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Disruptive Business Models

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Disruptive Business ModelsHow disruptive is your business model? While much has been written about corporate vision, mission, process, leadership, strategy, branding and a variety of other business practices, it is the engineering of these practices to be disruptive that maximizes opportunities. Without a disruptive focus you are merely building your business model on a “me too” platform of mediocrity. Few things are more critical to your efforts in increasing your revenue growth and corporate sustainability than understanding the value of disruptive innovation. So, in today’s post I’ll examine the power of disruption as a key business driver…

Disruptive business models focus on creating, disintermediating, refining, reengineering or optimizing a product/service, role/function/practice, category, market, sector, or industry. The most successful companies incorporate disruptive thinking into all of their business and management practices to gain distinctive competitive value propositions. “Me Too” companies fight to eek out market share in an attempt to survive, while disruptive companies become category dominant brands insuring sustainability.

So why do so many established and often well managed companies struggle with disruptive innovation? Many times it is simply because companies have been doing the same things, in the same ways, and for the same reasons for so long, that they struggle with the concept of change. My engagements with CEOs often focus on helping them to embrace change through disruptive innovation. As a CEO, I would strongly suggest you conduct a gut check during your next executive meeting by counting the number of times you hear your CXOs say things like: “That will never work,” “We can’t do that,” “That’s not my problem,” “We’ve always done it that way.” or my personal favorite, “We need to focus on our core business.” Don’t allow your enterprise to adopt an attitude of complacency, because the simple truth is that complacency kills companies.

There are examples of companies throughout history and across every sector that have either failed to embrace disruptive business models, or have failed to maintain their once disruptive edge. Let’s just take a moment and look at a few notable examples of what happens to companies that become complacent…Why didn’t the railroads innovate? Why didn’t Folgers recognize the retail consumer demand for coffee and develop a Starbucks type business model? Why didn’t IBM see Dell coming? How did Microsoft not keep Google at bay? Why did American auto-makers lose their once dominant position to their European and Asian counterparts? How did the brick and mortar book stores let Amazon get the jump on them? I could go on-and-on with more examples, but the answer to these questions are quite simple…The established companies become focused on making incremental gains through process improvements and were satisfied with their business models and didn’t even see the innovators coming until it was too late. Their focus shifted from managing opportunities to managing risk, which in turn allowed them to manage themselves into brand decline…

At one end of the spectrum take a look at the companies receiving investment from venture capital and private equity firms, and on the other end of the spectrum observe virtually any category dominant brand and you’ll find companies with a disruptive focus putting the proverbial squeeze on the “me too” firms occupying space in the middle of the spectrum. With the continued rapid development of technology taking the concept of globalization and turning it into hard reality facing businesses of all sizes, it is time for executives and entrepreneurs to examine their current business models from a disruptive perspective. Ask yourself the following questions:

  1. Why should anyone be led by you?
  2. When was the last time your business embraced change and did something innovative?
  3. When was the last time you rolled-out a new product?
  4. Are your management and executive ranks void of youth?
  5. Do people in your organization laugh at new ideas?
  6. When was the last time you entered a new market?
  7. Are any of your executives thought leaders?
  8. When was the last time you sought out a strategic partner to exploit a market opportunity?
  9. Does your organization focus more on process than success?
  10. Are employees who point out problems looked down upon?
  11. Do you settle for just managing your employees or do you inspire them to become innovators?
  12. Has your business embraced social media?
  13. When was the last time your executive team brought in some new blood by recruiting a rock star?
  14. Does anyone on your executive team have a coach or mentor?
  15. Has anyone on your executive team attended a conference on strategy, innovation or disruption in the last year?

If you’re an executive or entrepreneur and you can’t put forth solid answers to the majority of the questions referenced above, then your company is likely a market lagger as opposed to a market leader. If you continue to do the same things that you have always done in today’s current market environment you will see your market share erode, your brand go into decline, your talent and customers jump ship, and your potential never be realized.

