How to deal with disruption

disruption1There is hardly an industry or a market segment that is safe from disruption these days.

In the past, companies had to deal with dislocation from above or from sides through conventional market forces, but these days the Internet opened up the sluice gates for all sorts of disruption from below.

No matter how successful your company, how tangible your products, how regulated and protected your industry, sooner or later you will get disrupted and you must be prepared for it. Nothing new so far, right? This tip is not about how inevitable disruption is but about how to deal with it.

In the past, many successful industry incumbents have attempted to ride the wave of innovation whilst holding on to their core business, trying to get the best of the both worlds. That strategy was rarely proven successful in the long run. The list of victims is headed by such prominent players as Kodak, Nokia, Microsoft, Yahoo, Xiaomi, etc.

There is a number of factors that make this strategy detrimental: split focus; loss of identity; inability to pivot the culture quickly enough, etc. Just imagine if Qantas offered both high-end and budget fares at the same time. They would lose much of their brand identity and alienate their core customer base.

The more successful strategy seems to be to spin off the innovative branch of the business into an independent entity.

Although creating more competition for yourself seems counter-intuitive, analysis shows it to be a more profitable strategy in the long run. This is why Qantas opted to create JetStar.

So, the tip is this: you will have to compete with new disruptive players sooner or later and it will go easier for you if you own them in the first place.

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