Self-Disrupt or Self-Destruct

Disruption isn’t a concept which CFOs normally favor. But in business, disruption is everywhere one looks, as companies grapple with disruptive business models, disruptive channels, and disruptive technologies.

In fact, according to Gartner’s Top Strategic Predictions for 2018 and Beyond: Pace Yourself, for Sanity’s Sake [1], “by 2020, five of the top seven digital giants will willfully ‘self-disrupt’ to create their next leadership opportunity.”

This means that companies such as Amazon and Google – will create new leadership opportunities in their markets by “self-disrupting,” requiring them to cannibalize some existing product through the creation of a new one that will transform the market.

The Gartner report states that “self-disruption involves seeing the possibility of a significant disruption and being proactive by deciding to embrace the disruption even if it cannibalizes some existing advantage before someone else does.”

For the disrupting company, the intent is to get there first — even if it is necessary to cannibalize previous success with a product or service; and the potential payback can be substantial — the chance to be the leader of a new market trend or, for an existing leader, to protect its position. For companies that don’t keep up, however, a market disruption can cause real problems.

Consider the situations of one-time market leaders such as Blockbuster and Kodak, which basically owned the consumer video rental and camera markets, but which failed to anticipate trends and innovate in their markets. As consumers increasingly bought their movies online, rather than from brick-and-mortar video shops, Blockbuster’s in-store sales plummeted. Kodak, despite inventing the first digital camera in 1974, had trouble shifting from a film to digital business model. Later, they failed to recognize the trend of sharing photos online and focused instead on the ability to print photos at home.

Both companies serve as extreme examples of what can happen to companies who turn a blind eye to the importance of successful self-disruption.

An example of a successful self-disruption was Apple’s iPhone, which included features previously found in separate products – such as MP3 players and personal navigation systems, to name a couple. Apple allowed its own iPod MP3 player to be cannibalized as the price to pay for being an early mover in the smartphone market.

While self-disruption is, obviously, a high-risk strategy, not doing it carries potentially greater risks for companies competing in rapidly changing markets such as consumer IT. Apple’s move obviously paid off; today the company is not only into PCs, tablets, and smartphones; but there is increasing speculation that it is looking to become a major player in the next generation of TVs, electric cars, and personal transportation.

While Apple has successfully stayed ahead in its markets, there are many more companies that failed to do so. The names of former market leaders that lost out to more innovative competitors litter the business landscape: Borders (failed to anticipate the digital book market), Blackberry (missed out on the touch-screen smartphone market), Blockbuster (taken down by Netflix and online movies), and Kodak (which didn’t foresee the huge popularity of digital cameras), are just a few.

In hindsight, it’s easy to see why these companies lost their market lead to more disruptive competitors. But anticipating a future market disruption is much harder.

We’ll explain the keys to being a successfully disruptive organization, and to surviving in today’s highly disruptive markets, in the next installment of “Self-Disrupt or Self Destruct”. Stayed tuned.

  1. Gartner Research, Top Strategic Predictions for 2018 and Beyond: Pace Yourself, for Sanity’s Sake, 29 September 2017

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