New technologies and methods of connecting with potential customers has seen the likes of Deliveroo, Airbnb, Slack, Instagram, Waze and so on make massive inroads into established markets, changing the way those markets operate forever. These 'Market Disruptors' bring game changing concepts and innovations that rocket them into market leadership.
For CEOs and Marketing Heads, the fast moving and ever transforming digital environment is a constant consideration as whilst it potentially poses threats, the opportunity presented is tenfold. Clearly disruption is not a bad thing if you are the brand who has found an edge to transform a market, but if you are the one watching from the side lines while an innovator erodes your market share it can be fatal for your brand.
The rate of change in the marketplace is supported by findings from Richard Foster, a lecturer at the Yale School of Management, back in 2015.
- Average lifespan of an S&P500 company reduced from 67 years in the 1920s to 15 years
- On average an S&P company is replaced every two weeks
- Estimates that 75% of the S&P 500 firms would be replaced by new firms by 2027
Even dominant global market leaders can be displaced. A McKinsey report* from October 2018 on the global economy talks about "superstar firms": the top 10% of companies who capture 80% of economic profit among companies with revenues of $1bn plus. Their research showed:
- In each of the past two decades almost 50% superstar companies fell out of the top 10%
- And 40% of those falling ended up in the bottom 10%
While we may not all be global superstars, it's clear from the market shake-ups in recent years that successful companies should not be complacent. 33% of UK businesses** say that 'disruptive forces' are the greatest near-term risk to their business.
Businesses need to be constantly seeking opportunities to innovate and grow market share. However with the digital landscape changing so quickly companies often struggle to keep up with developments that might allow them to effect market shaping change.
We spoke to Phil Goodman, CEO at leading innovations agency Brandwidth, for his thoughts on how to protect your business from the threat of disruption and perhaps become that market disruptor yourself.
"We believe in practical innovation. Businesses must seek to innovate as frequently as possible." He cites Amazon as a great example. "Many think of Amazon as disruptors, but we see them more as everyday innovators. They make lots of relatively simple but effective innovations on an ongoing basis to provide their customers with what they want, before the customer even realises they want it."
So it's not always necessary to be radical but it's this continual and restless digital improvement that sets them and other innovators apart and ultimately protects them from disruptive threat. If brands adopt and embrace emerging technology early on, then they are far less likely to be threatened. We have seen huge hits in the retail space for a number of major high street brands, who have all cited the relatively poor performance of their online presence as a contributing factor. It's easy to blame the 'decline of the high street', but all bricks and mortar brands have a digital footprint too.
Phil firmly believes that through continuous innovation established businesses can deny disruption the oxygen it needs to exist. He references Uber and Instagram as cases in point where whole industries have been turned on their heads. "If the private-hire taxi industry had recognised that the digital technology existed to simply track the route from car to customer, then Uber wouldn't have had the space to move in and disrupt the market so aggressively. If Kodak had embraced the rise in digital photography earlier they could have created a platform as effective as Instagram."
Disruption in a market can be intentional or simply a by-product of bringing a fresh pair of eyes to an established industry; not following the rules but following a novel idea that resonates with a market open to change. But without a doubt the innovative use of technology has paved the way for paradigm shifts in the way products and services are consumed in a number of traditional markets.
So businesses must continue to appraise and challenge their digital marketing and think one (or three) steps ahead. Is your social following as large and engaged as it could be? Does your e-commerce provide as frictionless a route to purchase as possible? Are you considering how Augmented Reality and Artificial Intelligence can work for your brand? Is your brand recognised by all the Voice Assistants, like Alexa?
Phil's final point was, "Continuous and effective digital innovation in your marketing will help keep your brand relevant. And if your brand remains relevant you leave no space for disruptors to affect you. If you start to slide into irrelevance then this is often when the opportunity space occurs for the biggest threats."
PEPCO can support portfolio companies with a free digital health check with recommendations of areas for improvement and innovation.
If you would like to find out more please contact Mark Russell on 0203 008 7585 or firstname.lastname@example.org * https://www.mckinsey.com/featured-insights/innovation-and-growth/superstars-the-dynamics-of-firms-sectors-and-cities-leading-the-global-economy