Is Your Business Unsinkable? Think Again
Thomas Andrews Jr. oversaw plans at the Belfast shipyard where it was built. He was onboard for the maiden voyage. Because he knew every detail of the ship, my way-back forebear was the one summoned urgently to assess the damage from the collision—and had the task of telling the captain that the unsinkable vessel was going down in mere hours.
Today, we are all familiar with the story: The iceberg was spotted too late, too many of the Titanic’s watertight compartments were breached, the lifeboats were too few (this despite Andrews’ objections, I must add), and the crew was not trained for such a crisis.
Apart from the human tragedy, the image of the Titanic—a ship rapidly sinking while the band (bravely) played on—may seem a bit cliché as a business metaphor. But the incredible speed at which that ship went down keeps coming to mind today as companies with staid, seemingly solid business models, in industry after industry, capsize in very little time.
Some hard numbers: One New York City taxi dispatch company has seen a 40% decline in business in the last year and a half because of services like Uber and Lyft. Airbnb, which launched in 2008 with two bookings at SXSW in Austin, now has a 12% penetration of the travel market, and that number is expected to continue upward (hurting hotels some, but travel sites like Priceline, Expedia, and Orbitz even more, according to a Morgan Stanley Global Insight report in November 2015).
In other words, even businesses born in the Internet Age are vulnerable.
Charting a New Course
Just two years from now, IDC predicts that one-third of the top 20 market-share leaders in most industries “will be significantly disrupted by new competitors (and reinvented incumbents)” that create new services and business models using a combination of mobile computing, social media, cloud computing, analytics (big data), and potentially the Internet of Things.
“Companies are trying to figure out how to participate when everything is coming on-demand through the crowd,” says Jeremiah Owyang, industry analyst and founder of Crowd Companies. Crowd Companies brings together leaders from larger, established companies to learn about and discuss the changing business environment in the collaborative economy—and perhaps connect with startups for potential partnerships. Membership reads like a Who’s Who of familiar names, from FedEx to Fujitsu, Ticketmaster to Taco Bell, USAA to AARP, and Xerox to Oracle.
“It’s about new business models, not necessarily coming up with the next generation of products; that’s two different things,” Owyang explains. “For example, a hotel never imagined an Airbnb on its product road map. It was only focused on building a better hotel experience. Creating a marketplace and leveraging the crowd is a very different strategy.”
But moving in new directions means being able to balance risk with a very new reality. Part of that reality is that the most critical drivers of business value today, according to a global survey of senior executives conducted in 2015 by Oracle and CGMA (Chartered Global Management Accountant), are customer satisfaction, quality of business processes, customer relationships, quality of people, and brand reputation, each of which involve groups across organizational silos. Add to that the fact that business models for the collaborative economy effectively redefine success for each of these areas, making it more important than ever for an enterprise to define, access, and analyze the right data to determine opportunities and measure performance.
The Siren Song of Inertia
Instituting a change in direction or strategy when a company is struggling is far easier than making a shift when things are going well.
The Boston Consulting Group recently highlighted this tendency in its blog, noting that big companies that have been successful tend to “overestimate the longevity of their products and business models and underinvest in building new ones”—and once results start to slide, they react by reducing costs and buying back shares rather than innovating.
“Companies have to decide whether they’re going to change in hopes of not being disrupted or if they’re going to just wait until they actually have been disrupted,” Owyang says. “A lot of big companies don’t move until their actual revenue has been hit and hurt. By that time, it could be too late.”
Eyes on the Horizon
So what can an enterprise do to avoid joining the ranks of seemingly unsinkable companies like Blockbuster, Circuit City, and Borders?
Reconsider your market. Don’t think you’re safe because change hasn’t hit your industry yet. Step back and think of your business as a provider of services rather than a seller of products. What services could you provide? What services would customers (and potential customers) find appealing? For example, Hasbro opened up its intellectual property and offered customers the chance to create and sell designs based on their toys.
Think sustainability. Fewer people are of the mindset that they need to own a product; having a product (such as a car) available on an as-needed basis is increasingly attractive. So carmakers could dig in their heels and look at ways to add more bells and whistles to attract more buyers, or they could start a parallel business that sells a single car many times over—like BMW, which offers on-demand rental of vehicles in select markets through itsDriveNow program, and GM, which recently introduced its Maven car-sharing service.
Consider partnering. Established companies are tapping into the sharing economy by linking up with startups to offer new services far more easily than building them internally. American Express recently partnered with Airbnb, enabling customers to book Airbnb rentals and earn AmEx reward points doing so. And Whole Foods joined with Instacart to offer deliveries within an hour.
Know that more change is coming. Technology is begetting new business approaches at a rapid clip. It’s never been more important for an enterprise to have the latest modern technologies and capabilities—and to focus on new strategies rather than patching old systems.
“We’ve gone from the internet era to the social media era to the collaborative economy very quickly, and these new eras are coming at a faster pace,” Owyang says. Next up—and we’re seeing the beginnings—is the autonomous era, where self-driving cars and robots build on these previous eras to evolve how business is done and change customer expectations yet again.
Like the previous trends, the autonomous era will prove to be some companies’ proverbial iceberg in the dark, catching them off guard and scrambling to change too late.
Where Andrews is concerned, he was among the more than 1,500 people who went down with the ship—but he helped many fellow passengers get aboard lifeboats and is considered one of the heroes of the Titanic tragedy. Two years from now, if Australian billionaire Clive Palmer has his way, Andrews’s design will once again sail the seas. Palmer’s Titanic II, an exact replica of the ill-fated luxury liner—except for modern safety precautions and navigational technology—is scheduled to have its maiden voyage in 2018, sailing from Jiangsu in Eastern China to Dubai in the United Arab Emirates. Yes, far from any sign of ice.