Many executives are losing sleep over new, digital and data-savvy entrants disrupting their industries. However, even more prefer to picture themselves as the disruptors, extending their reach into adjacent or entirely new markets. A recent survey of 275 executives conducted by Forbes Insights finds 26% report they are fighting disruption from competitors from outside their industries. (I helped develop and analyze the survey.) However, 32% are playing the roles of disruptors, actively seeking to expand their markets within their current sector or new/adjacent sectors.
The question is, what does it take to be the disruptor? The qualities of disruptors were recently explored by Venkat Atluri, Miklos Dietz, and Nicolaus Henke, all with McKinsey. “Digitization is causing a radical reordering of traditional industry boundaries,” they state.
There was a time when if you were in auto parts manufacturing, you made auto parts. If you were in the temp help industry, you dispatched temp help to client sites. If you were a book publisher, you published books. Nowadays, with the explosion of big data and accompanying analytics, the rise of the Internet of Things, and the ubiquity of cloud, everyone is getting into everybody else’s business.
While there isn’t necessarily anything new about cross-industry disruptions – banks and supermarkets have been expanding into adjacent sectors for decades now – digital technologies bring something new to the table, the McKinsey team points out. This bleeding – or outright vanishing of industry categories – “has accelerated recently with tremendous increases in electronic data, the ubiquity of mobile interfaces, and the growing power of artificial intelligence.”
It’s understandable why many executives would like to see themselves as disruptors, rather than the disrupted. In line with what Atluri and his colleagues write, there’s opportunity not only in adjacent business sectors, but also areas unimaginable before the digital explosion. “Look no farther than the phone in your pocket, your music and video in the cloud, the smart watch on your wrist, and the TV in your living room,” they illustrate.
Platform thinking is the key to opening up opportunities across new industries. The McKinsey team makes the following recommendations for participating in the economy of vanishing industry boundaries:
Adopt an ecosystem mindset. “Job one for many companies is to broaden their view of competitors and opportunities,” Atluri and his colleagues advise. The goal is to change alter your organization’s perception of itself. Ask questions such as “How can we turn our physical assets and long-established customer relationships into genuine consumer insights to secure what we have and stake out an advantage over our competitors – including the digital giants?”
Employ data to build emotional ties to customers. “Customer ownership is becoming the ultimate prize,” the McKinsey authors state. “Companies that lack strong customer connections run the risk of disintermediation and perhaps of becoming white-label back offices or production centers, with limited headroom to create or retain economic surplus. Data to customize offerings, content to capture the attention of customers, and digital engagement models to create seamless customer journeys that solve customer pain points can all help build emotional connections with customers and occupy attractive roles in critical ecosystems.”
Follow the data. Data is the fuel that drives digital crossovers between industries. “Information from telecommunications-services players, for example, can help banks to engage their customers and make a variety of commercial decisions more effectively. Deeper data insights are finally beginning to take ideas that had always seemed good but too often fell short of their potential to turn into winning models.”
Change your partnership paradigm. Partnerships arise as a natural byproduct of platform thinking. “We’re seeing a new wave of partnership energy aimed at making the whole greater than the sum of its parts,” the authors say. Also important – application programming interfaces (APIs) and integration solutions. Also, “don’t assume that if you were to acquire a potential partner, you’d necessarily be adding and sustaining their revenues on a dollar-for-dollar basis over the long term.”