Why do traditional companies fail where disruptors succeed? The magical recipe : “intangible assets with the internet as perfect distribution channel in a hyper connected world through technology”. The best known examples : Airbnb has no rooms and Uber has no cars. No assets thus. What is more is that the consumer is their product, they just offer the technology, the trading platform. They create a new WIN-WIN situation via the new ‘capitalist’ sharing economy! They activate the “unused” potential. And so they bypass the traditional companies. Uber is attacking the taxi driver companies, the express delivery companies and many more to come. They activated a driver network that was not “in business” before. They give consumers intrapreneurial freedom.
As the list of unused potential is unlimited – from rooms, office spaces, lunches, credits, private cars, parking lots, education to talent – disruption is omnipresent. These disruptors also aim for fast scaling via the internet and go global in a record time. They get big financial injections from successful other disruptors or VC companies. At least the promising ones, because one might never forget that at the same time 99% of the start-ups fail. The very successful start-ups showcase swift market penetration and steep market share curves. This winning mentality makes them almost invincible, whilst the classical business are more and more confronted with disengaged personnel. People want to join a winning team.
So how can the classical business get in a winning mood again? There is only one way and that is through innovation. For traditional companies it is really important to build an organization that discovers, shapes and brings innovations to scale as part of its core business operation! Encouraging entrepreneurship, creating resilience and leveraging success at speed. The enterprise functions as a big learning loop. The Boston Consultancy Group states even that classical businesses should disrupt their own business before others do. Not easy, but probably necessary to think in a “new” way.
The problem is that lots of companies see the digital transformation as the ultimate solution. But what you see is that this is often resulting in the digital substitution of the current business instead of the necessary digital innovation. Why? Because they continue to look at their business in the same classical way, while only shifting to the digital area. They do not reinvent nor broaden their business. And since in the digital world competition is fierce and the rules of the market are very different, often as a result these companies change a dollar for a cent. Real ground breaking innovation is looking beyond the current assets. Sometimes even the assets become a mean and not a goal on itself.
For example, media companies giving content for free as an e-commerce driver, creating a digital ‘shopping’ compass (platform) in the new world. In the lease market with the mobility issues, it could be about evolving from assets to services by activating the private car sharing economy. Not carpooling, but car sharing thus. In the “directories services” it could be about shared marketing automation at scale, with valuable data at the core. It is about offering high relevance through valuable experiences based on the brand purpose. So the dynamics of innovation could be visualised as follows:
One could argue about the fact if traditional companies are able to truly innovate? Well there are some reasons why in each case it is a huge challenge:
- Traditional companies are addicted to their current business. A dependence with physical and psychologic effects. A big risk in making them blind for real innovation, because they are to focused on what they know best.
- There is since several years an extreme evolution form push to pull, that changes the way in doing business. Lots of these companies have been primarily organised in function of their products, instead of their customers. Bill Gates’ quote: “Banking is necessary, banks are not” betrays the name of the NEW game.
- And then there are the cumbersome processes in traditional companies, the bureaucracy, the politics … that are real innovation killers. This requires often some profound “reshuffling” in the current management structure.
The question to ask yourself as a company is – based on your company culture – if innovation can work from within. Ideally it should. An alternative or an aid to get started is that companies actively look for start-up partnerships or classical partnerships in their field of business and try to join forces to broaden their business. Incubation with a direct mission related to their own company.