Written by Jarther Taylor, Datarati CEO
There is often the suggestion that one should disrupt oneself. But the reality is that self-disruption almost never happens because shareholders want neat quarterly returns. Shareholder demands for regular profits simply won’t allow for a fundamental change of a business model. The CEO and Board would be punished for it.
Some of the most popular examples of self-disrupting businesses actually made far less radical changes than their older competitors:
Netflix self-disrupted (kinda…) when it shifted from shipping movies to streaming movies. I say kinda, because compared to Blockbuster, shifting from mailing to streaming is less of a disruption. Blockbuster would have needed to dismantle a massive franchise structure – an almost impossible task.
IBM, my alma mater, disrupted itself by mistake. Inventing the PC meant the mainframe terminal business tanked.
Then years later, when I was working at IBM, we struggled to embrace Cloud Computing (remember when that was a hot topic) because Cloud is a low margin, as-a-service product, which meant our highly profitable hardware-and-software business was about to have its margins slashed.
Cloud Computing actually meant that IBM’s business model (and associated organisational strategy) no longer fit. IBM still hasn’t figured this out entirely, so its sales continue to dive. Although the Cognitive Computing division is delivering better profits, it’s still a long way from rebuilding the value IBM once enjoyed.
Telstra is in a similar position: the decline in usage of home phones (remember those?), the NBN and the price squeeze on mobile deals have all hurt. The business model that once sang is hitting some bum notes. The strategy of evolving from a communications provider to become a tech company is a smart one, but it’s also incredibly hard given its organisational strategies.
My experience in IBM and Telstra is reflected on a different scale in my current role. At Datarati we work with clients every day to help transform the way they interact with their customers. And changing that is hard. You need the right capability to drive transformation, the organisational capacity to absorb change, and the financial know-how to manage the transition smoothly.
In a recent meeting with the leadership team of one of our clients, we explored exactly that issue. How does a seasoned exec team, made up of people who know their industry inside out, start thinking differently? We focused on getting the exec team educated and connected to fresh perspectives to create a clear way forward.
We’re seeing great results with another client that is much further along – currently in year 2 of a multi-year program – with the kind of strategic vision required to drive substantial change. Some steps are easier than others because the rewards are more obvious, but the hard-won victories are often the sweetest.
Recognising the need – and the capability gap – is a great first step. We’re ready when you are.