Disruption Strategy
Disruption strategy – What to do when you see disruption coming.
In my last two articles, I discussed types of disruption and how to anticipate disruption in your industry. In this article, we’ll take a look at what steps you can take when you see disruption coming.
When disruption threatens your markets, it’s easy to become fearful. Disruption, after all, is an existential threat to existing players in most circumstances. The best way we can effectively respond to disruption is to address the nature of the threat. Furthermore, address any ways we can use existing competencies to retain relevance.
In general, the reason a threat is a problem for you will vary by the type of disruption.
1. Cost disruption
With cost disruption, the clear reason you’ll feel threatened is because something is dramatically changing the cost structures of your market. Quite often this is because a new competitor or alternative product is significantly lower cost than what you are offering today.
2. Displacement disruption
In the case of displacement disruption, something new is replacing your product or service. Usually, this happens because the replacement is clearly superior in meeting customer needs OR it has a clear cost advantage.
3. Demand disruption
Demand disruption threatens us because something is altering the customer decision making process. This means that the way we reach potential customers and convert them into actual customers may no longer work.
4. Utility disruption
With utility disruption, the way customers meet their needs is in flux. This can lead to displacement, but it can also change how customers select and use your product or service.
Cost and displacement disruption strategy
Clearly, if some fundamental need or preference is shifting, ask if you can profitably change your current offering sufficiently. If the preference is primarily cost, a realistic assessment of your costs versus disruptive costs is vital. In some cases, radical redesign of products or processes can bring your cost structure into line. Alternatively, you may need to assess how to exit your old approach while preserving the value your business creates.
Displacement disruption strategy
With displacement disruption, unfortunately there will likely be an end point (or near end point) to your current offerings. Although there are still people buying vacuum tubes today rather than cheap transistors, the old players are basically gone. If this is happening to your industry, you should focus on high-value competencies that you can shift into something new. For example, a vacuum tube manufacturer might have successfully downsized to meet the smaller, more specialized market needs. More likely, that manufacturer might have sought other applications of their precision metal and glass manufacturing capabilities and prosperously survived.
Demand and utility disruption
When sales or marketing-based elements cause disruption, the old way of reaching customers is likely to decline in effectiveness. In some cases, you may need to shift the effective messages that you use in promotion. This shift is not small, and it may fall beyond the current capabilities of your team. The sooner you realistically assess this, the better off you will be. If you can precede the disruption with learning about the new approach to the market, you’ll be much more competitive in the changed market. If you delay too long, you will end up playing catch up on new approaches to the market. While catching up is possible, it is usually expensive and time consuming. Consequently, some companies realize that acquisitions may be a faster way to gain the required market competencies to succeed.
How will you meet disruption that is coming to your industry? The disciplined, data-driven approach of Simplified Strategic Planning is a great framework for both evaluating and strategizing around disruption.
If you’re like most people, you’d benefit from having an experienced professional lead you through the strategic planning process. Then you can focus on the content of your strategies. If you’d like to explore how you could do this, please contact me at rbradford@cssp.com. Center for Simplified Strategic Planning professionals have successfully conducted thousands of strategic planning meetings. Furthermore, they understand how to best use your planning time. Consider holding a one-day workshop on Simplified Strategic Planning in the next few months to improve your results.
Robert Bradford is President & CEO of the Center for Simplified Strategic Planning, Inc. He can be reached at rbradford@cssp.com.
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Author Robert Bradford