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Tools to help you innovate the right elements of your current business model in response to today's disruptive changes in the external system.

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21_Insights_when-disruption-hits-your-business-model

When Disruption Hits Your Business Model – Surviving The Collision

So much has been said about disruptive innovation, that it can sometimes feel that to be in a traditional, scaled business is to somehow be on a fast track to extinction. In fact, scaled businesses are remarkable success stories – to have survived from start-up to profitable-at-scale is no mean feat. The threat of disruption might be existential, but that doesn’t negate the fact that within the success of the current business lie the clues to the shape of the future business.
In our experience, surviving the collision does not mean starting from scratch. The answer doesn’t lie in abandoning the current business in favour of something completely new and different, but rather in innovating the right elements of the current business model in response to disruptive changes in the external system.
How to do this? While there is no perfect answer, there are some common tools and approaches which can help successful businesses today is to identify where those differences might lie and how to respond to them, while also capitalizing on the advantages that can be sustained from the current business model.
Disruption happens due to changes in the external system – from regulatory changes, to technology changes to changes in consumer attitudes, so in some ways the collision is inevitable for any business.
But that doesn’t mean that you can’t pick the right battles and respond in the right way. In fact, with vision, preparation and a gameplan, the collision can be the impetus to the next version of your business. Here’s how..
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Tobias Rooney

Tom Gray

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Innovation and strategy for disruptive times

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21_Insights_big-strategy-is-dead

Big Strategy Is Dead

Who still writes 5-year strategy plans? For most businesses &#8220;big strategies&#8221; are out of date within 18 months. Does this mean we are &#8220;post-strategy?&#8221; Are we in an age where we &#8220;just do it&#8221;?
Some consultancies might urge big businesses to &#8220;act like a start-up&#8221; and just get out and do stuff, but this is the opposite of what successful start-ups actually do. Strategy has never been more critical to business survival, but the way it is formulated and executed needs to change – to be faster and more flexible.
In Big Strategy Is Dead, Commercial Strategy Director Tobias Rooney explores the meaning of Strategy in a world of compressed business cycles  &#8211; and the five innovation plays that ensure you are thinking and acting with strategic agility.
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What will the world look like when the disruption has passed?

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The New Normal

This is not another article about how to cope with the Coronavirus, it is about how to deal with what the world looks like when that disruption has passed.
Businesses and markets are reacting strongly and with concern to the Coronavirus. Not surprising stock markets tumble and supply chains are significantly disrupted. These are immediate business concerns that companies need to manage around. But what next? What happens beyond that? How will the world change, and how can we emerge stronger?
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<h3>The New Normal</h3>
This is a time of unexpected disruption and the more strategic question businesses need to reflect on is “what next”?
What, after the Coronavirus has come and gone, will the world look like?
Speaking with my colleague, Tian in Capgemini&#8217;s Insights &amp; Data advisory team, he raises the question of a “new normal”:
What if, after this initial burst of change and disruption, with markets, businesses, people in disruption, the world finds its new equilibrium somewhere different to when we went into this disruption? Perhaps more insidiously, what fundamental changes are occurring in the background which have been obscured?
The last great disruption was the financial crash of 2007/8 where similar stock market effects were felt and there was a similar level of anxiety in the broader population. One of the outcomes in the UK was a shift in consumer behaviour. In the pre-crisis Aldi, a German supermarket chain distinguished by its low prices, had entered the UK. Aldi arrived in 1990 with little fanfare and little initial success.
Spurned by many with only 20% of richer customers (group ABC1) shopping. It was seen as cheap product with low choice and average quality. But during the crisis this switched dramatically and by the end of 2008 the share of ABC1s was 50% of Aldi customers and the business had grown by 25%. This growth continued so last year saw a 10% increase in sales putting it in reach of the top 4.
The financial crisis had nudged a behaviour of shopping and the UK consumer was nudged out of one behaviour where they tended to shop at one store became, as a result of a search for value, into another where shoppers increasingly use multiple stores to get the best deals and in particular use Aldi.
In the same time we have seen Tesco’s share price slide from a peak of £479 at the end of November 2007 to around £192 ten years later. This is a classic case of customers working through a crisis, nudged out of an existing set of behaviour and finding a new equilibrium post crisis, which continues to this day.
The dominant logic in supermarkets is that there are online products such as staples &#8211; pasta, tinned food, toilet paper, and offline/ in-store purchasing where consumers want to touch, see and smell products. Currently we are seeing a threefold increase in China of purchases of seafood, fresh fruit and vegetables, what if this becomes the &#8216;New Normal&#8217;?
The most obvious shifts that we are experiencing is a shift to online purchasing as well as remote access models.
Again in China you can see a ramp up in online search and purchasing of vehicles. If this comfort, nudged by the current crisis becomes the new normal how different will the retail environment be? As Tian highlights, experiences rooted in personal touch and experience such as luxury could become unwanted, will people want to spend an hour being looked after in a store with high contact? Will the existing view of “time in stores is proportional to sales” still hold?
&#8220;One view is that any experience that can be managed remotely will be managed remotely during this period. The question for businesses is whether having become used to the new experience whether customers will ever go back.&#8221;
Beyond the offline to online shift there could be broader and more profound shifts in what customers value. As people stop travelling will they shift their sense of holidays and travel to something new and different? Or will the loss of travel have the reverse effect, people seeing travel as a new liberating moment? Or will it be back to business as usual?
The many questions above highlight one thing:
Significant disruption creates opportunities for customers to “reset expectations”. When our habits are disrupted, we tend to view the world through fresh perspectives.
Moments of significant disruption open up the possibility of customers, a market, an ecosystem shifting to a new equilibrium. Businesses must be sensitive to this &#8211; the danger is that the short term needs sets the trap that that we will return to business as usual.
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<h3>How to engage with this</h3>
This was the outcome when the oil crisis hit in the 1970s. Shell had run a bunch of scenarios about different futures. When the crisis came and oil prices skyrocketed they recognised a scenario that they had explored: a new normal of high prices. Having thought about this possibility Shell were alive to the indicators, while other oil companies took years to adapt because they were waiting for the market to return to normal. This helped the company weather the volatility of the 1970s, bringing financial gains running into the billions of dollars thanks to the re-configuration or sale of refineries and installations, or decisions not to replace them.
These shifts are hard to anticipate precisely because they sit outside the everyday framework of the business and are from difficult to impossible to access. Even Shell will tell you that the thinking was really strong but shifting an organisation to do this is hard.
From our experience, here are four ideas to consider:

