Although it may seem like it sometimes, disruption is nothing new. As long as technology and competition have existed, so too has disruption - the only difference now is that it is happening faster than ever before.
This speed does, however, mean that disruption poses a far greater challenge to organizations than before, leaving them little time to adapt and remain competitive. In a recent survey by Oracle, more than a third of the world's CFOs said that disruption or technological change threaten their firm's profitability in the medium term. In an Accenture Strategy report released last year, 58% of CFOs said they believe their industries are set for disruption, while 24% of CFOs said that disruption will destroy their company and 41% that it will cause more than half of their competitors to fold.
Disruption is, by its nature, tremendously challenging for strategists. It is unpredictable and difficult to account for, therefore it is no surprise that even though most are aware of the scale of the challenge, they have little faith in their ability to mitigate against it. In a survey of 1,042 executives conducted in December 2016 by IMD and Cisco Systems, just 13% of those surveyed said they were very prepared to meet the challenges posed by digitally disruptive competition, while less than half said they were fairly prepared.
There is, unfortunately, no universal model for avoiding disruption. Every incumbent has its own history, experience, strengths, and weaknesses, and every challenger is different for the same reasons. There are a number of universal truths, though, that must be applied when developing a strategy capable of withstanding the most innovative entrants to the market. For one, it is no longer enough that you evolve gradually, to stay ahead you have to be taking more significant leaps than you have before. The strategy needs to be a careful balance of the bold ideas than ensure this can happen, and risk mitigation to make sure you don’t go too far and lose what you have. If you cling to your existing business model while making only incremental improvements, you leave yourself highly vulnerable to disruption in the market, but equally abandoning your proven business model in favor of what may be a flash in the pan fad is foolish. The phrase ‘if it ain’t broke, don’t fix it’ has long proven useless, but that doesn’t mean you should rush out to fix things that aren’t broken.
We asked seven of the world’s foremost strategists from leading organizations how they set their long-term strategy in such a way that avoided disruption and ensured they stay ahead of the pack.
Sayeed Sanullah, First Vice President (Strategy & Analytics) at Wells Fargo
I think long-term plans should not be reactive but proactive to disruption. One of the best approaches to be proactive to disruption is to observe, analyze, and learn from not just how companies are disrupted in one’s industry, but also how companies are being/ disrupted across all industries. I study and evaluate how customers’ expectations, preferences, and experiences are shaped and influenced by different companies/industries who fulfill their needs and aspirations. I leverage all such insights and regularly adapt, adjust, reshape, refresh, and recalibrate my long-term plans. I am comfortable with uncertainty and open to taking informed and calculated risks after assessing and evaluating multiple scenarios.
James Lemon, VP Commercial Strategy at Travelport
It’s your people, not your plans that need to be reactive to disruption. Be realistic about your planning. How long-term are you really looking? Is that the right approach, given the speed of customer, competitor, and industry change you are seeing? New entrants often start by doing common sense things that incumbents miss, such as gaining customer traction at a fraction of the cost of a legacy player. Ask yourself periodically: What value do you really add to your market and can you protect that value, such as your pricing – in the face of someone who is bringing a totally fresh approach?
Clive Tillotson, Director of Business Operations & Strategy at Fujitsu
Let me turn this around as a question. How effective do you think your long-term plans are for you? Can you recall long-term plans are really materialising? I’d invite a different approach, instead of investing massive efforts in your long-term plans, consider different scenarios for the business and build a narrative around each one, including how you would plan to react as each scenario unfolds. Then, revisit these periodically with leadership teams and see how realistic and likely the scenarios are. Long-term plans can bore even the most committed business leader, but a scenario is more pervasive - it’s a story, a snapshot of possible outcomes that people discuss vigorously, and as they do so, they surface the points of disruption much more readily and focus on how to address that disruption. Long-term plans often sit on the shelf.
Lillian Bautista, Director Strategy at Adidas
I would go a step further to say that one shouldn’t only be reactive to disruption, but you should do all you can to anticipate the disruption – be constantly scanning for disruptive threats in your competitive environment and have a strategic process that can take in new bits of market developments and adjust course if necessary.
Ignaas Caryn, Director, Corporate Strategy at Air France-KLM
Scenarios offer perspectives on how the future might look like. Building perspectives derived from future scenarios into your strategic planning processes can give you a sense of the scale of the changes that might occur. Building a portfolio of options can make a company better prepared to seize opportunities and address challenges.
Thierry Van Landegem, Chairman at GreenTouch
One will never be able to foresee every single move, especially disruptive ones. It is, therefore, essential to build an organization that is flexible and adaptive in all its dimensions. As mentioned before, employees and management play a crucial role in this. As a company, we need to make sure that those key stakeholders deserve enough attention and get a continuous development opportunity. Developing their skill base, in order to become more innovative, flexible, and business minded is critical. And, not only to become reactive but more and more pro-active.
Charles Purtell, VP Open Innovation & Strategy at Beckman Coulter
Our 3-5-year outlooks include fairly rigorous evaluation of the risk of disruption. When we identify a potential threat, we monitor them routinely, (monthly, quarterly, annually) and develop countermeasures to minimize the risk of the threat as part of our execution of strategic plans. We are also far more open to disrupting ourselves, which is an important cultural element to drive disruption versus reacting to it.