Often feared as the Freddy Krueger of the business world, disruption is something that strikes fear into the hearts of business leaders everywhere. But is it really something we should fear?
Rates of disruption have never been higher than they are today. In the developed world, the ‘topple rate’ (a measure of the rate at which companies lose their leadership positions) has increased by 39 percent. The tenure of companies on the S&P 500 has declined from 61 years in 1958 to 18 in 2012. Two decades from now, 75 percent of the S&P 500 companies will have turned over.
A little closer to home, nearly half of all New Zealand small businesses expect to see disruption in the next decade, but interestingly less than two-thirds are actively trying to take advantage of it. (MYOB Business Monitor 2017).
Sir Paul Callaghan profoundly pointed out a few years ago that Samsung generates the equivalent of half of New Zealand’s GDP with only 123,000 employees (about five percent of our workforce). That’s a stat to get you thinking. “Productivity is not about how hard we work”, he said, “it’s about what we do, and in today’s world it’s technology that counts”.
So as business leaders, how do we lead with optimism to make disruption an opportunity rather than a threat in an environment with no clear end-state?
Each year in New York City, Fast Company hold their Innovation Festival. In late 2017 I was able to attend and learn from a range of leading-edge speakers from diverse companies and organisations as broad as BuzzFeed, Nike, IDEO, Facebook, R/GA, Droga5, eBay, Planned Parenthood, Jessica Alba’s The Honest Company and many more.
The festival itself is dedicated to looking at the future of business, exploring themes around innovation, entrepreneurship, leadership, technology, social good and creativity. It is highly experiential, involving small group visits to companies and organisations across New York, bringing to life the ideas that are being discussed. The end goal is to encourage participants to “lead with optimism” and effect positive change in their careers during this era of disruption.
I’ve distilled a huge array of speaker insights (from Kimbal Musk, Jessica Alba to Bob Greenberg) into four key learnings on how companies can lead with optimism. These take-outs have as much relevance for a Brooklyn-based Dumbo start-up, as a Kiwi Generator start-up:
Learning 1: Disrupt yourself or face disruption.
There is a clear need for businesses to actively disrupt themselves before disruption strikes and establish appropriate business structures to enable new growth. This can take many forms, from partnering to acquiring, investing to collaborating. In whatever form, the development of a new ventures arm to futureproof your business is now simply a hygiene factor of doing business.
Just look at Google’s Other Bets (who spent $4.4 billion or seven percent of operating expenditure) on ‘Other Bets’ in 2016 to try and find the next game changer outside of their search business, from Nest home automation to self-driving cars.
Visiting R/GA’s offices magnified this strategy as they have a clearly defined playbook for self-disruption. Bob Greenberg, the original founder, believes that having an ongoing plan to disrupt yourself is critical to future survival and success. The agency was set up in 1977 and from then has worked on a broadly nine-year cycle of reinvention. However, they now seek to disrupt themselves every year, through a consulting plus ventures model entirely focused on delivering growth to their clients.
Greenberg’s view is that advertising is a solved problem and a legacy industry (in fact, R/GA has long since dropped the word agency). They try to get into spaces where the problems are far from solved (the “40 percent” spaces) through a dedicated ventures arm to incubate the best ideas and utilise core skills to build further capability. There is a strong focus on building a culture of change as essential to self-reinvention.
Learning 2: Harness the power of data analytics, AI and machine learning to power all functions of your business.
Beyond data analytics, AI and machine ‘deep’ learning have emerged as the critical tools for making sense of multiple signals coming into an organisation. It is clear that being data agnostic will be a critical skill of future winning businesses. From functions as diverse as marketing through to office design, staff recruitment and staff engagement, AI and machine learning are changing how businesses not only build their businesses but also run them operationally.
BuzzFeed is a classic example of a business harnessing the power of AI and machine learning to reinvent the future of television, through a belief that effective use of data should deliver the right audience, not just a bigger audience. They use a sophisticated continuous feedback loop, through their use of data.
It is not new news to say that TV is being fundamentally disrupted by AI and digital watching behaviours. BuzzFeed segment TV watching behaviour into ambient, channel surfing and appointment viewing and split digital watching behaviours into short form (unintentional) and long form (eight minutes and intentional), which is rapidly growing. From BuzzFeed’s perspective, Netflix and Amazon are the SKY TV of New Zealand today – the old school premium cable players with a limited lifespan.
BuzzFeed is focused on using data analytics and AI to create new-world content that harnesses social amplification, while also creating real-life experientialism for viewers. Unsolved is a weekly web series that screens on BuzzFeed's YouTube channel, having amassed over 200 million web views across its various instalments. Rather than commit to an entire series, each episode harnesses new-world technologies to shape and alter the content, making it incredibly difficult for traditional players to win (who must commit to a full series before any viewer feedback is gained). BuzzFeed is constantly using AI and machine learning to inform future content creation decisions, generate new ideas, analyse view counts, audience data and how viewers interact and engage with content (likes, comments, shares) to judge how they feel about it. Put simply by BuzzFeed’s founder Jonah Peretti, they are a “data, learning, dollars” business.
Beyond the screen, Unsolved has also moved into product placement (with brands currently spending over $70 billion a year on TV, integration is a natural play), along with merchandise and experiential events which allow viewers to visit the set, join parties, take photos with the cast and also suggest plot ideas for the future. Their strategy is IRL marketing.
Learning 3: Experience is kingmaker. A brand’s experience needs to be so good that people will tell others your story for you.
Experiences (and ideally those that are transformative for a person in some way) are emerging in culture as what people value, beyond material things.
Since brand is experience and experience is brand (these are not different entities despite popular discourse) it is not a case of using communications to tell your story. Your brand’s purpose (i.e. why you are in business) must be laser-defined and your experience so good that people will tell your story for you.
As the world’s largest brewer, Anheuser-Busch focus on purpose and experience in all of their portfolio through an approach termed the “3P’s” – purpose, product and passion.
Innovation is not a gated process but more about finding shared passion points with people and then finding ways to connect with these in a meaningful way so that the brand story is told.
Learning 4: Culture is everything. Understanding culture, rather than the individual, is paramount to success.
Understanding a brand’s role in the broader cultural context of people’s lives is critical. Humans are herd creatures. Much of what we think or do is driven by what is happening in the world around us. In creating a customer-centric company, there is a need to predict what customers are going to demand in the future, along with an understanding of what shifts are happening as a result of cultural movements.
Anheuser-Busch stays ahead of changing trends through a focus on culture and cultural shifts, using multiple data sources to find points where innovation can flourish. This is undeniably where cultural currents meet demographic shifts meets “in-between spaces” (the spaces between categories that offer opportunity). Anheuser-Busch works to a model of being 70 percent sure, testing small, acting fast and then scaling the good (with a particular focus on things that could disrupt themselves). They encourage significant collaboration and mash-ups to find new spaces e.g. coffee or spice makers are invited in to brew beer.
The learning from New York’s most innovative companies is that disruption is not something to fear but embrace. An opportunity and an environment we can lead with optimism in.
Where disruption becomes less Freddy Krueger, more cuddly teddy bear.
- Amber Coulter is a partner at TRA.