"Don't worry about failure," Dropbox founder and CEO Drew Houston once said. "You only have to be right once."
This is a belief many hard-charging founders and leaders live by. It's what spurs their innovative spirit and fuels their passion for market domination. And despite the staggering failure rates of most upstarts, some present a real threat to established businesses.
Disruption and changes in the marketplace are constant --even the most long-lived, established brands face challengers who are ready to eat their proverbial lunch. While experts agree that successful organizations must be prepared to pivot to avoid death by being average, there are various schools of thought regarding how much organizations should fear disruption.
If your organization is leaning toward the anxiety end of the spectrum, there's good news: Doing competitive due diligence, evaluating your value proposition, and staying aware of new market opportunities can help ease angst and keep you positioned for success.
Dig into the data
One of the best ways to alleviate the stalling fear of disruption is to educate yourself -- on the competitive landscape, the state of your market, your customers and prospects, etc. Fortunately, in today's digital world, finding information, particularly on potential disruptors, is relatively easy. What should you look for?
- Assess the scope of the threat: Is the competition direct (offering the same products or services as you) or indirect (meeting the same need as you in an alternative way)?
- Determine positioning: Analyze competitors' key benefits, differentiators, and target demographics.
- Learn about market share: While revenue numbers might not be readily available, industry contacts, trade associations, and analysts are all good sources of information. The bottom line is, you will need to look at the reality of the threat. How large are they, truly, and how quickly are they gaining market share?
- Consider pricing structure: Be sure to make an apple-to-apples comparison of a competitor's products and services.
- Get the 411 on customer base: Social media and online reviews are excellent venues for assessing how consumers judge your competition.
Evaluate the value propositions
Once you've done your homework on an industry disruptor, evaluate your value proposition versus that of the potential competitor. In The Innovator's Dilemma, Clayton Christensen theorized that because the scope of disruptive technology markets are unknowable, managers are best served by discovering and learning, not planning and executing in a hasty or premature manner.
When evaluating your own organization's value proposition, be honest in judging your strengths and weaknesses. Focus in on the customer experience -- as this should be your key differentiator.
What are the unique benefits of the customer experience you provide? How has it influenced the development and delivery of your products and services? Does it save your customers time or money, demonstrate that you truly understand them and their needs, and give them something they won't get anywhere else?
Now consider your competition. Are they delivering a better customer experience than you or can they solve the problem faster or cheaper?
Be as critical as you can. Turning a blind eye to the hard facts, as painful as they can be sometimes, will only hurt you in the long run.
Are they able to market a simpler product that's easier to sell? Do they have the capacity for faster execution? Have they figured out how to eliminate the "middleman" or increase efficiencies?
If your value proposition comparison indicates risk, proceed with caution. "Proactive measures are often needed," said PwC's Paul Leinwand and Kellogg School of Management's Cesare Mainardi. "But they should be well thought out and center around those advantages that you already have and control -- your own strategy and strengths."
Thoughtfully consider a change
If you determine a modification to your business model is in fact necessary, carefully assess the threat before making a sweeping change. This will help you determine the degree to which you may need to adapt.
"The higher [the threat] level, the more risk you need to be able to take," said Roy Vallee , former chairman and CEO of Avnet. "The smaller that level, the less risk you want to take, and consider dealing with it through some new objectives or strategies."
Alterations to your original vision could range from introducing a new product or service line to simply tweaking the way you deliver existing products and services. But, words to the wise: Focus on what you can control. This includes the quality and execution of your offerings, and - most crucially - how you're engaging with your clients before, during, and after you switch gears.
After all, you're not designing a product or service for your competitors or even your revered investors. You're innovating for the sake of building and retaining a loyal customer base.
If you can't beat 'em, join 'em
Finally, if you've evaluated a disruptor as a serious threat but can't modify your existing strategy in a timely or efficient manner, consider one of the following options:
- An acquisition or investment: often startups will be willing to talk about some type of financial partnership or full buyout.
- Partnership: "Competitive collaboration" in the form of joint ventures, outsourcing agreements, intellectual property licensing, or cooperative research can be a win-win for both businesses and consumers alike.
- Launch of a new brand: Not willing or able to mess with your existing value proposition? Spin-off a new brand that leverages the strength of your existing investments and resources, but also captures the passion of changing market ideals.
Keep in mind, you will never be immune to disruptors, but often that is a good thing. When you have competitors, it's a signal you have something people want and need.