How to Navigate Business Disruption
No company can think it is immune from the threat of disruption. The term disruption is overused, and we prefer to consider disruption as the extreme of a spectrum of change that occurs in an industry. Nearly 40% of CEOs don’t believe their companies will be economically viable a decade from now if they continue their current path. Significant changes in how businesses operate or deliver value to customers are caused by emerging technologies altering the business landscape, shifting consumer behaviors, regulatory changes, or unexpected global events. Anticipating these changes or disruptions, assessing their potential impacts, and developing strategies to navigate them increase a company’s resilience. This process can safeguard your company’s longevity and unlock new opportunities for growth and innovation.
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Survival of the Fittest.
As daunting as they seem, disruptions can catalyze positive change. They often pave the way for replacing outdated business models with more efficient, customer-centric ones. When Netflix disrupted Blockbuster with its DVD-by-mail model and later disrupted itself with its streaming service, it heralded a new era for the home entertainment industry. Similarly, the advent of smartphones disrupted multiple industries, from cameras to watches, while providing a platform for entirely new businesses in mobile gaming and entertainment.
Disruption can raise everybody’s game as companies respond by ‘upgrading’ their portfolio to include better products and services that meet new needs of customers and consumers. Since the introduction and the success of the Nest thermostat, other manufacturers like Honeywell and Schneider Electric have followed and leveraged their existing distribution channels to scale quickly.
The flip side is equally valid. Companies that fail to anticipate or respond to disruptions can quickly struggle to stay afloat. Kodak’s downfall in the face of digital photography is a stark reminder of this.
More recent is the accelerated pace of developments in AI. This technological discontinuity is already having a profound impact. Education is the first to be caught off guard as students quickly adopted ChatGPT for researching topics and writing papers. The current state of AI models produces so-called hallucinations. Some see this as an opportunity to advance students’ ability for critical analysis skills and learn to use AI in ways that lead to better results. Once these institutions get past their own orthodoxy that AI is a threat to the teaching community, new opportunities can be identified that embrace this technology.
While new services based on AI are popping up everywhere, they may affect and disrupt multiple industries in many different ways. Companies with a robust innovation capability will capitalize on opportunities ahead of their competitors. These companies will be able to learn faster, generate better ideas and experiment with changes in their business model quickly to test and launch new value propositions in the marketplace more successfully. Identifying and navigating disruptions is not just a matter of seizing opportunities—it’s also crucial for a company’s survival because it keeps a watchful eye out on changes that may affect them. By examining these and other examples, we can observe distinct patterns that indicate how disruptions occur.
The Challenges of Navigating Disruption.
Despite the apparent importance of navigating disruptions, the task is far from straightforward. Business disruptions often stem from technological advances that are difficult to predict accurately. Additionally, how these disruptions will affect customer behaviors and market dynamics is often unclear until they’re already underway.
Organizational inertia can also pose a significant challenge. Employees may resist changes to established processes, while managers might be reluctant to risk the security of proven business models. These challenges make it hard for companies to change course even if the signs are visible to all involved.
Overcoming these hurdles requires strong leadership, effective change management, and an organizational culture encouraging adaptability, innovation, and the willingness to challenge the status quo.
A Practical Approach to Navigating Disruption.
Despite these challenges, we offer a way for CEOs to anticipate and navigate business disruptions. We present a framework to demonstrate what forces hold us in place and which forces pull us into the future by viewing our company and the future from four different perspectives.
- Core Competencies are unique capabilities, combinations of assets, skills, processes, technologies, and values that allow a company to win customers and build a successful business. If understood well, we can leverage them to drive growth in new areas.
- Orthodoxies are what people in your company believe it takes to be successful. These beliefs have accumulated over years of experience in what works and what doesn’t. They guide decisions about where to invest and how to grow the business.
Both these perspectives are the result from past successes, and while they may serve us in the future, we should periodically investigate whether they are still valid or make us vulnerable to disruption from others. Success from the past is a poor predictor of the future.
Meanwhile, other forces pull us into the future. These forces are indifferent to our preference for maintaining the status quo. Change will happen whether we choose to act on them or not.
- Discontinuities show us what changes are on the horizon and how these could play out. Discontinuities are not about predicting the future since most signs and trends that will drive those changes are already visible today if we are open to seeing them.
- Customer Insights tell us about the deeper needs and problems we could address. As these evolve and change over time, customers will be looking for companies that can help them better than today.
So, will you cling to your core competencies indefinitely? Will you stick to the orthodoxies that potentially can misdirect your investments? Or are you prepared to adapt to changes that are visible on the horizon, develop new capabilities, and serve the new needs of customers?
By embedding innovation to the core of your organization, you can anticipate and even seize disruptive opportunities. Having a robust innovation process that incorporates discovery-based learning and developing different perspectives will help you understand the forces at play and the opportunities that could emerge.
Lets talk! We’re always interested in hearing from you about the plans you have and exploring opportunities to collaborate.
The role of leadership.
As a CEO, your leadership is critical in how your business navigates disruptions. You set the tone for your organization’s response, making decisions that shape your business’s future. Successful leaders remain calm and composed during disruptions. They communicate openly and transparently with their team, and demonstrate resilience and adaptability in the face of change. They provide a safe environment for their employees to challenge orthodoxies and for innovation teams to experiment beyond the current business model.
Leaders approach innovation systemically. By anticipating disruptions, assessing their impact, developing a flexible response strategy, executing your plan, and learning from your experiences, you can turn disruptions into opportunities and lead your business to greater success.
A crucial aspect of successfully navigating business disruption is embracing innovation and focus on developing world class innovation capabilities. Disruptions often present the best opportunities for innovation, offering companies the chance to reinvent themselves, discover new business models, or explore uncharted markets. Embedding innovation to the core will increase a company’s resilience simply through its ability to adapt to change.
Adopt an Entrepreneurial Attitude.
CEOs leading in times of disruption need to foster an entrepreneurial attitude by encouraging their team to embrace risk-taking, accept failures as learning opportunities, and maintain a laser focus on customer needs. It means staying agile, allowing quick pivots when necessary, and continuously iterating your products and services based on feedback and changing circumstances.
Disruptions often arise from technological advancements; at the same time, technology can also provide the solution. The right digital tools can allow businesses to streamline operations, increase efficiency, and create more value for customers. Therefore, investing in technology and digital transformation should be a significant part of your strategy to navigate business disruption.
Engage and Empower Your Employees.
Employees are on the front line of disruption, dealing with the changes it brings every day. By engaging and empowering them, you can tap into their insights, build their commitment to your strategy, and improve your organization’s resilience to disruption. It requires open communication, collaborative decision-making, ongoing training and development, and recognition of innovative ideas and solutions.
Looking to the Future.
Business disruptions will likely become more frequent and impactful due to rapid technological change, globalization, and climate change. Navigating disruptions is becoming an increasingly important skill for CEOs and their teams. Access to proven frameworks, such as the four perspectives, is essential in discussing change, sharing viewpoints, and deciding a course of action.
Successfully leading through disruption is about surviving the immediate challenges and setting up your organization for long-term success. It requires a forward-thinking approach, and proactively preparing your business to respond. By embedding innovation to the core, organizations can apply a systemic approach to capturing opportunities from disruption.
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