Why Companies Get Disrupted
Let’s face it… Great companies get disrupted all the time.
When I refer to Business Disruption, I mean an innovation that eventually disrupts an existing market, displacing established market-leading firms and products.
Examples of disrupted companies include Sears, Kodak, and Blockbuster. They were all high-profile brands at one time. And there are hundreds of small-to-mid-sized growth companies that also get disrupted – every few years.
These are companies that were once high-flying growth companies, well-financed, and able to source the very best talent. But they all faced disruption in their markets.
Was it because the leadership got complacent or lazy or over-confident?
Did these companies lack great talent?
Or….Did Great Management cause the company to be disrupted
Can Great Management Be the Reason Companies Get Disrupted?
Perhaps it sounds counterintuitive, but Clayton Christensen, in his book, The Innovator’s Dilemma, lays out a strong case that the same Great Leadership that helps companies become extremely successful is also a big reason they get disrupted resulting in their demise.
The problem with disruptive innovation is that: 1) It often initially promises lower margins, not greater profits; 2) it generally starts in insignificant markets, and 3) often your most profitable customers generally don’t want or need or can’t use this technology when it’s first introduced.
Core customers always come first
Good companies and leaders focus on the needs of their core customers who are the engine that keeps the company moving. Addressing your customer’s needs and staying ahead of your competition is and should be the primary focus of your business. After all, most successful companies are set up so that managers and executives are rewarded for driving increased revenues and higher profitability. This culture and mentality are important to become a high-growth company.
So, when a manager is evaluating how to best spend company resources, it is certainly reasonable to expect him or her to allocate those resources to products or features that their top customers are requesting. This is the already established marketplace that meets the company requirements for margins. These decisions are good decisions for the short-to-medium health of the company and for the manager’s career trajectory within the organization.
And that is The Innovator’s Dilemma.
Disruption challenges current culture
Introducing disruptive innovation into a company often goes against the very culture of the organization that made it successful.
The first step in helping your company prepare for disruptive innovation is to acknowledge your company’s limitations when dealing with disruption. Once you understand those limitations, you can then start to craft a long-term strategy for handling and eventually embracing it.
Paul Benevich has been helping to re-imagine companies through innovation for the past 20 years. Paul can be contacted through his consulting company www.nonfictionbusiness.com or by emailing him at email@example.com