Disrupt or Be Disrupted - Co:Collective

Page created by Ted Day
CONTINUE READING
Disrupt or Be Disrupted - Co:Collective
A Guide to Company Survival

Disrupt or
Be Disrupted
                              ©2020 – CO:COLLECTIVE LLC
Disrupt or Be Disrupted - Co:Collective
What business are you really in?
Today, the answer is no longer ‘nice to know’, it’s do-or-die.

Kodak thought it was in the film business.      likely to contribute to company failure. The
They didn’t realize they were actually in the   companies that thrive when faced with
“treasured memory” business until it was too    these challenges have one thing in common:
late. And Blockbuster was in the video store    they define the business they’re in beyond
business. If they had realized they were in     core product offering, category or enabling
the “entertainment provisioning” business,      technology. To outlast disruption, they orient
we might be streaming Blockbuster original      their business around a lasting benefit they
series this weekend.                            bring to the world.

We rarely talk about death. In the world of     At co:collective, we believe that this is the
business strategy and innovation, we’re         key to survival. Having a clear and generous
constantly discussing the next big thing, but   purpose and taking actions to bring it to life in
we rarely dissect what makes a company fail.    the world - is essential to remaining focused,
Our curiosity led us to investigate why some    relevant and proactive in the rapidly changing
companies die, and why others survive.          business landscape.
What are the biggest threats that companies
face today – and what can be done to            The following field guide is designed to help
combat them?                                    companies recognize and anticipate factors
                                                of death, and take action to navigate them, all
We discovered there are six internal and        starting with the question: what business are
external factors of death that are most         you really in?

                                                                                                    2
We are living in a time
of unprecedented
corporate mortality.
                Research firm Constellation found that
                between 2000 and 2015, 52% of the Fortune
                500 were merged or acquired, went bankrupt,
                or fell off the list. Another indicator of
                corporation health – the S&P 500 – shows a
                similar pattern. According to Innosight, the
                average tenure of a company in the S&P 500
                is 24 years. It was 61 years In 1958. At this
                current rate, Innosight predicts 50% of the S&P
                500 will be replaced within the next 10 years.

                                                                 3
Company mortality is increasing
because the rate of change is increasing:

Technology, of course, is fueling this change.              Take, for example, insurance startup
The number of patents granted annually by the               Lemonade, which gained a 27.6% market share
US Patent and Trademark Office has doubled                  of first-time renters’ insurance buyers within
between 2005 and 2015.                                      its first year of operating in New York. They
                                                            beat out longstanding titans like AllState,
                                                            Liberty Mutual, State Farm and GEICO. Not
                                                            only is Lemonade a digital-first brand with an
As a result, consumers are quicker to evolve                impeccable user experience, but its mission
                                                            of transforming insurance from a necessary
their needs — and quicker to abandon a brand.
                                                            evil into a social good also resonates with
Expectations are rising and options have
                                                            customers. As part of Lemonade’s Giveback
increased. A global study from Accenture
                                                            program, leftover premiums are donated to
found that in 2017, 61% of consumers switched
                                                            causes dictated by each customer.
providers in at least one industry.

Finally, competitive landscapes are changing
faster. Every year new companies enter the
market providing appealing alternatives to the
business models, customer experiences, and
brand purposes of legacy companies. Between
2013 and 2018, there was a 29% increase in first-
time venture capital funding dollars for startups.

Lemonade Giveback 2018: The Lemonade Social Impact Report                                                    4
Why do
companies die?
The world is quickly changing; those who are                            If we observe which organizations do or don’t
slow to evolve have been falling into oblivion.                         succumb to these types of crises, a trend
According to the most comprehensive study of                            emerges: the way an organization defines the
corporate crisis ever conducted, the top 2 causes                       business it’s in is a powerful predictor of its
of corporate crisis are failure to adapt to external                    ability to survive. A future-proof definition of
changes* and failure of vision.                                         the business you are in is a powerful antidote
                                                                        to both of these causes of death.

