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The Future-back and Disruptive Horizon 3 Leader

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Leadership in its True Essence

In the early 1960s, if you wanted a distinct quality watch, you would go for a Swiss one. Their caliber of craftsmanship was evident in their timepieces. They dominated the 300-year-old watchmaking market.

Fast forward to the 1970s…

Enter Seiko, Timex, and other Japanese watchmakers with their innovative quartz technology. They offered new features at a lower price!

The Swiss watchmaker market took a drastic hit. It plunged from 48% of global production to just 15% by 1980.

Interestingly, the Japanese watchmakers did not try to level the playing field with accuracy and quality. They knew Swiss watchmakers were masters at that. Instead, they offered something different…

• Cutting-edge features. Lower prices. Increased functionality.

Disrupted but not defeated

At this point, the Swiss could have bitten the bullet and dealt with the situation head-on. They could have introduced their line of cheap, functional, and innovative watches to capture the market again.

But they took a different approach…

They entered the market with a completely different value proposition. They presented their watches as the hallmark of style and fashion. They enticed the customers to buy watches that would match their clothes, moods, and occasions. Something that was never done before.

The Swiss succeeded in their strategy. So much so, that they stand as the sole icons of luxury watches to date.

You’ll notice a distinct pattern here

In the first game, Swiss watchmakers banked on the accuracy of their craftsmanship and dominated the market for over a hundred years. In the second game, the Japanese watchmakers entered the industry as disruptors. They brought innovation and new features at a lower price.

The Swiss watchmakers didn’t strike back immediately. They analyzed the market, found loopholes, and anticipated the future. They capitalized on a hitherto unexploited feature of the product.

Companies that adopt bold offensive strategies in the face of industry digitization will come out the winners

— Jacques Bughin and Nicolas van Zeebroeck [1]

Being a disruptor doesn’t mean doing something better than your competition. It’s the systemic approach to creating products, services, or processes that turn a market on its head and gives you the leading edge.

Consider all the disruptive technological innovations that are commonplace today: Internet, email, smartphones…

Think of corporate giants such as Facebook, Amazon, Netflix, or Airbnb. They all started small as a disruptor. They challenged the old business models, superseded them, and made their way to the top.

Preparing for a constantly disruptive world

The business environment today is much more complex and competitive than it was ever before. Your big idea is at the mercy of the next disruptor who comes your way, be it human or AI.

Traditional barriers to entering and setting up a business are low and dropping. Upfront investments are being replaced by purchasing cloud-based products as a service. Social media has slashed the cost of advertisement and given immediate worldwide reach. Technology advances mean we can operate globally online and virtually from the comfort of our homes.

Therefore, we need a different mindset as leaders in facing disruption. Our traditional approach to minimizing the damage, by slashing costs and increasing efforts, is in vain. We need to become smarter, more agile, and more adaptable.

A true Catalyst leader…

We spend less time than we should on strategy and more time than we should on regulation in our business today versus our business tomorrow.

—Deloitte

Move over VUCA, here’s BANI

An acronym—VUCA— has been used for several decades to describe the business environment as volatile, uncertain, complex, and ambiguous. Our response is to invest. Invest in slack, stockpile inventory, and overbuy talent, to ride out the volatility. Invest in restructuring to counter complexity. Invest in analytics to reduce uncertainty. Invest in experiments to separate cause from effect, eliminating ambiguity. The problem is that the threats keeping us awake at night are vague and nonspecific, not well-formed and precise. We want to avoid our Kodak moment, but where should we invest? [2]

The new kid on the block being used to describe our current and future business ecosystem is BANI. Brittle, anxious, non-linear, and incomprehensible.

The rapidly accelerating rate of change being experienced by all businesses in this 4th industrial revolution rewards agility and punishes those that stick to the status quo. Companies must hard-wire their leaders to be open to constant reinvention.

Reinvention does not mean taking an existing product line and putting it in an e-commerce store. Or increasing Ad-spend on social media platforms.

Rather, it is the ability to find new, sustainable, and significant sources of revenue. A company must be ready to make more profound changes to its core business model…

Reinvention is a rethinking of a business itself.

