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Is Disruption about to Eat You Alive?

June 21, 2019
How to spot change early in the game.

Disruption isn’t new. But it sure is getting a lot of attention these days.

Think about the innovations over the last one hundred years. Cars were mass produced and everywhere. People went to the moon. You have a computer in your pocket or purse that you call a phone. You talk to people on the other side of the world by getting on a plane, picking up the phone or using Skype.

And that doesn’t even cover how people shop or where the goods are produced. All of that has changed wildly in the last 50 years.

Over the last century, the biggest sectors and companies have changed dramatically. In 1917, steel was the largest sector (based on assets). Today, it is tech (based on market size). The tenure of years spent in the Fortune 500 by 2026 is expected to be less than half of the time it was in 1965.

The reason? Too much time is spent on day-to-day activities, and not enough time spent on strategy and innovation. And that’s how disruption happens.

Spotting Disruption

Whether you call it disruption or change. It isn’t new. It will continue.

When life or business is hard or expensive for your customer, someone will notice and figure out a way to make it better. Someone is listening or noticing that the customer is struggling. But it usually isn’t the company producing the goods.

Or maybe someone thinks your industry isn’t being a good steward. So, regulations are enacted that impact your cost structure and competitiveness.

That’s why disruption happens. And it can come in many forms: environmental, regulatory, customer driven, cost driven, etc.

Here’s how you can spot disruptions coming your way:

1. Where is the money going?

When disruptive products/companies start getting traction, you’ll see investments in companies that are developing them. Many times the disruption comes from outside of the industry. As the product is proven out, cash follows.

That’s when following the money is important. After the company grows beyond friends and family and small-business funding, you’ll see venture capital enter the picture. While it’s tough to get insight into how much money is flowing in the early days, you can pay attention to the how the businesses are growing and the products that are under development.

As they become bigger, they’ll get more attention. The first one out usually stumbles a bit. So watching the one behind them is equally important. For example, while everyone was watching Tesla as the disruptor in the electric vehicle sector, Lucid Motors managed to get the $1 billion from the Saudi Investment Fund that was rumored to go to Tesla. And Lucid has attracted many of the people who developed Tesla’s products. Time will tell who will capture the most market share. But in the meantime, it is a good example of following the money to see massive investments in the space.

2. Where is the talent going?

New companies spring up looking to develop a new product and deliver it to the market in a different way. Usually they are formed by people from outside the industry.

But they need talent from people who know the industry inside and out; people who realize the customer is not satisfied. Or the costs are too high to be competitive long-term. These people see the vision of the disruptors and jump ship from their current positions to help deliver the vision.

You’ll know when people are moving based on the rumor mill in your industry and industry publications. If you aren’t long in the industry, others in your company are. And they know when people are moving.

When you see a number of people heading out of the traditional industry roles into the startups, it is time to watch because something is coming, and it will impact your company.

3. What are customers saying?

Disruption comes when your products are not working well for your customer, or someone else figures out how to make their business better. Your customers will tell you everything you need to know about how your products are working for them if you listen.

It is easy to think you are getting all the intelligence you need through your sales force. And in today’s environment of data analysis/business intelligence, you will certainly get a lot more data. But is that really all you need?

Going out to your customer’s operations and seeing how they use your products in their business will provide many revelations, especially if you bring your operational people in addition to your salespeople. Asking them what can make your business run even better while standing in front of their operations will provide you insights you can’t get elsewhere.

It was this exactly this scenario that resulted in the creation of a new product in a manufacturing business where I was a senior leader. The product was higher-margin, worked better for the customer and wasn’t able to be replicated by competitors. Everyone ended up better off.

4. What do trade associations say?

Trade associations are on the front line of disruption. They see environmental groups starting to call out issues. They track legislation that is being considered in committees before being brought to a vote. They also keep tabs on administrative agencies that can promulgate rules that impact how you do business.

Many times the disruptive change that impacts your business doesn’t show up overnight. It develops over time. And that gives you the opportunity to respond either as a business or an industry.

I was in the paper and packaging business when there was a huge environmental concern over paper bags. The concern was growing at a rapid pace, and legislation was being proposed in many cities and states to ban paper bags.

That’s when the trade association and its members came together to educate the various stakeholders about the impact of plastic vs. paper. The result was continued use of paper, increased use of reusable bags and bans on plastic bags.

Spotting disruption takes concerted effort. It needs to be part of the ongoing operations of your business. If you wait for an annual strategy session, you might just find it is too late to do anything about it. So why not build disruption into your weekly and monthly conversations about your business environment? After all, it is not the disruption that will kill your business. It is not paying attention and reacting that does.

Heidi Pozzo is a leadership and high-performance expert, and author of Leading the High-Performing Company. Before starting her own consulting firm, she helped engineer the turnaround of a $800 million manufacturing organization.

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