenience stores who have pharmacies inside, into carrying a leadership flag in the healthcare community.

CVS came up with the “MinuteClinic” idea where it could offer accessible health services and continued with acquisition of several healthcare market disruptors and even the major health insurer Aetna to expand their capacity and service diversity in creating an end-to-end experience for their existing customers and expanding their customer base into sectors that they never covered before.

In many cases, acquiring a growing digital disruptor within the target sector and leveraging their niche position to stage a response is a good approach. Many incumbents have been doing that not just to respond back but to be proactive against competitions forming up for an attack against their market positions.

This has been accelerating across all large players, even those who are already considered high-tech and would be expected to handle their own weight in a digitally disrupted market.

Implementing Lean Thinking at the Core of Service Provisioning

The Lean approach was popularized by the manufacturing sector after the first world war and then again, the second world war. The heavy and prolonged global supply chain disruption caused by each of these two massive wars created the incentive to look for ways of rising efficiency in production by reducing wasteful work and having more output by spending less time and material. This lean thinking later translated into all customer value creation and delivery across all market sectors.

There are numerous examples of organizations that have optimized their ratio of value generation versus resource consumption in all industries and sectors, but perhaps some more interesting cases are where the lean thinking connects directly to higher revenue generation.

In one interesting example, Starbucks came up with a great idea to collect cash from its customers for the products and services they will purchase in the future. They came up with the concept of Starbucks’ refillable store credit cards where customers need to load their credit by paying cash in-advance so they can use them later to get what they wanted. This proved to be a success as now in US alone Starbucks is sitting on an average of ongoing balance of nearly $2B received in advance from customers.

This was achieved through leaning the service delivery pipeline by speeding up delivery of what the customers were asking for and making it easier to pay for them and further bundling them with a variety of perks and extended experiences to get the consumers to keep coming back for more and end up having to pay more cash in advance.

They even leaned their service delivery further by introducing “pick-up only” locations which can deliver faster service by just providing mobile-app order pickup services.

Re-forming the Organization’s around the Customer Value Delivery Pipelines

Many self-disrupting organizations learned that to serve more customer through a faster and more delightful customer journey, they need to re-form their entire structure around the main concept of delivering what the customer renders as valuable to their consumer base.

Large enterprises who benefit from strong digital leadership have carved out child companies with the needed flexibility for such formations, while having the deep rooted financial support and existing strong supply chain to back these child companies up while they are trying to stand on their own feet in the heavily disrupted market by smaller entrants.

These child companies have the needed nimbleness and speed of strategic decision making required to establish communities among their customers through covering and catering a wide scope of their needs and delights. The strengths they show is due to their ability to focus on the deep packets of the market sector where many customers have a narrow range of demands in a specialized area.

Learning from the damaged and destroyed incumbents

They say that experience is the best teacher. While this is true, that would only work if the experience has not led to the complete destruction of the incumbent.

Whether an organization has survived a disruptive blow to their existence, or they are among the “Still Standing” incumbents in the disrupted market sector, studying how the heavily hit organization survived the damage in the past, what was their responses and how effective they were, would provide a valuable lesson that can be used towards successful steering through the chaos and storm.

Let’s not forget that the sheer watching of how some other organization reacted – and hopefully survived – in the past is not enough. This observatory learning experience should be combined with pragmatic and relevant action items to push the organization forward and strengthen their existing weaknesses.

Forming Allies with Former Enemies

The new market entrants are mostly small but the aggregate effect of their presence in the market and their combined power in targeting the revenue streams of the incumbents is quite large and can pose an existential threat to them.

In many cases, the incumbent would not have enough counter-disruption power to defend itself going solo  against the mass of digital disruptors. In these cases, the enterprises form co-competition alliances with their former rival incumbents, and join their rooted strengths and customer-bases to block and punch back against the swarm.

One good example would be how the hotel groups and travel agencies formed new alliances to go against Airbnb using their joint power of share pools of resources, cross-group bundled discount offers and their existing, combined market influence.

