CXO

3 ways to outsmart disruptors before your company becomes the next Blockbuster or Kodak

With the pace of digitally-driven business "disruptors" increasing, here's how to identify and plan a response before you're pushed aside.

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Image: iStock/EwaPix

Everyone has heard the cautionary tales of companies like Blockbuster or Kodak, who failed to react to new technologies that dramatically changed their market. Blockbuster is, for all practical purposes, dead and Kodak is a shell of its former self. With the benefit of hindsight, we can shake our heads and wonder how Blockbuster failed to see that Netflix would forever change the movie rental business, or Kodak did not recognize that digital imaging would forever reshape photography.

As obvious as these lessons might be, it seems many companies are destined to repeat them. Even the beneficiaries of Kodak's bankruptcy, digital camera makers like Canon and Nikon, have hit challenging times as the imaging technology that brought them a windfall has now largely eliminated a portion of the digital camera market, replacing those single-purpose devices with the multi-use smartphone. What often occurs is that the market mistakes the event, like digital replacing film, for the longer term trend, in this case imaging technology transcending dedicated devices like cameras.

Look for the trend, not the event

Spotting specific threats to a market or industry isn't helpful if your company is outside that particular market. For example, Uber reshaping the taxicab industry is largely irrelevant if you own a network of hospitals, when viewed from the perspective of the event. The key to effectively identifying external disruptors is articulating the trend that those events represent, and determining how that trend might ultimately impact your company. However, a trend toward an intermediary company that allows individual consumers direct access to a resource without using traditional middlemen could dramatically change the healthcare business, and is an extension of the trend that Uber represents.

It can be easy to grow complacent in industries that haven't yet experienced major disruption, and to feel that you would react more rapidly and effectively than a Kodak or Blockbuster; however, once these disruptors have evolved and matured to the point that they're impacting a "safe" industry, it may already be too late. Rather than shaking your head in astonishment as Amazon redefines retail, or Uber and Lyft reshape transportation, consider the impact to your industry, however far removed it seems from the epicenter of change.

Imagine you're a well-funded startup

Once you've identified disruptive trends that are emerging or in full swing in other industries, consider how they would impact your industry. One interesting way to accomplish this is to put yourself in the frame of mind of a well-funded startup, with the goal of using these disruptors to dominate the industry. How would you deploy your disruptive technology or business model against mature companies in the industry? What unique advantages would these provide against entrenched competitors? Which of their weaknesses would be most easily exploited? What assets do the mature competitors have that would be most difficult to replicate or mitigate?

As you complete this exercise, you will ultimately end up with an idea of where your vulnerabilities and strengths lie. Intriguingly, size and even customer base often are not the assets you think they are, especially when customers are presented with a superior alternative.

Look for the leapfrog opportunity

In the classic case of Blockbuster, the company's ultimate response against Netflix was to copy their delivery model, attempting a DVD by mail service that essentially matched what Netflix was doing. This response ultimately failed. Trying to beat a more nimble competitor at its own game is difficult at best. Had Blockbuster identified the next logical step in movie rental delivery, either via digital streaming or automated kiosks, they could have potentially leapfrogged Netflix and outmaneuvered the company.

Rarely do incumbent companies beat a disruptor merely by copying their model once the competitor has already significantly impacted their industry. If you're lucky enough to spot a disruptor before it impacts your industry you can preempt the disruptive business model and adopt it before a competitor, but if you're one of the first industries to be impacted, the best course is to attempt to leapfrog the competitor and adopt the next evolution of the technology, or plan to exit the market.

Even relatively comfortable industries are now subject to potential disruptors. With an arsenal of cheap technology, new business models, and unconventional approaches, size and maturity are no longer bulwarks against disruption. However, if you can identify disruptive trends and determine how they could impact your company, you can co-opt, leapfrog, or mitigate the impact before your company becomes the next Kodak or yellow cab.

Also see:
Is your company vulnerable to disruption from 'digital intermediaries?'
How being fast and flexible can lead to a competitive advantage in business
CFOs fear tech disruption, but aren't doing anything about it
Meeker's Internet Trends 2016: Keep an eye on messaging, UI, big data, and connected cars

About Patrick Gray

Patrick Gray works for a global Fortune 500 consulting and IT services company and is the author of Breakthrough IT: Supercharging Organizational Value through Technology as well as the companion e-book The Breakthrough CIO's Companion. He has spent ...

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