Disruption is an opportunity – here’s how to recognize it and use it to your advantage
Companies and managers are working hard to find a way how to deal with this digital revolution. This leads them to conclude they need ‘a digital strategy’. But this is precisely what they should NOT be doing. Chasing a “digital strategy” implies that you keep your core approach as is and just add a layer of “digital magic” on top of it. You can’t just adapt your old ways a bit and expect that will work, though. You need to change the core, if you want to keep up. That’s why you don’t need a “Digital Strategy,” but rather, a Strategy for a Digital World.
It’s time to get rid of the Push Culture, and adopt a Culture of Reciprocity, one of “Many-to-Many.” We will need to look at existing markets, and their existing frustrations. Many pioneering companies of today (eg - Airbnb, Amazon, Uber) rode this strategy all the way to their success. They are some of the “Many-to-many” companies that went straight to existing markets and disrupted existing business models to improve the customer experience and company efficiency.
In “Managers the Day After Tomorrow”, you write about the TREE principle, which all successful companies have in common. Can you explain?
Rik: Well, I have found out that successful companies have one thing in common, which is at the core of their massive success. I call it the TREE principle, based on 4 rules.
The T in TREE stands for Technology: “Software is eating the world”, as Marc Andreessen once famously claimed. The digital evolution has an exponential nature and is setting all manner of flywheels in motion: new startups, new customer behaviors, new political behavior, new regulations and, yet again, more new technology. Technology has no limits and keeps going faster; just because you can’t do it today doesn’t mean you won’t soon. Successful disruptors use all the potential and power of the technology to the fullest to take away your customers' frustrations and offer them frictionless experiences.
The R stands for ‘Red ocean’… Disruptors like Uber don’t target a completely new market – the fabled blue ocean - but opt for the deep, red ocean because that is were the customers are. It’s a lot harder to find new customers for a new market than ‘stealing’ customers from existing markets. Disruptors love to tap into customer frustrations in an existing market while a lot of incumbents ignore these frustrations and strive for operational excellence. This is a mistake.
The E of ‘Customer Engagement, then: we’re living in a hyper-connected world, and costs of switching are very low. When customers find out about services that fit their needs, they’re going to adopt them and tell all their friends. They become the ‘Sales and Marketing’ and even the ‛infrastructure’ of the disruptor. In our hyperconnected world, your customers aren’t the end point, they’re also the start of a new one. All the big new companies - like Amazon, Alibaba, Tesla - they grew through the power of the network.
Last but not least, there is the E of Ecosystem: important exponential changes come from the interplay among individuals and institutions within the tech-ecosystem. Universities, startups, and technology partners work by themselves, and with each other to create change and opportunities, attracting capital in the process. You can see this at play in the Automotive sector. University research, Venture Capital, and dedicated Entrepreneurs coming together to build the future of better, sustainable mobility.
Once you understand the TREE principle, you can see new, customer-oriented digital TREEs everywhere you look! They are the ones who know how to connect to many, but still engage on the individual level. This is why, as a manager, you need to look at and understand your customers’ frustrations and needs. If you ignore them, they’ll abandon you and turn to companies who are based on a Culture of Reciprocity and Many-to-Many marketing, and who will respond to them.
So, how will you know when you need to adapt?
Rik: “Most of the time, I’d say RIGHT NOW! I don’t want to call them early warning signs of disruption, because this sounds quite negative, but if anything listed below applies to you, it’s time to rethink your current business model.
Complexity, first. Ask yourself if the current experiences you offer to your customers are too complex? Have you made things difficult for customers just to make them easy for yourself? A lot of banks and insurance companies tend to do this. Whenever customers have to sign their papers, they always think ‘What the hell does all of this mean’? This is a powerful sign, because a disruptor can come out of nowhere and offer the same in a better, clearer way.
Another telltale sign is “broken trust”. Trust is the most valuable commodity. And today, with the spread of information so fast, you can lose EVERYONE at once. The Volkswagen emission scandal is a great example. Disruptors can jump in on this and offer a more trustworthy experience (again, like Uber). Lack of transparency is the third: most companies are not transparent towards their customers. Customers want to know how their product or service was built, but companies take the line that ‘that’s none of your business’ and fail to involve the customer. Disruptors are 'spoiling' their customers with full transparency, and they won't settle for the incumbent's secrecy any longer.
The last red flag is the abundance of middlemen: As I’ve said before, we’re living now in a “Many-to-Many” society. Old world economy was a middle man economy. Between a company and its customers there were middle man. Wholesale. Retail. Salesreps. Agents… That was necessary in most cases in order to scale up distribution fast. Just like mass communication was the only way to scale up the number of potential customers. But today, too many middle men is the fastest way to get killed. Successful models get rid of the distribution and ‘in between’ channels and go straight to the customer: fast, efficient and a lot more human.