Disruption causes quantum shifts in industries and societal behavior by digitizing the analog, upending economic models and otherwise challenging the status quo. The disruptors think differently and act differently than the incumbents. Let’s look at how.
Business leaders are understandably concerned about disruption. Business as usual is a dangerous proposition in an age when entire industries can be upended by a disruptor armed with cloud-based computing power, lots of data, and effective ways of leveraging that data.
The typical response to the threat of disruption is digital transformation. However, digital transformation tends to be approached as an if/then statement. Specifically, if we embark on a digital transformation journey, then we’ll be able to compete effectively in the future.
“What they’re not recognizing is you have failed in your business,” said Jay Goldman, co-author of New York Times bestseller THE DECODED COMPANY: Know Your Talent Better Than You Know Your Customers and co-founder and managing director of digital workplace solution provider Sensei Labs, “You’re not being rewarded for doing something right,”
The quantum shifts that disruptions represent don’t happen overnight. A disruptor, like most startups, has an idea it hopes will change the world. It intends to challenge the status quo that has been created by an established order of market leaders with formidable market shares and deep pockets. However, the market leaders don’t serve everyone by design because not all business relationships are equally attractive or profitable, so they tend to focus on the most profitable segments and de-emphasize or ignore the less-profitable segments. Disruptors tend to take advantage of those opportunities, such as by serving niche markets or less-affluent customers.
The incumbents tend to ignore such startups because the new contender is relatively small, lacks resources and tends to have far less brand recognition. Moreover, the new contender has decided to address a market segment the market leaders have consciously decided not to serve. Then, when the new contender succeeds in those markets, it has to expand into other segments to continue growing and improving profitability. Ultimately, when the new contender starts to gain market share in the coveted market segments, the incumbents react, albeit later than they should have. As more market share is lost, the incumbents try to copy what the emerging leader is doing, which may not work well, if at all.
“If you say in the next six months we’re going to execute this transformation project and at the end of that we’ll emerge from this cocoon a new butterfly with everything we need to remain competitive from that point forward, you missed the point,” said Goldman. “There isn’t a set transformation that will keep you forever in a competitive state, ready to respond to the business environment. The only way to do that is to transform the fundamental parts of the organization so you are in a constant state of evolution and disruption.”
Achieving that state requires changing the company’s culture, leadership structure and tools.
By comparison, disruptors don’t have to transform because they’re new and have the luxury of creating a culture, leadership structure and toolset. Following are a few other things that separate the disruptors from the disrupted.
Disruptors are on a mission to affect major economic, business, industry, or societal changes. They have a vision and purpose that are woven into everything they do and the mindsets of their employees.
Incumbents often form a separate innovation group or hire a mover-and-shaker with a C-title, such as a Chief Data Officer (CDO) to lead a separate group. This powerful and brilliant executive, who typically comes from a high-profile tech company or a company in another industry, is given a massive budget, an enviable working environment and the freedom to hire the people necessary for success. However, there is a fundamental flaw in the approach.
“They set the group up [as a separate entity] for a whole bunch of reasons: 1) We know our culture will kill it if we put it inside the business and, 2) The kind of people we need working in that division are never going to work for our company if we try to hire them outright,” said bestselling author and Sensei Labs co-founder and managing director Jay Goldman.
They have an authentic culture
Every company has a culture by design or by default. Since disruptors lack a decades-plus legacy, they don’t have to transform from something traditional to something modern.
They recognize the importance of culture and the need for everyone in the company to not only buy into the culture but to advocate, promote, and advance it. Having a unified culture enables the realization of a unified vision and the execution of a unified mission.
In contrast, incumbents try to counter the effects of disruptors by attempting to mimic them. In doing so, they miss a very important point, which is what works at Google works because Google is Google. Every company is unique in terms of its people, processes, tools and value proposition.
“The one value that you see coming out of [the tours given by innovative companies] is to come back terrified and convinced of the need to make change,” said Goldman. “[Usually, the CDO and C-suite executives are] going to come back with good notes of how they might do that, but they won’t recognize the depth of the threats they’re facing.”
They reflect modern values
Startups have the benefit of being born into whatever “modern” era exists at their founding date. Today’s startups reflect the values of the younger generations including Millennials and Generation Z (Gen Z), both of which are highly tech-savvy.
“It’s not just you have a different set of values and priorities,” said Goldman. “You have an intimate level of familiarity with technology that the leaders don’t have because they weren’t born into that age.”
Goldman once met with a group of C-suite executives who couldn’t understand why their successful life sciences company had trouble attracting and retaining younger employees. To better understand the issue, they asked employees for suggestions, many of which they considered ridiculous. For example, they didn’t understand why younger employees would want to wear jeans instead of suits. How would that improve work effectiveness?
