how to manage industry disruption
/There’s something benumbing about industry disruption. Many decision makers are witnessing disruptive new entrants in their competitive space and they know it spells trouble. Yet the tendency for many companies facing industry disruption is to do one of two things (can you see yourself in either of these scenarios?):
- Ignore the disruption: hoping that it’s a fad or that it’ll take years to really impact on the business (by which time you’ll have a response strategy). This is inertia bias: the attractiveness of doing nothing even in the face of certain destruction.
- Try to compete with the disruptor: emulating their model and hoping you can take back some of their market share (or at least hold on to your best customers).
Neither course of action will help you manage disruption. At best it may delay the inevitable (but even that is doubtful). It is almost impossible to go up against a disruptive new entrant and compete (even acquisition of your competitor is no guarantee).
So how do you effectively defend market share and achieve growth in the shadow of disruption?
Firstly it’s important that you look deeply into the disruptor and its model to fully understand the unique value and utility they bring to the market. You don’t want to look just to a disruptor’s extrinsic value (which is where most competitor analysis stops). You want to understand their intrinsic value. What is about their value proposition that engages customers? What shifts in customer expectations, needs or attitudes does the new model respond to?
When you can fully appreciate the value customers gain from the disruptor’s offer you can then look to create new and differentiated value rather than trying to compete against an agile and powerful competitor.
A great example of this approach comes from the hotel industry, which is responding to Airbnb’s disruptive model. I have seen three very different responses from hotel groups. Look to each of these responses and ask yourself which best describes your company’s response to disruption:
Deny
Some hotel groups have chosen to view Airbnb as nothing other than a new channel to market. I’ve overheard hotel executives stating the model is a fad and that regulators will eventually step in to put a dent in its growth. Given Airbnb has 1.5M listings in 190 countries and is expected to achieve triple figure growth this year (pundits project 80M room nights) we should expect regulators to bend to the marketplace not the other way around. Ignoring Airbnb is a deleterious strategy.
Emulate
Other hotel groups have looked at the Airbnb model, understood it as a disruptive ‘channel’ and decided to enter into the game. We see a number of hotel groups investing in sites such as onefinestay, lovehomeswap and airbnb itself in order to try and get some skin in the game. To my mind they’re missing the point. They are looking to the share economy model on the basis of its business model (how it goes to market) rather than its value (why customers participate).
Create
One of the most exciting responses to Airbnb’s disruption has been from serial innovators Atyzen Group. They created CitizenM: the low cost luxury hotel (a great case study in itself). Their new venture is a hospitality concept for ‘digital nomads’: Artyzen Habitat. Habitat disrupts the hotel and airbnb model by offering a unique communal living space where travellers (including a growing market of working nomads) are able to connect to the community during their stay and have access to co-working and social spaces. Habitat staff play the role of host (rather than hotel employee), offering a non-obtrusive and personal service.
Artyzen Group has understood the value intrinsic in the Airbnb model. It’s not about the channel to market; it’s about creating community for travellers. They have looked at airbnb’s disruptive model only in terms of gaining essential new insights. And then they have created their own disruptive innovation. While yet to launch, Artyzen Habitat is creating enormous interest and is certain to have every chance of success. I myself can’t wait to book a stay at an Artyzen Habitat hotel.
How will you manage disruption?
So what does this story tell us? What is the lesson for incumbents as they witness impending disruption? Firstly – don’t ignore it. Responding to disruption through innovative strategy may have risk, but it’s not nearly as risky as the status quo (where eventual failure is certain).
Secondly, look beyond the disruptor’s business model: it’s only part of the story. Instead seek to understand the unique value that the disruptor offers to customers.
What new value does it offer?
Finally allow these insights to inform you only as far as they allow you to reimagine how new and unique value can be offered to your market (or emerging markets). Look beyond your assumptions and traditional market boundaries to find your own unique offer to the market place: your own disruptive innovation. To manage disruption, become a disruptor.
To learn more about Artyzen Habitat - watch the clip below.