* in 55% of cases, the management held on to strategies that were no longer working for the company,
and in 52% of cases, the management did not want to adapt to changes around them

        Defining the business you are in

        Traditionally, companies have defined                            Traditional definitions of the business you are
        the business they are in by their flagship                       in limit an organization’s ability to predict or
        product (e.g. a soft drink company), their                       adapt to external change. These definitions
        enabling technology (e.g. a motor vehicle                        are often tied to static views of industries,
        company), their competitive category (e.g.                       business models, culture, and technologies.
        a telecommunications company), or their                          They can also contribute to a failure of vision,
        business or distribution model (e.g. a luxury                    as they don’t provide a clear north star toward
        goods retailer). However, these traditional                      the benefit that the organization wants to
        definitions of the business you are in don’t                     contribute to the world.
        help prevent the two major causes of death:

                                                                                                   Read case study: Toys “R” Us

                                                                                                                                  5
Take one of the most popular examples of          So how could have Toys “R” Us survived?
company failure for example. Toys “R” Us
defined their business by their business          Toys “R” Us thought they were in the
model and core product offering: they were
                                                  business of toy retail. But the true
a toy retailer. By this definition of their
business, Toys “R” Us saw their mandate as        lasting benefit they brought to the
simply competing with other toy retailers         world was play and wonder.
(including new digital entrants like Amazon
and mass retailers like Walmart). As such,        Had they focused on this future-proof definition of
they focused on assortment and price. Toys        their business, they would have given customers
“R” Us struggled to compete with Amazon’s         a compelling reason to stay loyal. From in-store
multiple convenience factors powered by a         play experiences, to proprietary toy and game
digital-first experience. What’s more, Toys “R”   development, to play and wonder-related services
Us even entered a distribution partnership with   like playgrounds and amusement parks, Toys “R”
Amazon, allowing Amazon to quickly dominate       Us could have provided a unique value that Amazon
the online toy-shopping market.                   and Walmart simply couldn’t have. But choosing
                                                  to focus on stocking shelves and keeping prices
Toys “R” Us also fell prey to Walmart, who        low — spaces where they couldn’t compete with the
made shopping for toys effortless by providing    retail giants — kept them in a losing game.
a one-stop-shop for parents. Toys “R” Us had
a traditional definition of their business, and
as a result they failed to provide a compelling
reason for parents and kids to come to their
stores. When it came to selling toys, Amazon
and Walmart were simply better.

   “ ...they failed to provide a
   compelling alternative for
   parents and kids to come to
   their stores. ”

Bloomberg/Getty Images.                                                                                 6
Future-proof companies, on the other hand, have a different way of
defining the business they are in.
They define themselves based on a lasting benefit they bring to the world. A benefit that often
transcends technology, business models, and even core product offerings. We call this a Quest.

Let’s examine Red Bull. At first, you may              Earlier this year, Tru Kids — the parent
think of Red Bull as an energy drink company.          company of Toys “R” Us — announced they
But look closer, and you’ll notice Red Bull is         would revive the beloved toy brand and
a Quest-driven company. They define their              make shopping at Toys “R” Us an interactive
business not by a thing they make, but rather          experience. “We never really had a canvas
by something they want to accomplish in the            there to bring play alive,” said Tru Kids CEO
world. Redbull’s Quest is to help all of us live       Richard Barry. Not only is the company
our lives to the absolute extreme. Redbull is          designing “immersive toy wonderlands”, but
a CPG company that makes energy drinks.                they’re also partnering with Target to build
Redbull is a media company that makes                  out their e-commerce presence. By grounding
magazines and films. Redbull is a motorsports          their endeavors (e.g. experiences, e-commerce,
company that owns and operates two                     productization) in the benefit of play and
Formula 1 racing teams. And Redbull is an              wonder, Toys “R” Us has begun future-proofing
events company operates multiple extreme               their business for years to come.
sporting events around the world. But the
business that Redbull is in is “helping all of us
live our lives to the absolute extreme” - they
are in the business of making their Quest real
in the lives of people who want to participate
in the Redbull lifestyle.

