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How you know when your company is being disrupted

Reinvention and resilience are key to the success of any business. Look no further than the implosions of Borders Books, BlockBuster, Kodak, or any of dozens of other once seemingly impregnable or too-big-to-fail companies that have tanked in the past decade, to remind us that companies that fail to notice and adjust to change – and to see opportunities to innovate – are effectively digging their own graves.

So, amid today’s accelerating technological change and the resulting hyper-connectedness, how do we recognize when our own company is vulnerable – when we’re facing our own Kodak moment? I’ve pulled together  the seven major disruptive forces that have overturned and redefined the way business is done today.

The Google Effect: The separation of humans and information

The last time you Googled something, did you stop and think, “Hmmm, I wonder if these results came from a database in Oregon, Georgia or Virginia, or maybe from The Netherlands or Australia?” Of course not. Through the Google Effect, information and physical location in our personal lives have been fully virtualized and dematerialized.

So why in many organizations are the two (often very expensively) still forced to be co-located?

The Skype Effect: Free communications, death of distance

Remember yesteryear, when the physical distance of a long-distance phone call really mattered? When a call of 10 miles was significantly cheaper than a call of 1,000 miles, and an overseas call was a true luxury? Today, internet -based communication platforms have cost and usage bases that are completely disconnected to distance; speaking to someone around the world via the internet is the same as calling across the street.

So why mandate that employees travel to their knowledge work, when instead the work can go to employees?

The Facebook Effect: The virtualization of human relationships

Fundamental to Facebook’s immense popularity is that it allows you to maintain and enhance personal relationships even without regular physical presence.

The same intimacy is available to corporations, where working relationships based on capability and mutual trust no longer need to be physically proximate. So why stick to the high-maintenance, time-consuming and costly methods of the past?

The LinkedIn Effect: The virtualization of specialized knowledge

LinkedIn allows us to map our professional networks, and then to quickly locate trusted expertise. Why can’t organizations work in the same manner? The LinkedIn Effect provides a map of our personal networks; when brought to business, this capability enables the virtualization of expertise, allowing the right person to be brought to the right task at the right time.

The Amazon Effect: The virtualization of customer experience

Amazon knows you better than the manager at your corner store. Yet, when was the last time you met anybody from Amazon? This virtualization of customer intimacy is led by (but not the sole domain of)  new market leaders like Amazon, Netflix and Apple. Yet it is a viable option available to all organizations.

The Pandora Effect: Algorithms building customized products

“How did they know that?” If you’re a Pandora customer, you’ve probably asked that question. You provide Pandora with your favorite artist, or a few songs you like, and suddenly hours of music you truly enjoy is produced. It’s not magic; it’s Pandora’s algorithm at work.

This algorithm, finely honed by reviewing massive amounts of data, creates remarkably accurate musical taste profiles. In knowing just a few things about you – the first few dots if you will – the algorithm connects the rest of the dots to create customized play lists.

From such experiences, consumers are beginning to consider all their other business relationships: “If Pandora figured this out about me so quickly, why is my bank still so clueless? After going to the same ATM for 10 years, it still asks me what language I speak!”

iPhone Effect: The experience is more valuable than the physical product

Customer value is no longer confined to the physical manifestation of a product. Instead, it’s often found in the software. This was central to the recent transition in the mobile phone industry. Ten years ago mobile phone providers competed on hardware attributes – remember the famous Nokia ringtones, or the form factor of the Motorola flip-phone? That was the basis of competition.

Today, winning iPhone and Android models differentiate on the experience delivered chiefly by software. Most of the physical attributes of a mobile phone are now commodity. The experience has usurped the widget.

These seven effects are working together to alter the competitive fundamentals of many industries. With game changers like these, the cost of adhering to an industrial business model is significantly greater than moving to something new.

Malcolm Frank is Executive Vice President of Strategy and Marketing at Cognizant Technology Solutions, a global provider of IT, consulting and business process services based in Teaneck, N.J. 

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Photo courtesy justin maresch/Shutterstock.com.

 

 

14 Responses to “How you know when your company is being disrupted”

  1. Thomas Laur

    Insightful breakdown of the powerful external forces disrupting any business models operating on a large geographical basis.

    The key macro challenges of private enterprise are fairly consistent since 2007: (1) Globalization on the sell-side and supply-side (2) Innovation and risk balancing (3) Resilience through flexibility and nimbleness in the cost structure and product development side.

    These forces highlighted by Malcolm Frank are changing the rules of the game and creating a situation where the successful pioneer is able to capture disproportionate share. As a result, one clear winner, maybe a viable follower, the rest will struggle.

