Innovate, transform, remodel, or ..

While consumers enjoy cheap rides with UberPop, cabbies in regulated areas are struggling to survive due to their expensive taxi-licenses, lease contracts and fare cuts taken by cab companies. How to react? Built an even smarter app? Reform the taxi-business? Re-invent the business-model? Or ..

The question, “What to do when your future is threatend by disruptive innovation?”, will hit most all of us, sooner or later. Probably sooner.

First, let’s have a quick look at what ‘disruptive innovation’ actually is. According to Harvard professor and beststelling author Clayton Christensen the term refers to ‘a produce (product or service) that does not fit the minimal requirements of a customer’.

This means that the time between market introduction and mass market acceptation leaves a window of opportunity for incumbent suppliers to respond. However, in time some of these innovations will start to meet customer demands. Time is therefor limited.

So the big question is: what are you going to do during this time?

The awareness, of having time to react, is a valuable lesson by itself, which hopefully makes your time reading this blog already worth while.

But there is more.

Because the question I presented to you is: what are you going to do? Will you counter-attack the disruptor with your own innovation? Will you transform your command & control organization into a change & create holacracy? Do you plan to redesign your market penetration strategy or do prefer to invent a whole new business model?

Or ..

Kodak

In almost every management book or presentation Kodak is used as a textbook example of what might happen to a marketleader if a company isn’t responding effectively to technological disruption – in case of Kodak: the rise of digital film and photography.

But their failure wasn’t due to a lack of response, according to Scott Anthony in Harvard Business Review.

Kodak wasn’t merely the inventor of digital photography, they invested billions in it. In 2001, way before a line of code was written by Zuckerberg to create Facebook, Kodak bought the website Ofoto to help custumers share their digital ‘Kodak Moments’ online with friends and family.

Despite, Kodak failed to see or accept that social sharing by itself was destined to be the new business model.

How was that possible?

In my opinion Kodak acted in a way that is typical for most technology-driven companies : they innovate based on a gut feeling, not from customer demand.

Less than 1-out-of-10 technology startup fail because they don’t care about actual customer needs. The ones that do succeed are likely to fail later.

To understand market needs and to create products and services that offer real value to customers should be a no-brainer. But Henry Ford (1905) made it already clear that technology was a different ballgame: “If I had asked people what they wanted, they would have said faster horses”.

So although technology-driven companies tend to fail, most of the technology we know today only exists because of their gut feeling and persistence.

(i) Google’s founders indexed the internet. Not because of customer demand, but because Brin and Page believed it could and shoud be done.

(ii) Apple introduced the iPhone and the supporting ecosystem, despite Jobs knowing it would cause huge problems on the mobile network and potentially destroy customer satisfaction.

(iii) Uber knew they would cause havoc to licensed taxi-drivers in regulated markets, but their gut feeling told them the world needs a more liberal and sustainable form of transportation.

So they persisted. Like most tech-companies do.

The problems for technology-driven companies start to appear when gut feelings turn into arrogance and ignorance.

It happened to Xerox (PARC), BlackBerry, Blockbuster, etc.

The fact remains that when Facebook bought the digital photo sharing app Instagram for 1 billion USD, a company of  a 13 employees, Kodak’s market value had dropped from 30 billion USD (1997) to a mere 145 million USD.

The lesson for other technology-driven companies isn’t to stop believing their gut feelings. Heaven forbid!

But what they should realize is that in order to stay relevant (and become significant) they should learn to listen to their customers and get them involved. 

For some very good reasons:

(1) as the speed of technological innovation gears up, new opportunities arise ever more quickly, offering both incumbents and new comers a level playingfield. But brands that value, embrace and incorporate their existing customers will have a major head start.

(2) acquiring a new customer costs 5 times more than retaining a customer. It is therefor more cost effective and profitable to focus on retaining customers and build from there.

(3) research revealed that so called Network Orchestrators, companies that build platform to facilitate interactions that create value, are the most profitable and cost effective companies.

Therefor, to me the missing item in this blog title is to generate value. Not just by inventing new stuff, but by means of innovation through collaboration.

(4) Besides, if you start to value your customer and make them feel appreciated they will in return add value to your brand.

(5) And if they pick up on a new disruptor, chances are they are far more likely to share insights with you than if they were to believe you couldn’t care less about their needs.

Show them empathy. It works. Ask Apple!