In a time when uncertainty reigns, the fear of being disrupted can brutally hurt any business. Responsible leaders who dare to anticipate disruption and take steps to self-inflict it to their organization in a smart and controlled way are best positioned for the future.
For this purpose, we want to share in this article some key steps for a successful self-disruption.
Denying Risk Does Not Help Escaping From It
It is a mild understatement to say that across the world the business environment is changing rapidly and in depth with major disruptions, of which digital and globalization—not to speak of health and environment. Some companies—such as Google, Uber or AirBnB—have created such breakthroughs for their own benefit in their original sector and are now inducing new ones in numerous areas including banking and healthcare. Faced with these new economic dynamics, businesses of all sizes must be able to anticipate these changes and take advantage of all their available resources from the angle of risk management and business strategy.
In July 2011, Netflix1 decided to radically change its pricing model by increasing the price of DVD rentals and to promote the use of Internet streaming, with price raising by up to 60%. This “self-disruption” by Netflix of its own flourishing business model was the result of a strategic analysis: rather than being overtaken by new players leveraging the new streaming technology over high speed Internet and trying to defend DVD rental at all cost, let’s take the lead and be quick. With hindsight and despite some difficulties in the first months, it is clear that this radical decision by Reed Hastings was less risky than it may have seemed at the time, and certainly the right one for Netflix, its customers, employees and shareholders.
The apprehension of these new business models by “installed” companies, that is to say other than start-ups, requires a renewed governance that is more dynamic, more proactive, more innovative, more collaborative and more than ever based on the collective intelligence of the women and men within the organization.
Disruption is About Scale, Scope, Speed and Reversibility
This disruptive repositioning is not the privilege of the players in the digital economy and happen in sectors as diverse as electromechanics, construction, advanced metallurgy or education. The common point of successful businesses is a lasting alignment between the management of the company and its Board of Directors on the vision and its execution. Whatever the size, sector, age, or nationality of the company, this consistency is a key condition for sustainable development.
Daily, companies of all sizes are facing major changes: technology, regulations, environment … Some of these changes are “disruptions” that undermine conventional economic and organizational models. These fundamental changes can be classified in two groups: announced and disruptive.
There have always been heavy and predictable trends, some of which are however treated with reluctance if not pusillanimity and procrastination. Let’s take two examples of such announced changes:
- Environmental: according to the United Nations, more than 500 million people today live in areas affected by erosion linked to climate warming2.
- Demographic: the UN projects that the population of Africa could double by 2050, reaching 2.4 billion people, before settling at 4 billion around 2100.
What we call “disruption” is a major, unforeseen and irreversible change that is imposed on everyone, everywhere, quickly. These two examples illustrate how such phenomena have a strategic impact on businesses:
- Technological: the mobile Internet combined with the Internet of Things (IoT) opens up the banking sector to players such as Google or Apple who come from totally different industries, despite regulatory constraints deemed to be unavoidable.
- Sociological: with the decline of an ownership economy, models are increasingly based on use, experience and sharing, should it be among consumers or businesses.
We are therefore very far from marginal changes, which are certainly significant but do not restructure whole sections of the economy. In recent centuries, our societies have experienced industrial and political revolutions, but never with such velocity, such brutality and such magnitude as today. In addition, everything suggests that this trend will not be reversed but rather will worsen.
In our surveys of business leaders and their board members, we have found that they often express their desire to go beyond the framework of everyday reflections and actions—most often linked to urgent decisions—and to adopt a different, more creative and freer state of mind. There is therefore both a need and an expectation to be addressed by new governance practices.
The Self-Disruption Journey as a Means to Anticipate
Among the methods used to release this energy, one of the most innovative is the self-disruption journey. Its purpose is to create the new conditions to allow the management team to put itself in the shoes of “disruptors” of their company’s activities and lead a collective reflection on the strategy in a totally new framework. As a team, they set themselves the objective of answering together the question, “In the scope of our business, what transformations can be carried out to evolve and react better in the context of an external disruption?” The challenge therefore appears to create favorable conditions for business leaders to take responsibility and collective actions to optimize the use of their internal and external resources to integrate the risk, the certainty in fact, of disruption in their operations.
