How to know if your company is ripe for disruption

“How can a manager recognize the early warning signs of disruption?”: that’s the one-million-dollar question that company leaders ask me time and time again at the nexxworks Innovation Tours, Innovation...

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July 24, 2018

Even the first and maybe best-known victim of digital disruption, Kodak - with its analogue film rolls - was killed by consumers that had access to a faster and easier way to take and see their pictures. It was not killed technology. Nor by any specific competitor. It simply led the consumers to do it. Digital cameras conquered the market and killed the more complex analogue photography in a little over a decade. Only to be disrupted themselves by smartphones that simplified the whole experience even more.

Alibaba’s new offline Hema shop concept (never ever confuse this Chinese Hema with the Dutch Hema) is building further upon the concept of extreme de-complexifying of the shopping experience. Online experiences often win from offline because of their “de-complexity”, but some products, like food for example (especially in Chinese culture) needs to be seen and touched before being bought. The Hema shop has made offline shopping as simple as online by mixing on-and offline experiences using the same interface: your smartphone. They call us, consumers, the OMO Sapiens (online-merge-offline). That type of concept is going to disrupt every last old school (yes, some of them are 20 years old and more) online or offline retailer who still offers more complex experiences. If the latter think that the battle is between online and offline, they are wrong. OMO de-complexifying experiences will win over the consumer.

Broken trust

In the old world, companies were the centre of the universe and customers were those that just bought their products and could be easily influenced by mass communication (which is not communication, but broadcasting). Companies got away with murder. Literally. Think cigarettes. The fat companies grew fatter and fatter every day. Huge marketing budgets meant huge carpet bombing campaigns that generated more customers who generated bigger budgets for even bigger campaigns. One lost customer was not an issue and churn was just a percentage, if measured at all.

But in the networked world, churn can be lethal as it could explode exponentially now that all customers are connected. If one lets you down they may as well all let you down overnight. In a personal relationship broken trust is a major reason to break up. Business is no longer B2B or B2C, but H2H: Human2Human. Broken trust is very hard to repair. In the new world, people will always find out the inconvenient truth and no expensive mass communication campaign can win against the power of networks. Even companies like Facebook and Uber are facing trust issues and have to solve them. Not because they need to by governments, but because of us, customers. In 15 years we may look back and say: yep, banks did not overcome the bank crisis, combustion engines did not overcome diesel-gate…

When, in 10 or 15 years from now, we will be sitting, working, relaxing or sleeping in those electrical, self-driving vehicles - that we no longer have to own, but are the physical appearance of the mobility app on whatever device we will be using - we will be able to fingerpoint Dieselgate as that very moment when the automotive industry was killed. Electric mobility as a service would have happened anyway, but this obvious deception of the public killed all credibility of traditional car manufacturers. It did not disrupt the business overnight. But that broken trust, would never be repaired.

Lack of transparency

Trust is highly related to transparency. How can we trust a company, if it is not transparent? As long as companies were those ivory towers that broadcasted their mission statements and praised their products and services, they didn't care that they were a black box. But nowadays people want companies to be open and transparent. Honest. Authentic. Why do you do what you do? What do you exactly do? How do you do it? Are you responsible? Are you ethical? And can we have an inside view? What are our reasons to believe? Not what you say matters, but what you do and how you do it and why.

We no longer trust the middle man. We no longer trust what companies say about themselves. We know how companies and brands have been making up their own stories for years. We do not want companies to say that a car is going to get us through ‘the city jungle’ anymore or that it turns us into a macho sportsman. Tabaco brands have done exactly the same for years, trying to hide the inconvenient truth: cigarettes kill people. Remember the Marlboro man? The Camel man?

Internal combustion engine cars driven by people kill people. The fact that Chinese government has defined electrical, autonomous vehicles as one of the highlights in their China 2025 targets, is no wonder.

We reach the ultimate transparency when the truth ‘is out there’ amongst all of us. When there is no more central authority that can make whatever claim we have to believe until (dis)proven. Distributed authority is the one and only truth left. Talking to Alibaba management at one of our latest Innovation Tours to China, it was mind-blowing to notice how serious they take generating blockchain techniques to create full transparency for the products on their platform.

Redundant middle men

Old world economy was a middle man economy. Between a company and its customers there were middle man. Wholesale. Retail. Sales reps. 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. Too many middle men is the fastest way to get killed. You may still feel alive but you are not. Sorry for the harsh news. In the new world that is run by the power of connected people, companies DON’T need middle man.

Route to market can be based on the blockchain (you get increased transparency and traceability as well) and the connected world allows direct communication and direct business between companies and customers. Middle men make you too expensive. Middle men hardly ever bring added value. They eat added value. And middle men block transparency and add complexity.

Are these four signs on the wall only a problem for the big established companies? No. Not at all. I know way too many start-ups that make the same old mistakes right from the very beginning.

But there is a way to turn this evolution around if you have the guts: start listening to your customers. Really listening. And put them in the centre of your company. Them. Not your processes, structures, marketing, products and everything that starts with you.

Rik Vera
Rik Vera
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July 24, 2018