Indeed, conflicting data exists as incumbents in multiple industries (banking, foods, technology) gather more power and concentrate smaller players to achieve massive scale advantages at the expense of middle market players making some industry sectors look immune to disruption, at least at the top.
Meanwhile however, smart money continues to flow to an ever-growing number of start-ups across the economy each purporting to become the next UBER ready to topple the leaders. How do we resolve these apparent contradictions? Should we believe and embrace the hype? Should we just continue with business as usual?
Business leaders today almost unanimously agree that the pace of change is accelerating at an unprecedented rate and that traditional industry boundaries are being erased before our eyes. Research indicates that over 90% of CEOs believe that their market context has become increasingly unstable and that the traditional rules that govern the interplay between competitors is breaking down. Unfortunately, the tools and methods we use to help us design and execute our strategies are designed for relatively stable market conditions and are not well-suited to instability. We believe that a new approach is required.
Most strategies are built on one basic concept, the relentless pursuit of MORE. More customers, new markets, more products, etc. The extrapolation of core capabilities (i.e., what we are good at) into new areas to make this possible is the essential assumption underpinning most business strategies. Thus most strategies are built from the inside out. This approach works relatively well in stable market conditions where competitor and customer behaviour is largely predictable. In unstable markets (i.e., markets highly exposed to change) organisations must refocus their strategy planning and design efforts to include a more expansive view of competition that transcends existing industry boundaries, extrapolate unstoppable trends (not just capabilities) and consider fundamental changes to the core business model to maintain relevance. Disruptors, if you will insurgents, almost always approach competition from this perspective. Incumbents tend to ignore or discount these factors leaving themselves open to disruption.
Disruption is fundamentally a tale of incumbents versus insurgents. Incumbents by definition seek to preserve the existing order to their advantage and maintain a relatively stable set of market conditions in which to operate and therefore become ever more inward looking. In contrast, insurgents seek to disrupt the incumbent model and establish new rules that ultimately reshape industry boundaries at the expense of incumbents. Is your business an incumbent or an insurgent?
Established players seeking to find a balance between incumbent advantage and the benefits inherent in more nimble and agile insurgents and can adjust their mindset and strategic planning efforts to better prepare for, or initiate, disruption. The following 'top ten' focal points provide a good start for those wishing to proactively manage the risk of disruption:
- Start with the customer - build your strategy from the outside in focusing on emerging consumer / customer needs
- look for 'lazy incumbent competitors with unhappy customers' and exploit their weaknesses to your advantage
- Look for the convergence of 'unstoppable trends' - these can be difficult to find and typically act in concert
- Focus on the business model - while product disruption exists, it's usually business model change that drives disruption
- Every business model is underpinned by a set of key assumptions - breaking these is one of the keys to disruption (but they are hard to identify) know your key assumptions undermine your competitor's assumptions
- Create a different recipe for value creation, look for opportunities to shift any or all of the key elements of your existing business model into new territory
- Often, winning business models are on another cost curve, sometimes exponentially different from yours - seek to find ways to shift or eliminate the 'established' industry cost curve
- Look for inspiration outside your current industry definition, seek analogues from adjacent or distant ecosystems
- Cycle your strategy more frequently, i.e., move from annual to quarterly cycles
- Discover customer proximity (i.e., return to #1 above)
What separates incumbents from insurgents? Can slow moving relatively risk adverse incumbents learn to operate in a way that is more like their nimbler counterparts, the insurgents? We believe that they must in order to survive. Get to work, it is not too late to change the way you approach your planning to put your business on the front foot in the 'age of Insurgence'.
Matthew Tice is Founder & Chief Executive Officer of Insurgence Pty Ltd. Insurgence brings a unique set of skills designed to help organisations fundamentally alter their competitive perspective. This happens at the nexus of strategy, innovation and leadership. Time is short; your incumbent mindset will not be sufficient for the future of competition. Discover how Insurgence can help you transform your organisation, before it's too late. For more information, visit http://insurgencegroup.com.