In Harvard Professor Clayton Christensen”™s book “The Innovator”™s Dilemma,” he warned that the most established firms get trapped into making better and pricier products for their best customers, leaving them vulnerable to attack by nimble disruptive companies from below.
In his next book, “The Innovator”™s Solution,” Christensen realized that the disruptive force was not technology, but the entirely new business models being launched by innovators that the existing players never saw coming. Be aware of threats that can blindside and devastate and use technology to stay ahead of business model changes.
Over a decade ago the $40 billion music industry was blindsided by Napster which had 25 million users on a free digital system that never crashed. The music industry sued because Napster was not paying royalties, forcing a shutdown. But, six months later, nearly 100 alternative services sprang up to replace Napster, and today we have totally legitimate businesses such as iTunes.
Around the same time, traditional photography was blindsided by digital, forcing Polaroid to declare bankruptcy. According to Reuters News Service, Polaroid”™s last recorded share value was 28 cents compared to a 10-year high of more than $60 ”“ reached in July 1997. The 131-year-old film pioneer, Eastman Kodak, filed for bankruptcy on July 19, 2012.
Discount retailers were blindsided by Walmart and Amazon, the video rental industry by Netflix and Redbox and the printed encyclopedia industry has been virtually replaced by Wikipedia. In every case, as “The Innovator”™s Solution” points out, the disruptive force was not technology, but the new business models launched by the innovators using it.
In the book, “Need, Speed, and Greed,” author Vijay Vaitheeswaren says Bill Gates was asked if he thought the wave of technological progress brought on by the Internet revolution was cresting. Gates responded, “Absolutely not.” Gates noted that the pace of technological changes is more rapid today than ever before.
With the accelerating pace of change, companies will get blindsided more often than in years past. So what should you do? Perhaps the answer can be found in an article titled “Why Did IBM Survive for 100 years?” by Kevin Kelly and discussed on Forbes.com in 2011.
It starts with a statistic stating, “Of the top 25 companies on the Fortune 500 in 1961, only six remain there today. Nearly all the companies our grandparents admired have disappeared.” Of course, the survival rate for small- and medium-sized businesses is even grimmer. Kelly then discusses how IBM survived its “near death” experience in 1993.
Kelly states, “IBM”™s core mainframe business had been disrupted by the advent of the personal computer and the client server. IBM couldn”™t compete with smaller nimbler less diversified competitors.” So how did IBM survive its near death experience and remain one of only two companies on the Fortune 500 list since 1900?
They brought in a new leader from outside the industry. Lou Gerstner had to learn the business and had the good sense to start talking with and listening to customers.
Gerstner knew that an invisible force called “creative destruction” continues to eliminate old, inefficient companies and replaces them with outsiders employing innovative new business models.
All organizations must talk with and listen to what their customers want and, like IBM with their core mainframes business, muster the courage to make their own products and services obsolete. Introduce new ideas and business models to the marketplace. Failure to do so will cause blindsiding as new competitors render you obsolete.
Questions for discussion:
Do we really know what our customers want right now?
How can we develop a new business model and add more value?
Joe Murtagh, The DreamSpeaker, is an international motivational speaker, meeting facilitator and business trainer. For questions or comments, email Joe@TheDreamSpeaker.com, TheDreamSpeaker.com or call (800) 239-0058.
