This article has been originally published in Advertising Age.
It’s been a while since companies last experienced business as usual. For fifteen years, they’ve been in the constant mode of reorganizing, restructuring and reorienting their businesses in effort to crack the digital code.
Companies’ success in decoding digital is now a matter of survival. A CEO can wake up any morning to discover that a new Uber or a Farfetch or a Ringly sprung up and jeopardized their business. Digital technology can turn industries upside down seemingly overnight. Just ask newspaper companies and bookstores. The Internet is business’ Fear Factor.
The good news is digital disruption gives existing business a roadmap for how to use the Amazons of the world to rethink their own businesses and adapt to become stronger than ever. To do so, big companies need to think like disrupters, rather than simply play defense and prove out The Innovator’s Dilemma.
The astute brands already do that . They don’t try to be trailblazers; instead they follow the path that ‘s already been hacked, often literally, by tech upstarts. These companies build on top of what’s already out there. Walmart and Target didn’t create their e-commerce platforms from scratch. Instead, they looked outside, found what exists, and then went from there. From Amazon, these retailers took rating system, recommendation engine and a same-day delivery service. From Facebook, they used social sharing. From Groupon, flash sales. The result? Nothing we see on these retailer sites is new, and this is precisely why it works. Why innovate when you can adapt?
Shunning the new in favor of the incremental already has already proved to deliver consistent business results. Think of any digital product, and you will realize that none of them ever started big. What happened instead is their gradual evolution of offerings. When Amex created its Small Business initiative, it had in mind delivering value to small business owners in a sustainable way. To get there, it launched Small Business Saturday . It also partnered with Twitter and Foursquare, and it created Open Forum. Compared to an advertising campaign, all these efforts are low-cost and low-investment. They are a great way for Amex to try out many different things, test them in-market and evaluate them based on how many small business owners participate. As laborious and incremental as this process is , it helps Amex avoid the guessing game and stay atop of its users’ needs.
Staying close to customers is the only competitive advantage for businesses these days. Commoditization, price transparency, and lowering of barriers to interaction swiped away all the rest. Visa’s new card, Simple Visa, was created based on discovery that people are mostly concerned with their daily spending (versus saving). The company worked backwards from this customer insight to create its entire brand around it. Simple has since become synonymous with the intuitive user interface, ease of transactions and a service native to customers’ decision-making process. Instead of advertising its low APRs, Simple understood that user experience is its business, and created both a compelling consumer value and a viable business model.
Companies have spent far too long maximizing their business value at the expense of customers. They cut call centers because that ‘s an overhead cost, forcing people to jump through hoops just to get help. They outsourced production thinking that customers won’t notice the drop in quality. This value myopia paved the way for newcomers. AirBnB, a short-term property rental service, brought a disruptive economic dynamic to the hotel market with the simple realization the world didn’t need more hotels, it just needed to match up people with extra space with those looking for somewhere to stay.
Where Airbnb snubbed the hotel industry is its definition of the business they are in: not building and maintenance of properties, but accessible accommodation. Along the way, it created new value to a new set of customers: people with an extra room or an empty apartment. Airbnb’s igloos, tree houses, and a Borgia castles in Tuscany are more accessible, convenient and cheaper than the existing hotel industry offerings. Best thing is , next time AirBnB-raised customers want to book a room in a hotel, they’ll expect the same flexibility and personal touch that AirBnB offers.
The Airbnbs of the world are business manuals for companies to learn from and apply to their businesses. Forget Six Sigmas and Five P’s. In a volatile environment, it’s more important to have the agility necessary for incremental growth, a laser user focus and ability to view business through a problem-solving perspective. As digital-first companies grow and move up the value chain, their definitions of quality and value become the norm. With no barriers of entry left, big companies have no choice but adopt them.