“The reality is, that the executives who made a company successful are disconnected from what people want in the workforce today,” said Goldman. “People will take a pay cut to work at a business where they’re deeply aligned with the values of the company and they believe they’re doing good for the world. In my generation and the generation before me, you looked for a well-paying job, and company values were on a poster with a soaring Eagle on it in the break room.”
They have the latest and greatest tools
Cloud-based technologies enable startups to do what was cost-prohibitive in the past. Now, businesses of all sizes have affordable access to massive computer power, storage, data analytics, and AI. More importantly, they can experiment and iterate in low-risk, low-cost environments and scale as necessary to meet the growing requirements of their expanding customer bases.
In contrast, the life sciences company C-suite executives didn’t understand why employees didn’t want to use Lotus Notes!
Their leaders are enablers
Disruptors attract, hire, and cultivate highly-effective people. Changing the status quo of an industry or society at large not only requires bright, driven people, it requires leaders who are not threatened by other bright, driven people.
In a command-and-control hierarchical structure, power and great ideas may be reserved for the chosen few.
“Traditional roles are managers who are there to make sure things happen on time and on budget, and that you hire the right people to do the job,” said Goldman. “When it comes to topics like transformation, innovation, and disruption, you should be a gardener. Your job as a gardener is to make sure your plants get enough sunlight, water, and nutrients. You can weed out the weeds that would have prevented them from growing and you can protect the garden from being raided by animals.”
Leaders should be enablers instead of managers. Enablers want great people to do great work, so they create an environment that includes the freedom to do that. The traditional management mentality can be stifling by comparison when people can only rise to whatever level of competence or incompetence the manager himself or herself possesses.
Change drives them
Change is what drives innovation and disruption. It’s about affecting change and also having the agility to change when an experiment or even the entire business model fails.
Goldman said even though incumbents may be out interviewing customers and iterating products rapidly in response, they’re not doing the same internally. Heads of innovation tend to be brilliant at product innovation, but they’re not necessarily change agents,
“The actual MVP customers you should talk to are the P&L holders that will have to sponsor [the innovation lab],” said Goldman. “Don’t present something that’s so radical and transformative [the P&L holders] look at their products and realize they’ll probably lose their job.”
Their value proposition trumps products
Disruptive companies tend to view the world differently than their incumbent counterparts. The disruptive companies think in terms of value; incumbents tend to have product and solution portfolios that are presented and regarded as such. They articulate use cases, but they’re missing their company’s fundamental value proposition.
For example, when a fertilizer company was going through a transformation, it “did all the right things,” according to Goldman. It changed the business, empowered the leaders and trained all employees to think creatively using tools and modern problem-solving approaches. During the process, the company’s identity shifted from being a fertilizer company to one that improves crop yields. While the distinction may seem slight, the new definition enables the company to imagine and provide other products and services that improve crop yields. It’s now using satellite data to tell farmers about crop issues they’re not aware of so they can remediate the issues with unprecedented precision (arguably using the company’s fertilizer products). The satellite data is also the basis for a new subscription-based service that guarantees a certain level of crop yield improvement,
They create best practices
Disrupting an industry or changing people’s behavior requires a different approach. When a disruptor is successful, its best practices are adopted by others who want to compete more effectively.
Right now, there’s a general belief that if a company implements best practices, it will transform or disrupt. The problem with best practices is that they’ve gone through an entire cycle that is invisible to others and therefore not completely understood by others. That cycle is to conceive, test, deploy, scale, and promote via case studies.
“You’re looking at a best practice that is five to seven years old,” said Goldman. “[It’s been through] two or three generations of technology that you’re trying to make work in your company, so that’s Problem A. Problem B is that [the original] thinking was done in a completely different organization, which had a different skill set, a different talent base, access to different data, a different funding model, and it’s written up in a 5-page document. So, you’ve lost all the depth of the real context in which those innovations were born and you have a highly simplified view.”
What’s not obvious are all the failures that helped shape the final solution. Because no one is aware of those failures, people may repeat them.
They have the right talent
Disruptors couldn’t accomplish what they do if they didn’t have “the right” teams in place. Like any other organization, not everyone makes the cut as the company evolves or chooses to stay as circumstances change. However, they’re keenly aware of their goals and what must be done to achieve them, part of which is ensuring the right people are in the right jobs.
“Employee engagement is gaining momentum. How you keep people engaged has got to be front and center to your strategy,” said Randy Mysliviec, Managing Director of the Resource Management Institute. “Not only does talent management need to be more fluid, you can’t expect people to stay at your company for 20 years regardless of how you treat them.”
In the last two years, enterprise IT resource management has shifted from a simple supply and demand model to a more forward-looking strategic model that considers where the company wants to be in six months. So, when it comes to recruitment, hiring managers are now considering what talent they’ll need to get where they want to go, Mysliviec said.