Tommaso Boddi/Getty Images Sports/Getty Images.                                                         7
How does redefining
your business
help you survive?
A traditional definition of your business can
cause failure to adapt to external change and
failure to have an internal vision. Having a
Quest that’s rooted in a lasting benefit you
provide to the world does the opposite.

A Quest stays evergreen through
external change and creates
vision and decision making
structures that drive action.

                                                8
Let’s break down the key ways the definition of
your business can make or break your company:

Companies with a traditional                        Companies on a Quest
definition of their business

Fail to adapt to shifts in technology               Use a definition that is broader than their
As we saw, Toys “R” Us failed to adapt to the       enabling technology or business model
increasingly digital-first, convenience-based       REI thrives even in an age of online,
market of toy shopping. Not only did Toys “R”       convenience-based shopping because it thinks
Us not provide a compelling digital experience,     of itself as an enabler of outdoor lifestyles.
but they also didn’t give customers a reason to     It’s more than a brick-and-mortar retailer. REI’s
come to the store instead of shopping online.       stores serve as community hubs and outdoor
                                                    skills learning centers. Its digital offering
                                                    includes apps such as Snow Project and
                                                    Hiking Project, which help customers plan out
                                                    their outdoor adventures.

Fail to adapt to shifts in customer needs           Leverage changes as culture evolves
Hummer failed to adapt to shifts in green           Danone (Dannon) is successfully navigating
transportation culture because it saw itself        the shifts away from dairy consumption due
as being in the business of large and military-     to sustainability and health reasons. This is
inspired SUVS and trucks (a product that went       because it sees itself in the business of health
out of style).                                      through food. Danone made investments
                                                    early on into plant-based foods and was one
                                                    of the first major multinational companies
                                                    to become a B-corp, which is a key marker of
                                                    sustainability.

Fail to anticipate competitive threats              Have a broader view of their competitive set
A legendary example of this is Blockbuster,         Tesla looks for competition beyond General
which failed to anticipate and compete with         Motors or Ford because they don’t think of
Netflix because it thought itself as being in the   themselves as a car company. They broaden
video store business.                               their competitive set to anyone in the energy
                                                    industry. They are in the business of the
                                                    electric economy.

                                                                                                        9
Beyond external changes, lack of internal vision can also kill an
organization. These are the key ways in which clarity of vision – and
the actions resulting from it – determine which companies survive.

Companies with a traditional                       Companies on a Quest
definition of their business

Fail to act on a vision                            Have a clear purpose in the world - and act on it
because their business definition doesn’t give     Google has successfully grown into and
them a clear north star. After being acquired      dominated numerous categories because
by L Brands, Henri Bendel focused more on its      they don’t define themselves as being in
own luxury product lines than on third party       the business of search or advertising. They
products. But they lacked a clear vision of        define themselves as being in the business of
what their brand was about. This is why Henri      organizing and enabling access to information.
Bendel failed. They failed to see their strength   This has allowed them to develop a product line
lied in tasteful curation of innovative and        that ranges from search, to mail, to maps, to
emerging design.                                   cloud computing and enterprise software.

Fail to focus                                      Have a clear sense of what to start, stop, and
dispersing their efforts and therefore gaining     continue doing
no traction. Yahoo, for example, failed because    Their business definition provides them with
it couldn’t determine which business it was in.    focus on where they can contribute. Red Bull
They played in a broad set of categories from      experiments in a broad variety of categories,
search, to media, to advertising. They tried to    but it keeps a clear focus on what is in and
be a jack of all trades, but mastered none.        out of its scope: anything that inspires people
                                                   to live life to the absolute extreme is up for
                                                   consideration.

Fail to let go of legacy assets                    Know which assets can propel them forward
Blackberry failed to see that consumers,           With the rise of online retail, Best Buy doubled
not business customers, would drive the            down on their Geek Squad, because they
smartphone revolution, because they                thought of themselves as being in the business
thought of themselves in the business              of providing technology solutions, not just
telecommunications category. By remaining          selling technology. This allowed them to survive
attached to the business consumer, Blackberry      the rise of online retailers and mass retailers,
also remained attached to their plastic            who focused more on price and convenience.
keyboard, and proprietary servers, failing to
adapt to the app economy.

