As I wrote in an earlier blog, historically companies believed that owning and controlling assets was the key to creating sustainable competitive advantage and building high barriers to entry into their markets and industries. However, in the new age of digital disruption, companies no longer have the capital, resources and capacity to own and operate all the assets they need to compete against well-constructed and well-orchestrated business partner ecosystems.
The results of KPMG’s 2016 Global CEO study delivered some very compelling evidence of how important it is for companies to leverage business innovation for their competitive advantage.
-66% of CEO’s believe that their business is at an inflection point and the next three years will be more critical than the last 50 years.
-40% of CEOs expect to be running significantly transformed companies within the next four years.
-70% of CEOs said it’s important to specifically include innovation in their business strategies.
-80% of CEOs are concerned that their existing products and services may not be relevant in 3 to 5 years’ time.
-70% of CEOs believe their organizations’ cultures do not encourage risk-taking and safe-to-fail environments.
A Little History:
In 1991, my brother Geoffrey wrote his first book called Crossing the Chasm which provided a framework along with models and tools to help technology startups successfully launch and scale new products and services into the high tech market. Twenty two years later, it is still the bible for most startups in Silicon Valley and elsewhere and is taught in many of the major business schools around the country. Who says longevity doesn’t count for something in this always on, always frenetic, 24/7 world we live in today?
Back in 1991, the primary challenge for hi-tech startups was to “break into” established markets that were populated by well entrenched competitors with long standing customer relationships. But as Clay Christensen taught us in his seminal book, The Innovator’s Dilemma, the skillful introduction of disruptive innovation ( products, services and technology ) could be used to get into established markets, mostly at the low end of the price/value scale, and then move up from that beachhead into higher price, higher margin offers.
Today the challenge for well-established companies is to fight their legacy cultures and behaviors to “break out of” mature, slow growing markets and get into higher growth, higher margin next generation markets.
Some Lessons Learned:
So what you may be asking has all this history taught us? Besides the obvious confirmation that:
- Most successful well-established companies are much slower to adapt to new disruptive changes than they should be
- It is very difficult for well-established companies to find the right balance between delivering short term earnings and investing in their long term power to grow
Well, from my perspective, one of the most interesting things we’ve learned over the past decade is just how challenging it is for well-established companies to successfully deploy market tested models and tools for startups to onboard and scale next generation businesses within their organizations and cultures. We call this challenge “Crossing the Chasm in the Belly of a Whale.”
One only needs to look at how painful and time consuming it has been for large companies to successfully adopt and integrate large ERP and CRM software tools into their organization. I have personally heard from numerous C-Level executives how those experiences caused their “will to live meter” to go to zero more times than they could count. Simply put, cultural habits and behaviors good or bad are very hard to break unless you can identify and adopt some “new rituals” to change them.
New Rituals to Help Successfully Launch New Businesses:
So here are some suggested new rituals, for you to consider that will enable your company to successfully launch and scale next generation businesses that can deliver material new revenue and profits to the mother ship?
1. Identify who are the “early adopters” within your company’s senior leadership team and deploy them as the “next generation business champions.” There is nothing harder than trying to get a senior executive whose business unit is responsible for delivering a substantial portion of the company’s current earnings and profits to divert his or her attention away to starting a new business.
2. Separate all the strategic discussions and resource allocation decisions about next generation business opportunities and have them the quarter before you start your annual planning and budgeting process. Bring the senior leadership team together and ask them to address this fundamental question: “Is it possible for us to onboard a net new earnings engine into this enterprise this year or not?”
3. Since there is no definitive data about the future, you will need to use frameworks and vocabulary to clearly define what the most promising new business opportunities are and what level of resource commitment is necessary to get them started. Believe it or not, the fundamental models, tools and vocabulary from Crossing the Chasm are still one of the most effective ways to work through this process and achieve the desired outcome while still residing in the belly of a whale.
- They will help you know where your new business resides in the product/service adoption lifecycle
- Which will help you deploy the appropriate marketing and business development tools to scale your business
- They will enable you to clearly define the target audience for the new business
- Which will allow you to create a “compelling reason to buy” your offer as differentiated from competitive offers
- They will allow you to assess whether you need partners and allies to deliver a “whole product or solution”
- Which will allow you to put together a complete business partner ecosystem/value chain that will give you market dominance
4. Like the whale, any large, well-established company has embedded behaviors and actions that have been developed to survive and prosper at the expense of smaller competitors. As such, there is “massive internal resistance” to moving resources away from current well-tested businesses to fund the launch of new untested businesses. As such, you need to re-assess how you incent and motivate your key business leaders so you can move from a “consumption comp plan to a replenishment comp plan.”
5. Lastly, you will need to have the courage of your convictions in order to stay the course as you drive your new business to its “tipping point.” This means that you cannot apply short term business performance metrics to your new business, and you need to stand firm in the face of both internal and external opposition when it doesn’t deliver immediate returns. If you can successfully drive the business against the market’s resistance to its tipping point, when it flips to embracing your offers, it will literally pull you into a market leadership position.
I am in no way suggesting that the process of installing and embracing “new rituals” into a well-established company is easy or a guarantee for success. But I am suggesting that it beats the daylights out of sticking with old habits just because that’s the way the whale has always behaved.
Wild Oak Enterprises, LLC
130 Ocean Park Blvd. #531
Santa Monica, CA 90405