Disrupt your business model to survive

lightbulb_momentDisruption comes from redefining your business model, not your business processes according to Dave Aron, a highly acclaimed and respected Gartner analyst, speaking at his company’s Outsourcing and Strategic Partnerships Summit in London recently.

Aron explained that innovation based on existing processes will only ever be incremental and linear rather than radical or disruptive; by starting with how you do things at the moment you are immediately constraining your thinking, placing limits and assumptions on what is possible. He also explained that looking at how your competitors are doing things will not give the game-changing answer you are looking for either, “looking at industry best practice will not lead to disruption. If it’s already best-practice in your industry then it’s too late.”

So how do you disrupt your business model? Aron suggests looking at other industries that have the same business model challenges as your own. He explained how the pharmaceutical company GlaxoSmithKline (GSK) had formed a partnership with the McLaren Group, the Formula One motor racing team, to share ideas in areas such as production line performance, analytics and high-tech research.

Looking at other industries that are facing similar business model challenges is a good starting point and may well lead to some game-changing ideas. But your competitors could do this too; the closer the source of an idea is to your own industry, the more likely it is that someone else will have the same idea or will be able to copy it quickly. To be truly disruptive you need to go further afield for ideas or, better still, come-up with your own.

Looking at completely unrelated industries, products and services will also bring radical new ideas to your organisation. The skill when doing this is to extract the relevant concepts and “re-factor” them for your own industry, products or services. In his book, Disrupt: Think the Unthinkable to Spark Transformation in Your Business, Luke Williams explains how the inspiration for the Nintendo Wii controllers came from the accelerometer chip that regulates airbags in cars, which respond to sudden changes in movement as a result of an accident. By looking at a totally unrelated industry Nintendo created a whole new category and style of gaming.

But what about generating your own ideas? This takes creative and visionary thinking, which is a skill that is lacking in many organisations that tend to place a higher value on analysis and problem solving skills. Analysing what you have already and starting with an existing problem immediately limits your thinking and will not lead to a disruptive idea.

Disruptive thinking involves challenging constraints, questioning even the most basic and long-standing of assumptions to create different thought patterns. This is a technique Einstein often used; by asking what he would see if he were sitting inside a photon, he forced his thinking into a different pattern and as a result made the observations that formed the basis of his theory of relativity.

In the early 1980s Intel, which at the time was focused on making memory chips, was facing strong competition from Japanese suppliers. Faced with falling revenues Intel’s CEO, Andy Grove, met with his chairman Gordon Moore to discuss options. Instead of analysing their existing business they asked themselves what they would do if they got fired, what market would they choose to be in? The answer was clear: get out of memory chips and focus on microprocessors. Intel went on to be the largest supplier of microprocessors for PCs as a result of challenging the most basic assumption about the markets in which it operated.

Joining up products and services is also another potential source of disruption. Luke Williams recommends taking a holistic view of what he calls product-service-information hybrids as there is significant value in the relationship between a product and service and the information they provide. He cites the iPhone as an example, where the product together with services such as iTunes and the AppStore, and information from social networks, developers and other service providers creates an offering far more compelling than the product alone.

In his presentation about digital disruption Dave Aron talked about how SKF, a Swedish company founded in 1907, had used technology to move from being just a manufacturer of ball-bearings to a provider of reliability services of the machinery in which its products were used, and then on to full asset management of this machinery. SKF has combined its core product with service and information to achieve this transformation.

There are many routes to disrupting your business model. But one thing is clear: it is better to be the disruptor than it is to be disrupted. So look at other industries and start challenging those assumptions and constraints before someone else does it to you.

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