It’s not enough to just theoretically redefine the business you’re in.
Companies on a Quest bring it to life through concrete actions.
                                                                                                       10
What’s next?
The mandate is clear: redefine your business          3 Involve your employees
through a lasting benefit you bring to the world      As you explore how you might redefine your business,
— and take actions to make it real — or risk being    consider including folks from different departments,
disrupted. While the task may seem daunting,          seniority levels, and markets within your organization.
redefining your business can be an exciting way       Including a variety of perspectives will help you see
to energize your leadership team and inspire your     opportunities and hidden strengths you didn’t know
organization. Get started with these five steps:      existed. It’ll also give you a barometer for whether
                                                      this new vision is something your employees will
                                                      believe in. Once you land on a Quest, share it broadly
                                                      so all employees understand it.

1 Think differently                                   4 Start doing
Brainstorm how you could redefine your business       Once you’ve reached a decision about your Quest,
in a way that feels authentic to your organization    start living it through your actions. To begin, identify
and builds on your strengths. As you explore what     some low hanging fruit opportunities to change.
business you might be in and what your Quest          Define a few major, iconic actions you could take.
might be, consider the following questions: what      Perhaps it’s launching a new product, experimenting
does your current offering enable people to do? How   with a new business model, or entering a new
does your current offering make people feel? What     partnership or joint venture.
unique and differentiated value do you bring to the
world? Why does your company do what they do?

2 Explore the implications                            5 Measure your progress
Test if your Quest feels right for your brand by      What gets measured gets managed. To ensure
thinking about what you would do differently if       long term sustainability of your new vision, see to
you redefined your business in this way. What new     it that your internal metrics are tracking towards
products and services would you launch? Which         the contribution you seek to make in the world.
ones would you discontinue? What organizations        Consider introducing new performance metrics at
would you partner with or acquire? What kinds of      the team and individual level that will both hold all
business models would you explore? Remember, a        members of the organization accountable to your
good Quest should feel a little uncomfortable.        organizational goals and help all your employees
                                                      live out your Story.

                                                                                                            11
Workshop                                      Who it’s for

                                              The c-suite and leadership teams of companies

with us
                                              ready to disrupt themselves

                                              What you’ll do

                                              •   Gain an understanding of the future vectors of
                                                  change and provocations to get you thinking about
The Do or Die Workshop                            how they’ll impact your business
                                              •   Define a new way of thinking about how you
The best leaders understand that they
                                                  define your business
must anticipate threats and have a clear
defensive plan of action to survive.          •   Align on the most pressing threats facing your
                                                  business and chart a path forward to combat them
Guided by our experts in business
disruption, the Do or Die workshop explores   What you’ll get
the story of your business’ demise through
a series of interactive exercises and         •   A deep dive into your organization that will unearth
provides actionable tactics and techniques        a new definition of your business and reveal
you can use to think differently about your       opportunities for growth
business and take immediate action.
                                              •   A strategic analysis of the key factors threatening
                                                  your business
Get in touch                                  •   Alignment on at least two specific challenges to
                                                  tackle and a framework for how to solve them
labs@cocollective.com

                                              How you will use this

                                              •   Inspire and galvanize your team as part of your
                                                  strategic planning process
                                              •   Evolve your view of your company and where it
                                                  might be vulnerable in the face of change
                                              •   Create a roadmap for what you have to do to be a
                                                  great company of the future

                                                                                                   12
co:collective is a creative and strategic
transformation partner for bold businesses.
We specialize in brand building and business
transformation through Storydoing. Our approach
creates, accelerates, and transforms purpose-led
brands to thrive in today’s moment.

cocollective.com
(212)505-2300
419 Park Avenue South, Floor 5
New York, NY 10016
                                                   ©2020 – CO:COLLECTIVE LLC
You can also read