Netflix reinvented itself from being a DVD rental to a company that generates millions as an online subscription-based entertainment provider.

If that wasn’t enough reinvention, Netflix went ahead and invested in making its own content. This is a classic example of continuous reinvention.

Monetizing the Disruptive Changes

Disruption is not a novel phenomenon. Businesses have been playing around with this idea for a long time…

But the real challenge for organizations is…

The accelerating frequency of disruption and its unpredictable temperament.

The pace at which it arrives often leaves organizational leadership in a state of helpless despair. They are unable to make any strategic decisions.

To understand disruption, it is important to begin by understanding our own bias in seeing it. What we cannot see, we cannot respond to. Finding and understanding disruption is a core approach to defining an organization’s strategic choices and demonstrating how capturing these opportunities enhances shareholder and stakeholder value. And because organizational strategy development is an inherently people-driven process, it is subject to bias and misinterpretation. [3]

Businesses must recognize the forces for disruption and how they derive change. This insight will open new doors of opportunities for organizational leaders. They can deliver extraordinary value to their consumers.

According to Thales Teixeira, a Harvard professor who specializes in digital disruption and economics attention “This is very different from the standard competition that large companies have historically been used to.”

Think back to the times when Coke competed with Pepsi, GE competed with Siemens, and BMW competed with Audi. Teixeira explains, “each company would launch a new product and steal half of one percent or at most a couple of percentage points of market share from the other, and then the other would respond with new products and steal back some fraction of market share points.” [4]

Business landscapes are changing rapidly now. New entrants – aka startups and tech companies– can take away a significant market chunk from under the nose of corporate giants.

“They take 10%, 20%, or even 40% of the market away from established players. In fact, this is what happened when Uber entered major cities and quickly stole a major portion of market share from incumbent taxi companies,” Teixeira explains. “The same thing has happened in many cities around the world with Airbnb stealing a share of the market from hotels, Klarna stealing online payments in Sweden from big banks, or Dollar Shave Club stealing online razor sales from Gillette.”  [5]

What Does This Mean for Business Owners?

As a business owner, you need to understand that innovation and disruption are not synonymous. All disruptions are innovative but not all innovations can be disruptive.

Disruption replaces an existing way of doing something. But innovation involves working on an existing product or service to make it better, faster, or cheaper.

The disruptors today have a plethora of powerful digital technologies at their disposal. And this has changed customer behavior in three significant ways:

  • Consumers are happy to buy everything online be it mattresses, medicines, or even cars
  • Almost everything is being sold as a service starting from software to furniture to heavy machinery and even pets
  • Excess capacity is the consumer asset. This is the thriving business model for Airbnb and Neighbor.com

Incumbent leaders know that they have a problem — and they have to tackle that problem or go out of business. Unfortunately, many have no idea what the right course of action should be.

What research studies are showing us

McKinsey & Co. undertook a global survey of C-suite executives to capture how digitization unfolds across industries and how incumbents are responding. Few companies are responding appropriately to digital disruption, according to their findings…

While 90% of companies indicated that they are engaged in some form of digitization, only 16% said their companies have responded with a bold strategy and at scale. Likewise, only 30% of companies are focusing on new ways to bundle demand or resignment their market. [6]

The good news is that if your company is struggling with digital disruptions then you are not alone. You can still make a comeback with a bold digital strategy. The things you need are…

Agility. Innovation. Commitment and Curiosity.

Stay nimble and avoid the growth trap

Introducing a brand-new idea to your existing business is a gamble. Even with all the market research, you can have doubts if your ‘Crazy Idea’ will work. But…

Once you’re confident with your immense creativity and disruptive innovation, ask yourself: how easy is it for your competitors to imitate it?

Don’t differentiate for the sake of differentiation. Think everything through, otherwise, your competitive advantage will slip right through your fingers.

When starting out, young companies struggle with uncertainty but are agile and willing to experiment. At this time, companies prize learning and optionality and work toward creating value based on the expectation of future earnings. The new model then needs to reach some critical mass to become a going concern.

