Surviving the disruptive business environment

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(Commentary Today Friday 7 April 2017)

Surviving the disruptive business environment

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By Inderjit Singh -

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Published: 4:00 AM, April 7, 2017

A decade ago, Apple had zero per cent share of the mobile phone market. Today, Apple’s iPhones lead the pack. How did Apple do it? What happened to then-leading players such as Nokia and Motorola?

How do firms like Apple, Google and Facebook disrupt how things are done to become leaders in their sectors?

It is imperative that organisations embrace disruptive thinking if they are to survive a disruptive business environment. The more volatile the environment, the easier it is for the truly innovative — or disruptive — company to pull ahead of its competitors.

Disruptions have always been around. What is different now? A quick comparison shows that the world has changed faster in the last 50 years than in the last two centuries.

Mr Chris Donnelly, director of the Institute for Statecraft, a policy and strategy group based in the United Kingdom, said: “The rate of change we are going through at the moment is comparable to what happens in war time … yet we think we are at peace. The global pace of change is overcoming the capacity of national and international institutions.”

The question for any business is: How ready is your business to ride, nay, even survive, this disruptive environment?

The bad news, according to advisory firms Constellation Research and Innosight, is that three out of four S&P 500 companies from 2012 will fade into obscurity by 2027.

By their estimates, only one in five companies are highly prepared for disruptive innovation.

The past 50 years can be characterised as one of globalisation — where technology resulted in a more inter-connected world, and there was relative ease of movement of people and resources.

That world has changed. Today, we see the reverse — de-globalisation — taking place. Brexit, the election of United States President Donald Trump, and the uncertainty of elections in France and Germany are vital signals that the world that once found it mutually beneficial to work together no longer exists.

Businesses will need to navigate this new terrain. They will find it harder to borrow money in the face of new capital regulations while protectionism will lead to reduced foreign direct investment, increased tariffs and less talent flow across borders.

The disruption on the technological front is even more intense — think Artificial Intelligence, the Internet of Things, FinTech and cloud computing. More changes can be expected.

As the use of mobile payments increases, will credit cards soon become the “horse and buggy” of the digital age? Will asset-lite models such as Uber, where resources are shared, rather than owned by individuals, become the norm? Companies that are going to survive need to embrace these new technologies.

Leading edge, disruptive technology cannot take place unless it is supported by a culture that supports such innovation — one where experimentation and prototyping are encouraged; where failures are tolerated; where multi-disciplinary teams pool their resources and expertise together instead of guarding their own turf; and where there is enough agility to make changes necessary to implement new programmes, likely driven by top management.

Another way for companies to accelerate technological change is to acquire ventures that add to their operations; or be prepared to partner, via mergers or licensing, technology that complement and extend operations.

THINK LIKE A START-UP

Beyond technology, the whole organisation must also be able to adapt and change. One of the factors commonly holding organisations back is “de-responsibilisation”, characterised by institutional conformity, group think, or a state of denial, which results in a risk-averse environment.

Bright sparks, visionaries and mavericks do not thrive in such organisations and tend to pack up and leave the company in a fossilised stage, eventually resulting in a dearth of talent.

While it may not be possible for companies to completely overhaul their organisations, they could start by empowering mini-enclaves — such as “dare departments” that are given the mandate to come out with new ideas; or “red teams” of independent, contrarian thinkers tasked to challenge the conventional way of doing things.

Companies must also be prepared to have within their organisations skunk-works or experimental units that act like internal start-ups to empower small teams, which are allowed to develop new ideas quickly with minimal constraints.

In doing so, companies create safe spaces for experimentation — and mistakes — which is important as a company that is risk-averse cannot improve.

Organisations that will succeed are those that are able to think and act like a start-up — constantly searching for a better business model, better product, and better value. They are usually run by mavericks, usually their founders, who live by a crisis mentality — innovate or perish.

This brings us back to how Apple used platform technology, a disruptive business model, to change the playing field.

In rejecting the traditional business model of making and selling goods and services, Apple instead built an ecosystem with partners, and invited users to develop applications for its platform.

The platform-technology strategy removed supply chain inefficiency, helped users find content, attracted new customers from beyond its traditional sources and spread market risks among collaborators.

Apple and Android phones killed Nokia and Motorola. Sony, without the platform business model, is struggling.

Other examples of platform technologies creating great value are Airbnb, Uber and Grab, which have brought players — consumers, asset owners, payment systems — onto one single platform.

Page Adviser is doing the same for the service industry.

Big companies die because they are unwieldy, complacent and move slowly. They settle for incremental gains through increased efficiency. Disrupters have high innovation velocity and explode off their starting mark in a non-linear, exponential manner. They dismantle to re-create, re-focus, re-engineer.

Today’s most successful companies incorporate disruptive thinking.

History is littered with winners and losers: Netflix versus Blockbuster, Apple versus Kodak, Samsung versus Sony.

Leaders like Google know that they have to keep changing, and by adding Gmail, Google+, Drive, Hangouts, Calendar and many more into its G-Suite, make themselves indispensable to millennials.

About the Author

Mr Inderjit Singh chairs the Nanyang Technological University’s Board of Trustees’ Enterprise Committee. A former Member of Parliament, he is the founder and CEO of Solstar International, a Singapore-based consumer electronics products company. This article is an excerpt of a presentation made at the Nanyang Business School’s SME@Nanyang Leadership Programme Masterclass on Thursday (Apr 6).