If you think that success in business today fleeting, you're right. Unlike previous eras, disruption happens faster and from completely unexpected sources. Don't believe me, though: Nearly nine in ten Fortune 500 firms from 1955 are extinct--a trend that shows no signs of abating. (If anything, it's intensifying.)
Brass tacks: it's an increasingly uncertain business world. Against this backdrop, I recently sat down with Peter Sheahan, founder and CEO of Karrikins Group. We discussed his new book Matter: Move Beyond the Competition, Create More Value and Become the Obvious Choice.
Simon: Many companies are justifiably fearful of disruption. In your book, though, you advocate embracing it. Why?
Sheahan: Fear it or embrace it, disruption is happening. Fear tends to drive protectionist behaviors, which only slow your ability to leverage and capitalize on change. Of course, fear makes sense: organizations are designed to scale and drive efficiently by suppressing and eliminating variability. Even companies that want to respond to disruption find it challenging. Many organizations suffer from the gravity of success: leaders are taught to defend a market position, not explore new frontiers; the more success, the more there is to lose by innovating. Even more is at risk by going out on the edge and actually becoming the force of disruption. Most organizations are more comfortable playing defense than offense.
Simon: Can't some organizations expand their capacity to do both?
Sheahan: Yes. In Matter, we define this position as the Edge of Disruption -- the intersection of existing business models and the unknown future. It's where opportunities emerge that aren't anchored in an overly defensive or an overly offensive (and unnecessarily risky) position. They apply the right amount of risk while leveraging their core capability and reputation. The Edge is a difficult place to find, but once you get there, you thrive, as we saw with the companies we profiled. At the end of the day, when the inevitable future meets the expired past, the future wins six days a week and twice on a Sunday. These organizations were able to take control of the future.
Simon: While we're on the subject, what is "positive disruption" and why is it important?
We analyzed several organizations in Matter that represent "positive" disruption -- although it might not have appeared "positive" at the time. Angela Ahrendts, the CEO of Burberry, recognized their own online platform was the primary competitive force she faced in the retail market: Burberry customers could buy the same product for 25 percent less online. Ahrendts reversed a fundamental retail assumption -- that you should take the offline experience and replicate it online. Instead she said, "Walking into a Burberry store needs to feel like walking into our website." The London flagship store blended technology--the cloud, CRM, analytics, social media--with the physical environment, and used technology to treat customers as single individual entities rather than large demographic cohorts, tracking their buying history and online behavior. It showed that luxury goods are not just about the experience, but also the customization of that experience.
Simon: Got an example?
Sheahan: Standard Plumbing, a small family business in Utah, is another case study representing positive disruption. They found themselves disrupted head-on by Amazon, which had entered the director/consumer and director/contractor business with Amazon Supply. While most industry players declared Amazon the devil for undercutting their prices and dominating the market, Standard Plumbing asked Amazon how they could help. Turns out, Amazon had a significant challenge when it came to large bulky items with low inventory turnover, and were seeking a partner. Standard Plumbing now serves Amazon's entire North American marketplace in the plumbing equipment division.
These companies asked optimistic questions: What is the opportunity here? What can we learn to enhance and augment our existing product? What other problems could this disruption help us solve? Their optimism enabled them to positively respond to disruption, and re-imagine their business in the process.