New, transient behaviours during this time can be misleading because these can be nothing more than an immediate response to the passing of the disruption. These may not be good indicators of the new normal or signal the return to the old equilibrium.

The duration of this period depends on the cadence of our business, and that of the market. You get what you measure – be aware of the temptations and dangers of applying previously strategically sound definitions of success to a changed market.

As the American Economist Thomas Schelling said “one thing a person cannot do, no matter how rigorous his analysis or heroic his imagination, is to draw up a list of things that would never occur to him”.
This is the challenge for businesses imagining a New Normal, based on new perspectives. The way round this is to look for stimulus that comes outside in by stepping out of the company and into the customer / ecosystem to get a read on how things could look quite different.

Apply an ecosystem view

Most businesses figured this out many years ago, and have subsequently forgotten it &#8211; who cares, the product still sells! Diving back into understanding what you are actually solving for today (and how well) gives you visibility on how fragile you are and what are likely triggers of a shift.
Marketing myopia/ product orientation (preoccupation of converting what you have into currency) is a very real threat. The need to adopt a market orientation (instead, addressing evolving needs) will be key in establishing relevance and position.
Nudged by circumstance customers will be more open for another look for another “solve”. That solve might have been there all along and might have plenty of reasons to be a better answer but the inertia has prevented it from becoming dominant. The question for businesses is whether their answer and the inertia (hidden behind steady sales figures) are fragile equilibrium points. So back up, understand the job you are solving for and its fragility and inertia and look to how that job could be solved elsewhere, then wrap your metrics around it.

Go back to first principles and understand the “job to be done”

For those who have a well developed discipline of foresight, now is a good time to revisit those scenarios and opportunities in light of the changes to see if there are interesting patterns playing out there. What was not possible may be now, is there a micro opportunity in the playbook that creates a good time to trial and learn? At this time businesses should be as interested in probes (offers designed to collect rapid insight) as they are in products (offers to drive revenue).
For those organisations that are less familiar with foresight approaches now is a good time to take any available reflective time and look at key shifts around you, things that are the current rules of your business and imagine what would happen if they were broken. From here you can create a gameboard around the New Normal. The gameboard becomes a thought backdrop and as things happen you have a place to make decisions fast, a way of identifying new opportunities, a way of reskinning existing offers quickly and with purpose.

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