Albert Einstein said it best when he noted “the definition of insanity is doing the same thing over and over again and expecting a different result each time.” Bottom line…don’t be the CEO who causes your management team to continually say “the boss won’t go for that one.” If you lead from the front by inspiring change, innovation, and disruption your business will surely prosper.

Is your business focused on disruptive innovation? If not, why not? I’d be interested in your comments…

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    Mark Oakes

    June 15, 2010 at 12:28 am

    Mike,

    Good Post!

    One of the challenges with disruption is the 'cultural' balancing act required to attend to a core competency (primary revenue driver) while simultaneously recognizing that disruption must occur at the borders. Where companies often fail, is not recognizing their incumbent status and their failure to invest in a proper defense at their own borders. This also applies to launching an effective (innovative) offense on someone elses borders. It takes skillful attention to self-cannibalization, a bias toward innovation and recognition that 'sacred cows' often become someone else's T-Bone dinner steak.

    Keep up the good work

    Mark

      mikemyatt

      June 14, 2010 at 8:16 pm

      Brilliant commentary Mark. The understanding that neither offense or defense in and of themselves wins games, but rather that it's the proper blending of the two that insures victory is imperative for all leaders to understand. Your comment about "sacred cows" is also spot-on. I always appreciate your sage perspective Mark.

    […] So why do so many established and often well managed companies struggle with disruptive innovation? Many times it is simply because companies have been doing the same things, in the same ways, and for the same reasons for so long, that they struggle with the concept of change. My engagements with CEOs often focus on helping them to embrace change through disruptive innovation. As a CEO, I would strongly suggest you conduct a gut check during your next executive meeting by counting the number of times you hear your CXOs say things like: “That will never work,” ”We can’t do that,” “That’s not my problem,” “We’ve always done it that way.” or my personal favorite, “We need to focus on our core business.” Don’t allow your enterprise to adopt an attitude of complacency, because the simple truth is that complacency kills companies.  via n2growth.com […]

    patriciazell

    June 15, 2010 at 12:42 pm

    While I'm not on any leadership team in the business world–I'm a teacher and writer–I agree with your thoughts on the concept of disruption. Change is so necessary to keep things fresh and to keep them moving. An important part of effectively using change is to keep our eyes open for opportunities to think and innovate. Then, we have the challenge to make our changes less threatening, so productive communication skills are a must. Thank you for this post–you're making me think and that is a good thing.

      mikemyatt

      June 15, 2010 at 2:56 pm

      Hi Patricia:

      One of the best compliments I can receive is that I cause people to think. Your comment about making change a less threatening through improved communication is an astute one. Thanks for adding value to the conversation Patricia…

    Rick

    June 16, 2010 at 2:19 am

    Although Mike's comments are insightful and inspiring, one needs to take care not to throw the baby out with the bathwater. Disruptive Innovation (per the Christensen model) generally takes place in an industry dominated by an oligopoly and having an unserved segment ( towards the lower end in terms of profit margins and product capability) which attains visibility as a result of technological expansion in what is most of the time, a non-related field. To survive for long enough to become a member of that vaunted oligarchy is no mean feat, and in a competitive market requires that one focus on factors related to process standardization and cost containment. As Christensen points out, cultures that have successfully (and necessarily) made the transition from seat-of-the-pants entrepreneurialism to machine-like mass-producers cannot be expected to relinquish their present-day competitiveness in favor of becoming "disruptively innovative" for a possible benefit in the unforeseeable future. There is a way to prevail at this game, of course, but in order to survive for long enough to become disrupted – that way is not one which involves finding a magical elixir which makes everyone young again. Thanks for the thinking points, Mike – as well as for the opportunity to weigh in. Rick (http://www.linkedin.com/in/decisionscience)

      mikemyatt

      June 16, 2010 at 6:26 am

      Hi Rick:

      Great points and food for thought. While I'm a big fan of Claytons, I don't always agree with him – I'm sure he feels the same way about me :). I have witnessed disruption occur at every level of corporate maturation and I believe it's important to note that disruption isn't necessarily reserved for the privileged or mature entity. That said, your cautionary comments are well worth noting and greatly appreciated. Thanks for adding value to the discussion Rick.

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