Disrupt or destroy your own business to make it stronger

With this strategy, Amazon came up with Kindle and Netflix moved to streaming films and TV shows online

Rajesh Srivastava

[Photograph by Unsplash under Creative Commons]

"He not busy being born, is busy dying" - Bob Dylan

What are the thoughts that keep business leaders awake? The nightmarish thought that a competitor could make their business irrelevent. As Apple did to Nokia, Blackberry and Motorola and Amazon is attempting to do to Walmart and Tesco! 

What should you do to bullet-proof your enterprise from such a catastrophe?

The answer may surprise, even alarm you: you have to become your own fiercest competitor and disrupt or destroy your own business before competition does and reinvent it to make it more formidable. Because if you do not embrace this counterintuitive strategy, the fate of Nokia, Blackberry, Motorola awaits you. You will be rendered irrelevant and eventually decimated.

You have to become your own fiercest competitor and disrupt or destroy your own business before competition does

Has any successful enterprise disrupted or destroyed its own business and reinvented it in a more formadable avatar?


Watch a video of this episode or continue reading

Episode 12: New Rules of Business


 

Indeed many admired enterprises have successfully executed this strategy.

Take Amazon. In early 2000, Apple was revving under the innovative leadership of Steve Jobs. Jeff Bezos, the Amazon boss, feared Apple might come up with a device that will disrupt its successful online book retailing business.

As Brad Stone says in his book, The Everything Store: Jeff Bezos and the Age of Amazon, in 2004, Bezos "…started a secretive Silicon Valley skunkworks with the mysterious name Lab126. The hardware hackers at Lab126 were given a difficult job: they were to disrupt Amazon’s own successful bookselling business with an e-book device while also meeting the impossibly high standards of Amazon’s designer in chief, Bezos himself. In 2007, Amazon unveiled the result of this effort. Kindle."

Kindle is the child of Amazon’s efforts to disrupt its own business before other companies could do it to Amazon. Today, it is an important artillery in Amazon’s product range.

Let us move to Netflix, the on-demand content streaming platform, which also adopted the strategy of destroying its own successful business to reinvent itself into a more formidable avatar.

Netflix's business model involved sending DVDs by mail to its customers. Customers could get the next DVD only after they returned the previous one.

Netflix witnessed unprecedented success, but it did not rest on its laurels. It had the foresight to realise that physical delivery of DVDs would soon become obsolete and would be replaced by streaming content over the internet. So, instead of waiting for a potential competitor to take the lead on delivering content over the internet, it proactively destroyed its own mail order business and adopted the streaming-over-internet business model.

The result was tumultuous and triggered a free fall in its share price. It slipped from $137 to $69 (March 2010).

But Reed Hastings, Netfilx's flamboyant founder, was determined to pursue this strategy. Results started showing later in 2010 and Hastings was nominated Business Person of the Year by Fortune magazine. Netflix's stock price has rocketed to $456 (March 2015) since then. 

If the disrupt /destroy strategy has so many advantages, what is stopping companies from embracing it? There are several reasons, chief among them are:

1. The belief that past success is a guarantee of future success: This is akin to driving a car looking into a rear view mirror. Today, many companies are realising, much to their chagrin, that strategies that succeeded in the past are no guarantee of future success.

2. Sunk cost: Big companies would have invested heavily in factories, infrastructure, training their talent and many other tangible and intangible assets. Even if they wish to disrupt themselves, they find it difficult to overlook these sunk costs. Or at least their chief financial officers keep reminding them.

3. Cannibalisation: Dominant players fear that executing disruptive strategies would lead to cannibalisation of their own brand.

4. Measuring competition with their own yardstick: Companies often measure competitors' products by the rules they hold dear. They sneer at their competitors if the latter's products fail these tests. For instance, Nokia's engineers turned up their noses at Apple devices because they failed the 'five-foot drop test' - where a device survives and remains in working condition after being dropped from chest height.

Are there other, less violent strategies to quell competition? Yes, simply buy out the enterprise that has the potential to disrupt your business. Just like Facebook bought WhatsApp, for a whopping $19 billion. WhatsApp was acquiring users at a faster rate than Facebook. It had acquired 450 million active users in only four years; Facebook took six years to reach this milestone.

The lesson for enterprises is to constantly disrupt and destroy their own business before others do and reinvent themselves to become more formidable. If this strategy seems too risky, simply buy out the competition which has the potential to destabilize you. Embracing these strategies will ensure that your enterprise continues its dream run.

Key Takeaways

  • To stay ahead of the curve, become your own strongest competitor and be prepared to destroy your business; it’ll give you a fresh perspective.

  • Else, simply buy out the competition.

If you have any questions mail us at askrajesh@foundingfuel.com

[This article was published concurrently in Mint]

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About the author

Rajesh Srivastava
Rajesh Srivastava

Corporate Veteran, Thought Leader,

Educator & Bestselling Author

Rajesh Srivastava earned his engineering degree from the Indian Institute of Technology, in Kanpur, and studied management at the Indian Institute of Management, in Bangalore. He has over three decades of experience creating value in fields as diverse as the alcoholic beverage industry, food and commodities, personal care, lifestyle industries, education & publishing. He has conceptualised, launched, and nurtured over fifty products which enrich the lives of Indian consumers’ every day. Brands he has promoted include Bagpiper, McDowell Signature, Royal Challenge, Blue Riband, Blue Riband Duet, Captain Cook, Park Avenue Personal Care Products.

In 2002, he was named President of J. K. Helene Curtis Ltd, a Raymond Group Company. Over the next three years, he steered it to a 33% revenue growth (CGR) and doubled profits, despite operating at a time when the FMCG industry was recording a near-flat growth.

Mr. Srivastava also writes for journals and appears in broadcast media on topics of market analysis and trend recognition. His articles and columns have been published in Mint, Telegraph, Outlook, Mid-Day. He has also been interviewed as a business and marketing analyst on BBC World, Aaj Tak, and CNBC.

He has been invited as a keynote speaker, by premier schools, business schools, hospitals and corporates such as IIM Calcutta, IIM Bangalore, IIM Sambalpur, IIM Nagpur, IE Business School, Spain, Jamna Bai Narsee International School, Mumbai, Tata Memorial Hospital, Mumbai, Godrej & Boyce, Tata Telecom, Indian Oil Corporation, ICICI Bank, Crompton Greaves, Alstom India, Marico’s Ascent Foundation, AGC Networks Limited, Valmont Corporations, Hindustan Petroleum Corporation Limited, S&P Global, BSH Home Appliances and John Deere.

He has also been conducting customised workshops for many of the finest corporates including Mercedes Benz, Siemens India, Reliance Industries Ltd., Citibank, and Credit Suisse.

In 2011, he was named the Chief Operating Officer of S. P. Jain School of Global Management - Dubai, Singapore, and Sydney. He has been awarded the Best Professor Award for two consecutive years - 2009 & 2010. He also served as Adjunct Faculty at IIM Indore between 2008 to 2015.

He practises as an Independent Consultant and coaches CEOs.

Penguin Random House has published his two books, ‘The New Rules of Business’ & ‘The 10 New Life-Changing Skills’. Both have become national bestsellers. 

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