Are You The Point Of Inflection?
in·flec·tion point
noun
(in business) a time of significant change in a situation; a turning point.
Source: inflection point – definition of inflection point in English | Oxford Dictionaries
Lessons Learned, or, #hindsightis2020
Google for “blockbuster turns down netflix” and you’ll have hours of fun reading. Here’s a favorited quote;
Barry McCarthy, Netflix’s former chief financial officer, said in an interview with the Unofficial Stanford blog in 2008, “I remembered getting on a plane, I think sometime in 2000, with Reed [Hastings] and [Netflix co-founder] Marc Randolph and flying down to Dallas, Texas and meeting with John Antioco. Reed had the chutzpah to propose to them that we run their brand online and that they run [our] brand in the stores and they just about laughed us out of their office. At least initially, they thought we were a very small niche business. Gradually over time, as we grew our market, his thinking evolved but initially they ignored us and that was much to our advantage.”
Source: Epic Fail: How Blockbuster Could Have Owned Netflix | Variety
With all due respect,
In a way, it’s ironic that Blockbuster is being featured in a special issue on failure, because I spent most of my career capitalizing on failure by fixing troubled businesses.
Source: John Antioco, former Blockbuster CEO, How I Did It: Blockbuster’s Former CEO on Sparring with an Activist Shareholder April, 2011
But as Clay Christensen writes in The Innovator’s Dilemma,
… it is actually the same practices that lead the business to be successful in the first place that eventually can also result in their eventual demise.
Read the book and you’ll learn that a disruptive competitor starts at the low-end of your business. This enables them to go by undetected because they’re considered “junk”. But as their own processes and technologies improve – ignored by the leader, they enable themselves to target the most profitable aspects of your business.
Meet Chris*
Life’s Good
A few years ago, Chris became the CEO of a well established professional services firm. As he took the helm, his predecessor shared some sagely advice:
It’s a big ship. We’ve been in business for over 100 years. Don’t mess-up. Just keep her heading straight on course and you’ll be fine.
Having great respect and admiration for his predecessor, Chris followed orders. As a result, Chris has successfully not messed-up.
Is It Really?
But as Chris stared out the picturesque window of his office, he couldn’t help but feel something’s off. He remembers listening to the news on the way into work and hearing about a study where
… the average lifespan of a company in the S&P 500 index has decreased from 61 years in 1958 to just 18 years today, a run rate that would mean that by 2027, more than three-quarters of the S&P 500 will be companies that we have not yet heard of.
Source: Is the Life Expectancy of Companies Really Shrinking? – Only Dead Fish
So Chris did a little Googling of his own and learned,
The difference today is that it no longer takes 30 years for an innovation to become disruptive. Take for example the roll out of Airbnb and its impact on the hotel industry; Uber’s low-cost ride sharing, which will soon make city controlled high-cost taxis obsolete; Amazon’s online business, which is threatening higher cost big-box retailers such as Best Buy; and streaming services such as Spotify and Netflix, which are making CDs and DVDs a thing of the past.
Source: In the age of disruption, complacency is an investor’s biggest enemy
Humbled by not entirely understanding what exactly some of those companies did, he was certainly familiar with the disappearance of his corner Blockbuster store and Netflix now being streamed into his home. And while he may’ve even felt a little guilty about contributing to Blockbuster’s demise, he truly appreciated Netflix’s value proposition.
Not On My Watch
Needing some air, Chris decided to get out of the building. On his way down the corridor, he passed the portraits of past CEOs and made an executive decision; “Not on my watch.” Chris had no desire for his portrait to represent the point of inflection in the company’s spreadsheet of demise. So now Chris knew he had to do something. But what?
The Epiphany
As Chris walked the streets of downtown, his thoughts whirling around like a tornado, completely oblivious to his surroundings, he was suddenly brought back to reality by the honking of a sleek new Honda Civic. And that’s when it figuratively hit him.
Look at the Honda Civic! Chris remembers when it first entered the US market in 1972. Back then, it was a low-end car, not good enough for his needs. But look what’s evolved since then. In 1986, just 14 years later, Honda introduced their luxury brand Acura. While some may still consider it to be a low-end luxury car, it and similar tier car makers, are certainly making a dent ? in that industry.