Like any important managerial process, the self-disruption journey must be practiced within a structured and managed program. This must allow decision-makers to adopt a radically different position from the one they normally have, and to do this in a benevolent and stimulating environment. In this program they will no longer be asked to defend their current business against external attacks or significant changes already identified, but to behave during the program as creators and entrepreneurs. This process is iterative and borrows elements of the Agile Method. It enables organizations to capitalize on their collective knowledge of a sector and approach it from the outside, take advantage of abnormal market positions, leverage technologies from other markets, exploit regulatory changes, address customer needs that are poorly served or poorly served.
Three types of ideas emerge from a self-disruption journey:
- Those which are quickly set aside because they are currently not feasible (legally, technically, humanly, …) but should be revisited regularly to make sure they are still impossible to realize.
- Those which are really interesting and would fit into a start-up’s or another company’s strategy, but are not relevant in the current context of the given business.
- Those which make plenty of sense for the company to initiate within or aside of the current business organization.
Whatever the category, all three sets of ideas are interesting for the management to analyze in-depth. First of all, if it took reasonably little time and effort to find them, there is a fair chance that other smart professionals have already or will soon come up with them; so better be ready for the blow! Second, those ideas that are pursued could well become future growth relays through an incubation process. Third, the whole journey is a collective learning process from which customers and employees will benefit sooner or later; this may be a “soft asset” but it is definitively a tangible one!
By themselves, hence the term “self,” the leaders are in a position to anticipate and find original ways, in the medium term to protect the company from “disruptions” and even initiate some. Their state of mind is no longer that of defenders of the past, but of sustainable value creators who have the ambition to develop a sustainable business.
When There is No Time to Step Aside
However, the most constrained resource for any leader is, even before cash, the time available to step back and reflect. Skills and funding only come after. Therefore, it is key to find a quick, operational and pragmatic approach to set the organization in motion around this reflection and initiate actions that make sense. Where large structures have the capacity to isolate teams, launch “task forces” and initiate “programs,” midcaps do not have these means at their disposal. This frugality often makes them more agile!
The self-disruption journey is a new form of engagement of the management teams, their co-workers and their board. This requires a few specific tools to take advantage of the collective intelligence of the participants, and lean on specific external contributions as for technologies, markets, innovations, process, etc. It is therefore an approach extremely open to new economic models and organizations. The outcome is an intense mobilization of energy within a limited space-time and mostly based the resources directly available to the business.
Self-disruption as a journey is characterized by:
- a change of mindset, which goes from defensive to offensive, but without becoming aggressive
- highlighting, even questioning, what is left unsaid and shared beliefs
- collaborative and cross-cutting work to decompartmentalize the organization
- a strong connection between strategic thinking and operational action
- acceptance of the principle of failure for certain of the ideas generated throughout the process, since some the planned tracks will be modified or even abandoned down the way
- a dynamic of innovation based on collective intelligence
Rather Than Fear It, Dare to Anticipate Disruption
It is by working with management teams confronted with problems of market decline, sudden arrival of unknown competitors with new digital tools, that we notice how often they have – without even knowing – failed to leverage their available resources. The good practice of transformation uses powerful levers: the mixing of styles, functions and skills in a transversal and multi-disciplinary process that foster the pooling of ideas and knowledge.
Fear (of the future, of the competitor, of failure, of the client, of the leader, of the colleague …) is – as the saying goes – a very bad counselor. Contrary to the natural but negative behavior of trying to build a wall and retreat in the fortress, the self-disruption journey acts as an accelerator of decompartmentalization within and outside of the company, and makes it possible to connect buried skills and knowledge, to put them at the service of new economic models that create human, financial and social value.
Taking the Self-Disruption Journey is a Healthy Practice for All Organizations
While Rahul Kapoor and John Eklund3 rightly argued that self-disruption is not the panacea for all companies, we have found that following a strict process—we call it the journey—to explore various avenues, as one evaluates options in finance, can be a high-impact and low-cost approach for business leaders.
Whatever the way of initiating this process, it is essential to include it in a global approach supported by top management in a collective and collaborative commitment based on trust and diversity. It is a practice that should be regularly renewed to keep the dynamics created by the process, acknowledge new events within and outside of the given sector and integrate insight from new team members.
In a nutshell, the self-disruption journey is a formidable generator of time, energy, resources and sustainable value which are so necessary in these uncertain times.
About the Author
Patrick Giry-Deloison is an operational consultant, business coach and professor of marketing. His goal is to “transform great ideas into great business.” He is also a business angel and a keen horse rider. Connect with him on LinkedIn and follow him @pgirydel.
Email: [email protected]