Disruptive companies need to check their surroundings before overtaking.
Three Types Of Company
There are three types of companies in the world today:
- Dinosaurs: Traditional companies who are facing digital disruption in the marketplace driven by fast-changing technologies. These “cold blooded” businesses struggle to effect change – they are stuck with stodgy, outdated delivery models and immovable cost structures – but still enjoy significant revenues from their established customer base. There are increasing examples of formerly successful businesses who failed to react to changes coming and paid the price – Kodak, Blockbuster, Yellow Pages, the entire newspaper publishing industry…the list is long and getting longer. Established company lifespans are getting shorter:
“Since 2000, 52% of companies in the Fortune 500 have either gone bankrupt, been acquired or ceased to exist”
- Innovators: There is also a new group of businesses who are successfully leveraging new technologies into their existing business models and are successfully transforming themselves for the new digital age. To name a few: Disney, McDonalds, GE, IKEA, Starbucks, Air New Zealand. These businesses typically hire a dedicated Chief Digital Officer – an experienced digital expert who can take the lead in a permanent cycle of change and break down traditional internal silos. They will be fast to learn from disruptive competition and also to leverage their incumbent strength to protect market share and adapt to wider change as it happens.
- Disruptors: And then there are the fast-growing disruptors – those nimble, ambitious businesses who are using new digital technologies to effect a wholesale restructure of a traditional value chain – and in the process putting the old dinosaurs out of business. There are huge opportunities ahead of today’s disruptors to achieve a landgrab from established industries. But there are also risks in the timing and resourcing of tactics, together with anticipating the retaliatory defensive moves of incumbents.
What are the options for the leaders of today’s fast-growing disruptive business to keep looking up and ahead at the opportunities and risks – while keeping effective hold on the operational controls to steer firmly to the envisioned future?
Making Time For Strategy Is Hard When You’re Accelerating
“If you don’t know where you’re going, you’re unlikely to get there”
Digital Disruption is not just about the underlying technology – this is just an enabler of the changes brought about in the wider economic value chain. A business with a technology advantage needs to solve wider problems in order to effect a successful disruption strategy.
But think about typical fast-growing companies today – made it to a few million dollars revenue, growing 100% year on year, problems hiring people fast enough, projects are constantly under-resourced and running behind, sales are stacking up and needing even more resources next year, another round of capital to raise….the Board and CEO have their hands full just keeping the engine running. Over time, this can lead to strategic deficit – a blindness to the landscape changes that are happening around the company at just the critical moment when clarity of vision is needed.
Put simply, many fast-growing companies struggle to find space to fit strategy into their business cycle – leaving them vulnerable to missing external marketplace change risks and – more importantly – opportunities.
Some of the key challenges are summed up in the following quotes:
“We have our technology vision - pulling together a strategic plan is a distraction”
“The CEO is too busy running the business”
“The strategy will just sit on a (virtual) shelf”
“The tech industry too fast-changing, by the time you’ve written a strategy it’s out of date”
“There are lots of strategic plan templates and tools out there - none of them apply to our business”
“We can’t articulate our key success metrics because we’re disrupting the marketplace”
“Large strategic consulting firms don’t understand high growth tech business and cost too much”
“Overtaking Lane” Strategy
Digital Disruptors, like any business, should map out a clear strategy to guide their route through a changing market over a period of years, enabling them to overtake and accelerate away from incumbents. This change will be slow at first, like pushing a boulder continously uphill until, if successful, finally the business reaches a tipping point where there is clear momentum and the market dynamics change in the new entrant’s favour.
A useful metaphor for the four phases for disruption is “Overtaking Lane” Strategy:
- All the learnings from the Lean Startup movement apply here – Customer Development, Customer Validation, Customer Creation, early Company Building.
- It’s hard work getting a company off the ground, but the real work’s only just beginning.
Focus: Early Momentum, Preparation
- Gaining market traction, starting to win deals against incumbents.
- Go-to market is still “pre-chasm”, wider market acceptance is building but not there yet.
- Identify the competition: dinosaurs, innovators and watch out for other disruptors coming up fast behind you.
- Strike surgically where you have a clear advantage. Stay away where you don’t.
- Check that your business is prepared and ready for what’s coming up.
Focus: Direct Competition
- Ride the wave of change through your value chain as the mainstream market rapidly comes around to your way of thinking. Pick off your dinosaur competition rapidly with your clearly superior offering. Leave large innovators alone.
- Anticipate retaliatory defensive actions from incumbents.
Focus: Scale and Defend Market Share
- You’re now recognized as a market leader in your newly restructured value chain.Keep investing in innovation at scale, investing in defending your hard-won market share and building out features which maximize the advantages of your new platform.
- You are now the incumbent!
Fundamentally: Strategy Shouldn’t Slow You Down
Disruptors shouldn’t need to slow down on their execution to build effective strategy into their business operations and get on with overtaking the competition. It just needs a lean and agile approach to the early strategic review and setup, together with an ongoing cadence of regular reviews and disciplined measurement.
Bringing in an experienced strategy facilitation resource can speed up the delivery of the right sized strategic framework and choose the right planning tools. (Here’s a great resource of roadmapping tools I like to dive back into from time to time).
A typical 1-year programme to embed strong strategic practices into a fast-growing business is shown below:
- 3-4 Half-day workshops with Board, CEO, Exec Team.
- Define clarity of Purpose, Vision, and competitive position.
- Clearly understand how the market dynamics and value chain will change if you are successful.
- Develop what success looks like: achieving the vision. What KPIs will you measure? How will you measure them?
- Define KPIs and targets.
- Define strategic initiatives – what do you need to do to reach the targets set?
- Plan the resourcing to these initiatives and schedule the highest priority ones into a roadmap for the next year. (You can even treat this exercise as you would normal Agile planning for a Scrum project – define quarterly strategic “Sprints” and a backlog of strategic initiatives.)
- Diligently measure KPIs and report against them regularly – at least every month.
- Hold quarterly half-day strategic progress reviews.
- Keep a close eye on the competition but don’t get distracted.
- Aim to keep the strategic plan refreshed and looking out at least 3 years ahead.
The outcome of this investment in strategy gives the Board and Management the clarity of vision, timing and control to confidently steer and accelerate the company to success against a rapidly changing competitive landscape.
Fundamentally: don’t be afraid to continuously refresh and iterate the Vision and KPIs as the company makes progress. – strategy is something we “do”, not just write down!