    My sense is that while business model flexibility is key, velocity of change will become a significant variable in the magnitude of success achieved. This suggests some interesting questions about the future of governance model, investment structuring, risk management theories…

    Thomas Laur

  2. Ethan Hale

    Could someone help clarify this? Does it mean it is being forced to exist in a library or database rather than in a cloud?

    Through the Google Effect, information and physical location in our personal lives have been fully virtualized and dematerialized. So why in many organizations are the two (often very expensively) still forced to be co-located?

    Ask Yahoo… So why mandate that employees travel to their knowledge work, when instead the work can go to employees?

    When organizations can combine the intimacy of Facebook with the Skill sets of Linked In they will have mastered the connectedness needed to be agile partners in designing perfect fit solutions for their clients.

    Being able to create the data capturing software and utilize that to make future predictions as to consumer/organizations needs and purchases seems daunting but when taken with info gleaned from Social Sites and Company/consumer website or input, this ability is within the grasp of most SMB and the difficulty for large organizations is getting out of their own way.

    Ethan Hale

  3. Great article, the forces of disruptive innovation are often translated of late and are very different to optimised innovation which is not the same. I also think it is important not to confuse invention with disruptive innovation.

    I am wondering with all of the optimised and disruptive innovations how many physical people will actually be left working, and the impact on emplyability and what will we all be doing as organisations can innovate their costs to operate less and less for more and more

  4. Market disrupters deliver a surge of surprises as the waves they create consist of unconstrained strategy, growth and development.

    Companies with the courage to ride those waves enjoy the energy and unpredictable benefits that the disrupters make possible.

    Those less courageous sit safely on the beach and watch the world on which their business relies, change in front of their eyes. Before they know it, they’ve missed yet another wave and their deck-chair becomes even more comfortable as they continue to sit back and just watch.

  5. Mark J Stonham

    This article highlights the need to innovate in many ways – value proposition, product, process, relationships & technology – underpinned by very clear understanding of market and customer needs and preferences.

  6. Zulfiqar Mithani

    Yes, we should be taking advantage of the technologies around us but don’t forget the “human touch” in business management. I feel that physical networking is far benefiting than the virtual networking.

    A company should be mindful of its spending – i.e. right cost or the right intervention. When we say “investing in human capital” we should not forget how humans operate. Yes, avoiding travel cost by keeping a balance between physical training and online/virtual training could be a good way towards savings (every penny counts concept).

  7. Very interesting approach. I can relate in that the company I work for used to be the 800 lb gorilla, and now we are fighting to keep competitors from taking the lead. I find that SOP’s with the allowing of innovation is a key to success in productivity. But to really succeed in your market you need to know your customer in and out. You can have the best product, but if no one wants it you really didn’t succeed did you. But to succeed as a company as a whole you also need to acknowledge the employee, if you don’t value your employee you are not creating a healthy environment to work in.

  8. “So why mandate that employees travel to their knowledge work, when instead the work can go to employees?”

    Marissa over at Yahoo didn’t get the memo.

    By the way, the new Yahoo policy is killing Quora whose volunteer moderation staff was comprised mostly of work-at-home Yahoos.

  9. Patrick Savalle

    One would expect to find the ‘Bitcoin’ effect, or the ‘Ripple’ effect on top of this list, since these are without a doubt the most disrupting technologies of them all.

  10. David Howell

    “A well-oiled machine that’s raking in billions in profits today is very hard to disrupt for the sake of tomorrow’s competitiveness.”

    This is exactly the problem

  11. Robin Solis

    The distance of a phone call was a made up marketing play from the very start. There was no actual justification for the increased cost. It was just a ploy to charge more.

  12. Srikanth Rajagopalan

    How many times have we seen fancy ppt’s with similar catch-phrases discussed with much intellectual vigor, but never taken seriously outside the boardroom?

    In my experience, knowing these market forces are at work is the easy bit. Acknowledging that they affect your business is harder.

    Even so, the largest organizations are ill-equipped to make the strategic shifts to compete in a changing marketplace. A well-oiled machine that’s raking in billions in profits today is very hard to disrupt for the sake of tomorrow’s competitiveness.

    Ask the folks at Nokia, Kodak and Motorola. Kodak and Motorola refused to accept reality and died. Nokia accepted the reality, made the harsh changes necessary, but finds itself emaciated by years of complacence and arrogance as it executes in its new avatar. While I wish them well, the jury is still out …