Chris got back to his office and continued Googling. At first he was searching for companies that could disrupt his own. But given the vast array of high-end services being provided, that proved to be an exercise in futility. At best, it was as if the industry was becoming fragmented, or, perhaps highly specialized, yet somehow paradoxically generalized too. But that’s exactly what GM faced. Their vast array of car brands and models, waiting to be disrupted by an unknown brand with only one model.
So Chris decided to do the same. He had to find that one model and offer it himself.
When Not Good Enough is Actually More Than Enough
Chris got together with his C-Suite and brainstormed, looking for their Honda Civic. It took some time, but they finally agreed on one to try. They were going to experiment with a highly complicated service offering that targeted their very niche audience, yet could be generalized for a much larger audience.
They were not concerned about cannibalizing their existing clientele, because their Honda Civic would not be good enough for them. But the Civic would be more than good enough for a much larger market with much simpler needs.
#hindsight2020 Chris could have been a case study in Clay Christensen’s The Innovator’s Dilemma.
To The Spreadsheets!
Now Chris needed to cost their Honda Civic and figure out what price the market was able to bear. So he asked his C-Suite to make a few phone calls to their trusted providers and hit the spreadsheets.
But Chris now discovered a new dilemma. His C-Suite were experts in dealing the with the day-to-day operating challenges of a 100-year-old company. The spreadsheet quickly filled with six-digit estimates from well-known and trusted enterprise providers. And that was just for the analysis! It became abundantly clear, very quickly, this was not going to work.
Chris’ lesson?
Big companies have great execution habits to manage and improve successful business models and value propositions. But the habits that foster execution can easily kill new growth initiatives inside your company.
Source: Steve Blank – The 11 Bad Habits Killing Innovation in Your Company
Unwilling to concede defeat, Chris took his dilemma to his own, trusted outside network of friends. The result? Think outside the building.
#hindsight2020 Now would’ve been a good time for Chris to read The Innovator’s Solution by Clayton Christensen
To The Startup Community
A startup is a temporary organization designed to search for a repeatable and scalable business model.
Source: A Startup Conversation with Steve Blank
Through word-of-mouth, Chris found Tracy. She was experienced in his industry, understood his Honda Civic, and was well versed in the local tech Startup Community.
With his new lifeline, they decided to take a more innovative, or, agile approach as how to deliver their Honda Civic.
How To Be Agile, Mitigate Risk and Reduce Time To Market
Within a few months, they started to see the opportunity: There’s a wealth of innovative technologies being developed by innovative leaders whose work ethic, culture and desire to prove they can change the world, waiting to help them. Was there going to be one startup that could do it all? Absolutely not! But there could be many startups, all highly specialized in the one thing they do, that can collaborate with other startups, including Chris’ & Tracy’s, to collectively get their Honda Civic to market.
Child’s Play, sort-of
Imagine if each startup is like a Lego block. Each block completely self-sufficient, performing one function, yet each sharing a common method of connecting. Imagine if those connections allowed them to communicate with each other, the same way humans text, or, send emails to one another. If that were true, then you could build practically anything you could imagine, providing you found the right blocks.
Image source
But the beauty of Lego is not only building what you want, but changing your mind and switching out some blocks for others, to build something completely different. It’s sort of like getting a new toy without throwing out the old one.
With this infrastructure in place, Chris & Tracy can toy with their startup. They can experiment with different building blocks to see which fit better with their vision. But more importantly, as their startup evolves, their needs will change. And while they may’ve grown accustomed to the way things worked, it’s much easier for them to adapt. They’re agile! They can either replace startups, or, extend the current model by connecting more of them.
Bottom Line
IDC … predicts that a third of the top 20 companies in every industry will be “disrupted” over the next three years, meaning their revenue, profits and market position will deteriorate — not that they will go out of business.
Source: Digital Transformation Going Mainstream in 2016, IDC Predicts – The New York Times
There’s a huge gap between today’s established enterprises’ use of technologies and the innovative ones we see everyday in the startup community. Given #hindsight2020 and agility derived by connecting startups, just imagine the vast number of opportunities waiting to be discovered by the two collaborating.
Like Chris, your profile picture may also represent your company’s point of inflection.
* Inspired by a true story