Is your business staring down the barrel of disruptive change? No? But if the headlines are to be believed, disruption is trying to eat your business — all of our businesses. Yet the smartest companies are seeing disruption not as a threat but as an opportunity — and some are even now disrupting themselves before someone else does.
Search through any business magazine and you’ll find pages and pages of headlines like these:
But wait a minute — how many industries have actually been disrupted?
An obvious example is the video rental industry. Here’s what happened to my ‘local’ video store.
And when was the last time you read one of these?
But although printed newspapers are down, they are certainly not out. And that is true of almost all the industries which have supposedly been disrupted by new technology and business models. Take the hotel industry. “Airbnb is the major disruptor in the multi-billion dollar hotel industry,” claimed Business Insider magazine. But the facts indicate otherwise. Despite Airbnb, many hotel chains have been enjoying record occupancy levels and profitability of late. The CEO of Hilton Worldwide says AirBnB doesn’t scare him.
“I think it becomes more of a segment unto itself,” Chris Nassetta says. “I do not believe — strongly do not believe — that they are a major threat to the core value proposition we have.”
Analysts at Deutsche Bank agree that despite being worth more than many hotel chains (and almost as much as Hilton), Airbnb isn’t a threat to the industry — yet.
But how can hotels and Airbnb both be having record years?
“Ultimately, Airbnb looks to be ‘increasing the pie,’ rather than necessarily reducing the share for others,” say Iona Dent and Geof Collyer of Deutsche Bank. “Currently when cities sell out for an event, for example, and the market rate goes significantly higher than normal, we believe that is where Airbnb is currently offering a key alternative.”
They liken the effect to low-cost airlines such as Jetstar in New Zealand, which has expanded the whole air travel market by creating opportunities for people who would otherwise have not been able to afford to travel or would have travelled less frequently otherwise. The aircraft of Jetstar’s long-established competitor, Air New Zealand, are still full on peak-time flights.
So do you really need to worry about disruption in your business?
The answer is no, you don’t need to worry about it. Worry’s not going to do anything for you except maybe raise your blood pressure. Innovation is a fact of life in business. Always has been, always will be. Sometimes that innovation will cause disruption to your business — for example, if everyone’s streaming movies on Netflix and you’re left standing in your empty video store. But even the video store industry hasn’t completely collapsed — despite the demise of Blockbuster and, in New Zealand, Video Ezy, some chains such as Family Video are still expanding.
Although the pace of innovation is faster than it has ever been, very little innovation is truly disruptive. No matter how amazing and compelling the innovation, change naturally takes time because people take time to adapt to change. Even Blockbuster knew about Netflix before it transformed the video rental industry. It actually turned down an opportunity to purchase the company. Doh!
What’s important right now is that you accept that your business needs to keep evolving and that you have a strategy to keep abreast of innovation and change, in your industry and outside it, as well as embracing a culture of innovation within your own company. I am working with a number of businesses at the moment which have taken this strategy to the next level and hired me as an independent strategy consultant to explore ways to potentially break their business model. By identifying potential disruption before someone else does, they hope to futureproof themselves against disruption.
A smart example of how this kind of strategy can work took place a small resort town in New Zealand. A colleague and friend of mine, who later went on to establish a leading New Zealand pizza franchise, had a surfwear shop in the town. His store had no competition, but my friend was nervous about the expansion of a major international chain store into the town. His strategy? To disrupt his own business by opening his own competing store in the same town. The rationale? To gain greater penetration of the market, use the rivalry between the two stores to optimise their individual performance, and dissuade any larger competitors from entering a market already served by two stores. Genius.
Another example of a business using disruption to create a competitive advantage, albeit not in the way disruption using works, is Australasian advertising agency, Whybin\TBWA, which bills itself as ‘The Disruption Agency’. They have even acquired a registered trademark on the brand ‘Disruption’.