As they mature—that is, become incumbents—mindsets and realities change. The established companies lock in routines and processes. They iron out and standardize variability amid growing organizational complexity. In the quest for efficiency, they weed out strategic options and reward executives for steady results.

The measure of success is now the delivery of consistent, growing cash flows in the here and now. The option-rich expectancy of future gain is replaced by the treadmill of continually escalating performance expectations. [7]

Becoming the Future-Back Disruptor

It’s time for leadership to be proactive rather than reactive. Don’t concentrate all your efforts on the competition or be intimidated by the technology. Remember who you are and your purpose. This is what makes you unique.

Take a good long look in the mirror and consider what would truly allow your organization to become a disruptor.

  • Understand the needs of your customer.

Don’t just collect consumer data. Study it and adjust your business model accordingly. Look at the number of times Netflix changed its business model based on the customer’s needs.

An insightful leader will understand the importance of a customer-centric organization.

  • Have the courage, patience, and agility to execute.

Coming out of your comfort zone and trying something new takes immense courage. For 300 years the Swiss watch industry had been selling people something that told accurate time. Until they turned those timepieces into fashion articles.

It could have been a very stupid idea, but Swatch took a leap of faith and tried it anyways. Their courage and agility bore fruits. Their willingness to be patient and invest and spend money on their idea paved the path to success.

“Agility is about getting on and actually doing something, rather than spending an age tied up with micro-analysis of hypothetical outcomes. And once you’re doing it, keep doing it. Many companies try a new idea for two to three years then ditch it: if you come up with something radically different, you need to keep going.”                                                                            

— Costas Markides

The best defense is a good offense.

During the nineties, most newspapers went out of business when online news portals arrived as disruptors. Research indicates that newspaper companies that didn’t merely see the digitization of news as a threat— that was insightful enough to see the hidden opportunity— thrived.

They didn’t just defend their print business but also created strategies for the counterattack. Success comes from the ability to defend and attack at the same time.

Final Thoughts…

To not only survive but thrive in the digital era organizations must embrace the culture of disruption. Empower your people to be creative and innovative to build a remarkable customer experience.

Create an environment where agile leadership is nurtured at all levels, people are valued, collaboration is the norm, and people can learn from one another and customers — and then turn those findings into action. Disruptive cultures require continuous learning, and this is driven by values and the customer. [8]

Coaching 4 Companies – Your premier executive coaching service

We are a young, vibrant, and diverse executive leadership coaching group, with the operation registered in 2019, however, the formation was a 45-year career lifetime in preparation. During that period our founder Wayne Brown observed and worked with leaders of all levels in organizations across industries and cultures globally.

Based on that exposure, our company has intentionally set out to support those practicing the art and science of leadership – or as often referred to, “Executive Talent.” These are people who acknowledge that they are not experts. They are open to opportunities for continued growth and carry the desire for learning what is needed to become a success in today’s complexity and uncertainty.

To this end, we have purposely structured our company and engaged with associates in strategic global locations, so that we are able to provide the full suite of transformational executive leadership coaching, facilitation, and education support required.

References:

[1]. Jacques Bughin and Nicolas van Zeebroeck, MIT Sloan Management Review, 9th May 2017, The best response to digital disruption

[2]. Peter Evans-Greenwood and Devan Leibowitz, Deloitte Insights, 1st May 2017, Your Next Future: Capitalizing on Disruptive Change

[3]. Peter Evans-Greenwood and Devan Leibowitz, Deloitte Insights, 1st May 2017, Your Next Future: Capitalizing on Disruptive Change

[4] & [5]. Terri Williams, Economist Education, Be disrupter to Avoid Disruption

[6]. Jacques Bughin and Nicolas van Zeebroeck, MIT Sloan Management Review, 9th May 2017, The best response to digital disruption

[7]. Chris Bradley & Clayton O’Toole, McKinsey Quarterly, 18th May 2016, An incumbent’s guide to digital disruption

[8]. Joanna Swash, Forbes Magazine, 15th October 2021, Becoming A Disruptor: How Mastering Your Culture Can Help You Stay Ahead

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