By asking why not, rather than why, by challenging everything about the organization, from decision-making processes to supply chains, from innovation activities to brand strategies, even the largest CP companies can learn to act like new entrants. To do so, they may have to jettison the very things that once were their source of strength but now hold them back from acting at consumer speed. Many will need to develop new stories to tell their investors, manage expectations of continually rising earnings, and reallocate their outlays toward growth rather than dividends and share buybacks. That might not be as tough a sell as it sounds. EY survey results show that 67% of large institutional investors want companies to undertake potentially disruptive innovation projects even if they’re risky and may not deliver short-term returns. And 73% of investors say that corporate disruption readiness will weigh more heavily in their investment decision-making over the next five years.
Nothing about this undertaking will be easy or risk-free. Leaders will be challenged to embrace disruption and press ahead with business transformation in the face of internal and external skepticism and resistance. But the startling success of the CP industry’s new entrants demonstrates conclusively that business as usual is no longer the road to success — indeed it’s more likely to lead to irrelevance and obsolescence. The future belongs to the disruptors. The challenge for CP incumbents is to join their ranks.
1. Learning from other industries: automotive OEMs
Confronted by trends and technologies that have rendered old ways of operating all but obsolete, original equipment manufacturers (OEMs) in the automotive industry have reinvented their businesses from the ground up. They have redefined their core competencies to emphasize their strengths in design and marketing, and they have shed many of their fixed assets, turning to third parties to produce their componentry and assemble their vehicles. That has freed them up to integrate new technologies across their entire value chain and focus on the evolving relationship between consumers and technology. That focus, in turn, has helped them develop product and service offerings that meet consumers’ desires for connected cars; greener vehicles; and simple, friction-free mobility options, such as ride-hailing and car-sharing.
Not only have the OEMs embraced disruption, they are well on their way to becoming disruptors themselves.
2. Learning from other industries: financial services
Disruptive entrants to the financial services industries have a lot going for them. Born digital, they take agile development for granted and work with breathtaking speed to develop a minimum viable product and move it into the market. The rapid uptake of services such as online mortgage applications and approvals demonstrates that there is a ready market for such offerings. But not all the advantages rest with the new entrants. They lack the large capital bases, regulatory compliance infrastructures and funding sources that large incumbents enjoy.
That’s why forward-thinking incumbents in financial services aren’t just fighting back against the new entrants or developing me-too applications of their own. Instead, several established global banks have acquired or invested in upstarts with an eye toward pooling their strengths to capture the competitive high ground, reach new prospects, and improve their chances of developing the next game-changing innovation. It’s an example of how incumbents can find opportunity in disruption and learn to become disruptors themselves.