Going against the Continuous Disruption with Phased Counter-Measures

The enterprise under the heavy bombardment of new market entrants should not stand still while studying the situation and observing the battles across the market. Playing a sitting-duck would not raise their chance of survival and pushing back against the disruptors.

These organizations stage their response with all of their existing power of business and technology, trying to fast track a similar product or service or move funds around to drop the price on the existing products and services that are under attack, or take legal action against copyright infringement or other corrupt behavior, were applicable.

We have seen price-matching and offer-perk-ups as some of the most common, yet basic responses in this approach, which are now common practices across many retailers in several market areas.

Disrupting the Newton’s 3^rd Law

Sir Isaac Newton, the English polymath and one of the remarkable geniuses of our entire history had introduced three laws in physics. The 3^rd law famously says that “If two bodies exert forces on each other, these forces are equal in magnitude and opposite in direction.” That means in the realm of physics, when an object is pushed by a certain amount of force, it creates a push back, equal to that force and in the opposite way.

That rule, regardless of how natural and obvious it may sound, should not become the approach when responding to disruptions!

There are situations where an organization is not ready to stage a definitive response in the same way it was disrupted in market. In such scenarios the organization seek other opportunities in the same or different markets and pursue customers and sources of demand through new operating model and value propositions.

Even though this may not initially look like a response back on the received disruption, it will not only pull the organization away from a high-risk muzzle-to-muzzle conflict, but what would bring its might in an area where it stands strong as a new disruptor of its own.

Nintendo sought new customers when it moved away from the battlefield facing Xbox and Sony PS series and established itself in a family console gaming paradigm and been ruling it ever since.

Cultivate Internal Talent Through Intrapreneurship

Intrapreneurship is an organization’s approach to capture the creativity and drive of entrepreneurship for its employees. Intrapreneurship creates opportunities for the staff to be innovative and entrepreneurial within and for their organization.

It follows the Agile methodology in fast prototyping, testing ideas with potential customers, collecting feedback and data on market response, learning what works and what does not work, redesigning products, testing them again, and pushing through or around whatever impediment exists.

Intrapreneurs are vital to organization’s innovative edge against the entrepreneurs that are pushing their start-ups as contending disruptors into the market. Organizations need a growing number of intrapreneurs compared to what they used to have in the stable times of the past.

An organization’s ability to attract and maintain intrapreneurial talent significantly raises its capacity to address the opportunities and to respond against disruptions in the market.

Intrapreneurial activities can cover a wide range of counter-disruption responses; from developing new products and services tangent to the disruptor outputs, all the way to creating new business ventures and changing the strategic direction of a company.

Digital intrapreneurship can increase production speed, streamline value streams, lower costs, improve supply chains and allow companies to build more responsive relationships with customers. Digital intrapreneurship is any intrapreneurship that uses digital means as a critical component of its innovation initiative.

Ramping up the Digital Transformation journey

As the market waits for no-one to catch up, and as the landscape is constantly changing, organizations need to push forwards with the enterprise digital transformation alongside preparing and disseminating the responses that they select in the disruption battle that is happening.

The faster the organization is brought up to the level of business and technical agility and compatibility to the digital society and market structure, the better it can dodge or even weather the next disruptive attack and respond with proper power and precision.

Conclusion

Fighting the battle of disruption is happening in a live and moving environment in an ever changing market where the disruptive forces of new entrants are combined with the turbulence of the shifting customer demands and expectations into a volatile and complex scenario.

To stage and implement counter-digital-disruption responses, organization need to use all the knowledge and tools their disposal and cultivate their internal power of innovation and creativity as the source of their power to survive and the guiding mechanism to help them steer through the battle in the stormy weather.

The ever changing dynamics of the battlefield demand for organization’s agility in tracking and responding to customer feedbacks through iterative, evolutionary value delivery in the form of products and services.