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Bridge or a bunker: How should small business deal with ‘disruption’?

Dare to be different - disruptionGoogle, Amazon, Uber, Airbnb, Airtasker, Netflix… what do these brands all have in common? They are disruptors in their industry. As an avid consumer of their products and services, I love and admire the way they’ve changed the world by putting the customer experience at the centre of their operation. As a business coach I see that the writing is on the wall: mass industry disruption isn’t coming – it’s here.

What is ‘Disruption’?
The term refers more particularly to ‘disruptive innovation’ – a term coined nearly 20 years ago by Harvard Business boffin, Clayton Christensen. His theory recognises that some innovators don’t just create new products within a market, some create new markets with their technological advancements. But ‘disruption’ in business existed even before “Video Killed the Radio Star”. The invention of the printing press in 1439 was one of the main contributing factors to the Reformation in medieval Europe, enabling many copies of an idea to be produced and disseminated across a vast geographical area much more quickly than ever before… sound familiar? In terms of knowledge-sharing, it was the internet of its time!

Not all innovations are disruptive…
Consider the car phone. In the 1980s, it outstripped mobile phones in popularity and as a status symbol. Not much of a disruptor though – it was primarily a luxury accessory reserved for those who could afford the hefty price tag. People primarily carried on using landlines and then, as mobile phones grew lighter and cheaper, car phones sunk from sight around the 1990s.

… but all disruptors are innovative
Fast forward a couple of decades to the birth of the Smartphone. Your “phone” is now an essential item, used not just for calls and text, but also video conferencing, email and basic computer functions, listening to music, taking photos… it has forced changes in many markets outside the traditional telecommunications industry. Moreover, these small devices have begun influencing human behaviour as much they facilitate it – so they have proven to be a social disruptor as well.

Are you prepared for the change to come?
Disruption presents modern businesses of all sizes with significant challenges that, curiously, most are choosing to ignore. Last year, RMIT conducted a survey of Australian businesses which revealed that despite the fact that 73% of businesses have observed the effect disruption is having on multiple industries, one-third are ignoring the trend altogether and a further 30% are only just beginning to think about how they may adapt. That means two-thirds are completely unprepared!

It’s not all doom and gloom
Like all forms of change in business (as in life), how well you cope is directly linked to how you frame the issue: is disruption in your industry a ‘threat’ or an ‘opportunity’? I mentor my Tenfold coaching clients to tune in, stay ahead of the game and get excited about the potential that technological and social change may unlock in their industry.

How to deal
Businesses really have three core ways of dealing with disruption in their industry.

  • Become a disruptor and a leader of change
    Think like Netflix – they saw the end of DVDs and saw an opportunity with movies on demand. They quickly adapted their business model to deliver their product in a way that better suited their customers.
  • Be a fast follower and adopt (and adapt) innovation from the change leaders
    Facebook was a fast follower in the personal webpage space. We all know how that turned out. An illustrative example of why being a fast follower can be a better choice in some cases; Facebook was treading an already plotted path and was able to replicate and improve on the model, learning from those who went before them (anyone remember MySpace?).
  • Take a less risky route and opt to focus on continuously improving your products and services
    While there is no ‘right answer’, an argument can be made that the first two options are most likely to keep you in business for longer. Look at the recent example of makeup brand, Avon. How did a brand founded in 1886 and so famous that it was regularly referenced in popular culture, end up having to exit the Australian market? The business clung to its business model (representative-based direct selling) and was too late to the online party. At the end of the day, no matter how much they may have improved their product, customers just didn’t want to wait 3 weeks for a lipstick! Their failure to place the customer at the centre of their business model meant that their ageing customer-base slowly dwindled.


Cultivate a culture of innovation

The implementation of sudden change in a business requires three things:

  • courage and willingness to experiment
  • ability to fund experimentation
  • knowing when to ‘fast fail’ projects that aren’t proving successful.

You may be able to work these factors into your current business model, or it may mean creating a ‘test kitchen’ department within your business where you can try things out, while containing any risk. You may even have to consider the possibility of disrupting your own products or services. Look at Apple: how many times have they created a new product that leaves their previous offering in the dust? Innovation is clearly at the core (pardon the pun) of their business strategy and culture.

Small businesses have an Ace up their sleeve
When it comes to adapting to changes in your industry, small businesses have a real edge over their big business counterparts: changing direction is much easier for a speed boat than an ocean liner. Large companies are bound by the processes that enable them to have a repeatable and scalable business model. It is far cheaper and simpler for small to medium enterprises to experiment with untested service delivery methods, supply chain models and technological advances.

Time is also a huge factor in surviving disruption. Christensen claims that businesses entering a new market within two years are six times more likely to succeed. This is because early entrants create efficiencies, nab all the good distribution relationships and come to the party before saturation point, leading to better brand awareness.

Hold your shovels
I don’t think small businesses should be building their bunkers just yet. Disruption really can be the push towards innovation that your business may need to keep it relevant to consumers. By staying flexible and responsive, you can adapt your business model quickly and not only keep your customers, but also attract new ones. By preparing for change, you can retain some control over how disruption affects your business, so get building those bridges – let those disruptors come.


Next time…
Predicting disruption: what do disruptors look like and how can you respond?

 

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