Uber is the poster child du jour for “disruption” – a shift in an established industry or business model or product category that is often met with skepticism, only to be followed by the slippery slope of hubris, disbelief, rationalization, second-guessing, finger-pointing and half-hearted attempts to recover by the incumbent market leaders.
The last thing we may think of when we conjure up an Uber on our phones is the mountain of technologies that makes the deceptively simple service possible. But that’s the magic (a term my colleague, Paul Lewis, used in a recent blog) of technology isn’t it? Technology, often multiple technologies working in concert, has the power to create new business models and transform entire industries even while we rarely get to witness, let alone understand, what occurs behind the curtain (or inside the data center, wherever on Earth it may be).
As a business leader of an established, dare I say, mature organization, how do you leverage technologies, capital, and your teams to ensure you become the Uber and not get Ubered yourself? It’s much more difficult to transform an established company, and entrenched corporate culture; to become a disruptor, in essence to cannibalize one’s own market, product lines and customer base in order to not only survive, but thrive into the future.
I’m not going to dive into the differences between “innovation” and “disruption”, or even “disruptive innovation” as Clayton Christensen defined it more than 20 years ago – I’ll dig deeper into these topics in future blogs. Suffice it to say I agree with the growing opinion that “disruption” has become overused as a synonym for what is often incremental innovation – all disruptors are innovators, but not all innovators or innovations are disruptive. More on that another day.
The impact of a disruptive business model on a market-leading, but stagnant company or product category can be crippling as it scrambles to reclaim its relevance, retain its customers, and in some cases just to survive. Being on the losing end of disruption can be a matter of life or death, for the company itself, its employees, shareholders and customers. Anyone remember Kodak? Blockbuster? Nokia? There will be others...
But disruption doesn’t have to come in the form of a new company, new business model or a new product into an established industry (although unicorns do make for eye-catching magazine covers). Increasingly at Hitachi Data Systems we are seeing and working with large, well-established companies with decades of corporate culture and generations of products behind them, who are disrupting their own business model, evolving their businesses and in turn, changing the markets they serve - this can be the most challenging and most rewarding trick of all to pull off.
Often the term for this metamorphosis is “transformation”, and it is something everyone at Hitachi Data Systems and across the hundreds of companies within Hitachi Ltd, has taken on as our next act. Hitachi is transforming itself and in turn helping businesses, industries and entire cities enable and enhance their own next acts.
But how to begin or accelerate your digital and business transformation? How to adapt your processes, evolve your culture, become the disruptor? Well, therein lies the real magic.
Why even attempt to transform a well-established business, product line or corporate culture? The short answer is, “if you don’t proactively transform, someone will come along and force you to, and it might be too late.” Those organizations that are able to transform, to disrupt their own establishment, to adopt new technologies and processes to make a leap forward, to invest wisely but also take risks, to evolve the corporate culture and to do so with urgency stand to not only survive, but thrive.
An increasingly large and compelling body of research and data illustrate that companies who are able to master these elements, whether fast and flexible start-ups or established market leaders, have the highest financial performance across multiple measures.
Transformative companies generate more revenue per employee and per fixed asset than their industry peers. Increasingly many of the most disruptive organizations don't even own physical assets.
Transformative companies are by far more profitable than their laggard competitors. They leverage leading edge technologies, like cloud, to reduce their Capex and migrate what they do need to Opex (read: cloud) model. The savings can be funneled into continuing to grow the business.
Transformative companies achieve far higher market valuations that those who are not up to the challenges or risks.
And increasingly these companies, the transformers, the disruptors, the leaders, are born from technology, leverage technology, build their business model, their corporate culture and their differentiation using technology. We have passed the tipping point:
In 2016, 5 out of the Top 10 most valuable companies by market cap, are what I’ll call 21st-century pure technology companies (Apple (#1), Alphabet/Google (#2), Microsoft (#3), Amazon (#5), Facebook (#7)). Only 1 of those 10, Johnson & Johnson (#8), still derive the majority of their revenue from traditional physical, manufactured products.
5 years ago, 3 out of the Top 10 were technology companies (including Apple, which surpassed Exxon Mobile to become the most valuable company that year, Microsoft and IBM)
Go back 10 years, none of the Top 10 were tech companies. In fact, you had to dig deep to find today’s market leaders: Microsoft (#55), Apple (#283), Google (#439), Amazon (#906).
Some keys to transform and to become the "Uber" you always knew your organization could be:
- Leverage technology not only to build innovative products and services, but to help drive company-wide transformation.
- Technology can only get you so far – transformative companies and disruptors have a culture of innovation. People and process are as, or more, important to conjur that magic.
- You must have a vision of where you want to take your company and your customers. Why should a prospective buyer or investor go with you on this journey? How will your product, service, company help create new value in my life?
- Vision can only get you so far – you must have an achievable strategy to catalyze transformation and invest both capital and human resources to bring it about.
- Leadership, governance and accountability to evolve the company and the culture, to engage the market and customers and to continuously follow-up on transformative initiatives.
- Leadership can only get you so far – to truly achieve transformation, it’s got to become part of every employee’s individual culture, from top to bottom. Their commitment, their investment in time and energy, their accountability for the role they play in the journey, it all must matter.
Innovation comes in many forms, but it tends to be one of those “you’ll know it when you see it,” phenomena. Understanding disruption as a concept can be challenging. Disruption can come from a completely unexpected direction, from a previously unknown competitor or up-market from a lower-priced alternative. Both innovation and disruption can, from the observer’s perspective, seem like magic.
Creating a disruptive business model is an even larger challenge, but doing so as part of a holistic transformation of a large or mature organization in an established market is where real magic is made...or how it vanishes.
So...if you're part of an enterprise, or a current market leader or even an experienced disruptor yourself, I ask you...
Who's YOUR Uber?
Will you know it when you see it?