The 7 habits of highly effective disruptors
Business leaders who think their company or industry is immune to digital disruption are probably in for a nasty surprise. All industries will feel the effects of digital disruption, so the question isn’t if your industry will be disrupted but when—and how well you’ll survive.
Columbia Business School management expert Rita McGrath knows a thing or two about disruption. McGrath and her team scoured the S&P Capital IQ database to identify organizations that embraced disruption over a 10-year period and continued to generate steady, year-over-year revenue growth. The result? In those 10 years, fewer than half of one percent of the 2,347 businesses analyzed managed to achieve five percent annual revenue growth—just 10 companies in total.
Fortunately for enterprises in the throes of disruption, McGrath and her team were able to identify seven common attributes shared by these disruptors, providing a digital disruption survival guide of sorts.
Here are the seven attributes and their implications:
1. Experiment and innovate
Bid adieu to your fear of failure. Companies that want to survive disruption should embrace their missteps and make midcourse corrections as needed. Stop talking and start doing—the new product lifecycle demands it. As Amazon CEO Jeff Bezos said of the Amazon Fire Phone flop, “If you think that’s a big failure, we’re working on much bigger failures right now—and I’m not kidding.”
2. Take informed risks
Make small, calculated bets early. Launch minimum viable products that you can bring to market quickly. You can always release upgrades and revisions later as needed. Nest Labs, for example, started with a relatively simple smart thermostat. That same thermostat can now detect when you’re home and turn on the lights for you.
3. Make bold changes
Ditch organizational rigidity when it comes to internal processes. Take incremental steps and make adjustments along the way. Reallocate resources and people to projects that need them most. Online retailer Zappos, for example, eliminated its internal corporate hierarchy, doing away with traditional bosses in favor of teams where employee roles shift based on customers’ changing needs.
4. Invest strategically
Disruptors make calculated investments in organizations whose products and services are truly aligned to their objectives and customer needs. For example, Apple recently invested $1 billion in a China-based ride-sharing app, gaining access to the data the app collected about Chinese consumers—a huge market for the tech company. Conversely, pass up opportunities that don't fit your core capabilities. Stay focused, and avoid lurching from one business area to a completely unrelated one.
5. Foster open innovation
Encourage everyone within your company to share ideas and suggest solutions to problems. Disband siloed “innovation units” and be open to forward-thinking ideas—wherever they come from, including your customers. HBO recently opted to drive innovation using so-called Team Bs, an idea taken from the Central Intelligence Agency. Like the agency, HBO now handpicks talented employees and places them in groups whose purpose is “to challenge conventional wisdom and look at all options with an open mind.”
6. Be agile and adapt
Strive for speed and flexibility in everything you do. For example, Spain-based retailer Zara implemented a “fast fashion” strategy that develops and releases new designs quickly in response to changing market trends. This has reduced the need for expensive markdowns because Zara's fashions stay in season and on trend.
7. Set clear goals
You need stable company management to survive disruption. You also need flexible strategies, a flexible culture, and long-term customers. Banco Garantia, an investment bank in Brazil, puts a limit on the number of corporate objectives it sets each year, and the C-suite boils down those objectives for employees, setting three to five individual goals for each person that ladder back up to the company’s annual objectives.
How to cheat digital death: 6 questions to ask
While McGrath's disruptive companies share all seven of the attributes above, most enterprises can't be expected to adopt the whole lot in one fell swoop. Instead, identify the traits that make the most sense for your business and its offerings, and take the necessary steps to implement them. You can start by asking—and answering—the following questions:
- What steps can we take to identify and encourage innovation, regardless of its origin?
- How can we change our approach to failure at both a micro and macro level?
- How do we raise awareness of the frustrations our customers have in doing business with us and using our products or services and turn those into innovation opportunities?
- What internal processes can we change to foster flexibility and customer focus?
- What systems do we need in place to produce and launch minimally viable products?
- What’s the right time to cannibalize an existing product or service in favor of a new offering that is better for customers?