How to Embrace Disruption – and Thrive

How to Embrace Disruption – and Thrive

 

How to Embrace Disruption – and Thrive

 

At the turn of this century, Xerox was in trouble.  The competition was offering cheaper products and new technology was eroding customer demand for its products. Stock prices skid more than 90% from June 1999 to December 2000.

But then Xerox began reviving itself, aggressively reconfiguring its core business, simplifying product lines and outsourcing core functions. Cash flow became positive and stable.

But Xerox wasn’t done making changes. At the same time it was repositioning its core business, the company began experimenting with new service lines and bought Affiliated Computer Services for more than $6 billion.

By 2012, Xerox was hitting $21 billion in revenue.

Scott D. Anthony shares this story in his new book, “Dual Transformation: How to Reposition Today’s Business While Creating the Future,” which he wrote with Clark Gilbert and Mark W. Johnson.

Anthony says Xerox is an important example of what companies can do to thrive when their industry is being disrupted. But perhaps the real kicker to this story is this: Xerox is going to need to do it all over again.

That’s the lesson for any business wanting to survive in today’s fast-paced environment, Anthony says. Survival depends not only on repositioning the core business while also creating a new separate growth engine – but also being prepared to do it over and over again.

“That’s the new normal,” he says.

Those who don’t follow such a strategy will end up like businesses such as Kodak and RIM that were buried by disruption, Anthony says.

While Anthony says the book addresses many of the steps leaders need to take, he says it’s also important that employees “in every nook and cranny” of an organization been seen as a critical piece in helping such a strategy be successful.  Their input, he says, is important for spotting signs that companies may need to change.

“Employees can be a great early warning system for disruption. You tell them to keep their eyes open and ears tuned, and they can pick up on faint signals that new competitors are emerging or customer preferences are shifting,” Anthony says.

At the same time, these workers must be educated that change will be an ongoing requirement in order for a company to be successful, and be kept abreast of those shifts as they take place.

“You tell employees it’s sort of like an inoculation,” Anthony says of the need for ongoing change. “It may sting a bit at first, but then it’s not so bad.”

A clear destination

The authors write that the “hastening pace of disruptive change means that leaders have precious little time to respond” and they need to be the most prepared for change “right at the moment when they feel they’re at the very top of their game.”

How to make such a shift? They point to a formula they say that Xerox followed:

A + B + C = change

  • A = Repositioning today’s business to maximize its resilience
  • B = Creating a separate new growth engine
  • C = Fighting unfairly by taking advantage of difficult-to-replicate assets without giving in to the “sucking sound” of the core

Anthony warns companies not to fall into the trap of listening to their best customers in determining their strategy, “because then you set yourself up to be disrupted” because customers can have very different ideas about what they need. The key, he says, is to be more “purposeful” and figure out what’s plaguing customers.

“The way you really have an impact is to help them solve their problem,” Anthony says.

The authors point out that while disruption nearly always grows markets,it has destroyed many established companies. They offer some lessons on how to avoid a similar fate:

  • Don’t stick to the tried and true. Just because a strategy worked for 50 years or five years doesn’t mean it will save a company from disruptors, even if the company performance is better than ever. Dual transformation can give a company an advantage, but leaders must be smart about how to use resources and be aware that crisis management will be the norm.
  • Have a purpose. The best way to motivate workers to undertake dual transformation and embrace a culture of change is by continually communicating an organization’s key purpose. “Make sure everyone has a clear view of the destination – and it’s not just because you want to produce a number of dividends,” Anthony says. “Explain how there will be bad moments when a crisis hits – but it will lead to a stunning end.”
  • Use new metrics. Companies cannot use the same metrics before and after a transformation. When transforming, companies also will need to compete against different players. For example, Apple’s iPhone competes against a business like Sony after the company historically has competed against players like Microsoft and IBM.

The authors stress that dual transformation is difficult, because “changing the status quo is difficult.” But once leaders and teams embrace the idea and move ahead, they will create more customer and employee value – and be thanked by shareholders who will reap the benefits, they write.

 

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