How To Turn Your Enterprise Into A Disruptor, Not A Disruptee

Change is scary, but it's necessary for survival

20Mar

When you think about digital innovation, Ford, a century-old automaker, probably isn't the first company that comes to mind. Take a peek under its metaphorical hood, however, and you'll see that the blue-oval brand is in the midst of a modern makeover.

With fewer than 100 days on the job, CEO Jim Hackett rolled out a bold transformation plan, the centerpiece of which is a switch from a model of vehicle ownership to one of shared mobility.

To get there, Ford is betting on a bevy of new technologies and services. It's rolling out 'Rapid Recharge and Share' stations in Dearborn, Michigan; a smarter parking lot in Los Angeles; self-driving cars in Miami; and an all-in-one transportation app called FordPass, which we helped build, to tie it all together.

Through technology, legacy businesses are being disrupted faster and more forcefully than ever before. But legacy companies like Ford have an advantage. If incumbents refuse to rest on their laurels, they can turn the tables on would-be disruptors.

What It Takes to Transform

To be sure, change at Ford's scale takes courage. It requires executives to put their fears and comforts to the side for the sake of the company's future. 

To jump-start the business transformation conversation within your organization, conduct the following evaluations to identify vulnerabilities:

1. Think about the drawbacks of your legacy and assets.

A legacy corporation's size and business model can be both a strength and a weakness. On one hand, established business practices and assets keep revenues rolling in. On the other, scrapping working infrastructure or proposing changes in business models that affect valuable revenue streams is a risky decision that's often met with staunch resistance.

In 2000, for example, Blockbuster was the undisputed leader in the video rental industry. It had 9,000 stores nationwide, generating nearly $6 billion in revenue. That might sound like a great position to be in, but consider what happened when streaming video debuted: Blockbuster's brick-and-mortar stores suddenly became liabilities. By the time it decided to invest in its own streaming service, Blockbuster's battle with Netflix was all but over. 

Don't wait until your legacy approach becomes your Achilles' heel. If you're spending more on marketing than research and development, prioritizing brand-building over product- or service-building, or relying on your company's size to squash startups, it's time to think about what'll happen when a paradigm-shifting technology or service model hits the market.

2. Consider how your revenue model affects consumers' views of your brand.

It's a truth of the market: Consumers will actively seek out better ways to solve their needs. When a competitor offers a service similar to yours with fewer fees or better service, you can bet your customers will take notice. If your company's success depends on revenue streams or policies that create customer angst, you're in danger of being disrupted.

Consider how Dollar Shave Club cut industry heavyweight Gillette down to size. By offering low-cost razors and delivering them directly to consumers, Dollar Shave Club shaved Gillette's market share from its peak of 71% to 59% last year. Rather than try to compete on the shelf, Dollar Shave Club used a subscription model to sell similar products at lower prices and with better service.

Don't wait until a Dollar Shave Club comes along. Look for patterns in customers' feedback, and don't assume your business model means you can't address customers' concerns. If you don't change your model to suit, someone else will leap-frog you with a stronger service or experience.

3. Check out your sector's startup ecosystem.

Your industry's startup community contains companies that leverage new technologies, business models, and market approaches. Notice a growing crop of startups in your category or in similar ones? You can bet that, as the incumbent, you're in their crosshairs. 

If you haven't surveyed the startup landscape around you before, use a tool like CBInsights to see which companies investors are betting on. Investors double down on areas that they're confident will generate strong and speedy returns, which tend to be those ripe for disruption.

Another way to check startup activity in your industry is to look at media coverage. KPMG's Startup Trends Index uses the share of media attention received by an industry's startups as a barometer to gauge the sector's startup activity. Both methods show that tech and consumer goods companies are facing stiff startup competition.

Companies like Ford aren't around today because consumers are blindly loyal to them. They're here because they recognize that while change is scary, especially for established players, it's also necessary for survival.

Sometimes, that change happens organically. But when it doesn't, executives and managers must induce it. Despite the discomfort it creates, it's the role of a leader to understand where a company has been, where it is, and what it must do to stay ahead. 

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