How to Save Your Business When Your Industry Gets Disrupted
Geoffrey Moore
Author, speaker, advisor, best known for Crossing the Chasm, Zone to Win and The Infinite Staircase. Board Member of nLight, WorkFusion, and Phaidra. Chairman Emeritus Chasm Group & Chasm Institute.
SOE is our acronym for Systems of Engagement, the next generation of edge architecture, dominated by Social and Mobile on the client side and Analytics and Cloud on the server side. We’ve talked a lot (I would prefer it if you didn’t say incessantly) about Systems of Engagement and how they present architectural challenges to enterprise IT architectures. It’s a big deal, and it will remain so for some time to come. That said, it is not the biggest deal.
SOBs are the biggest deal. No, not your new boss, even if he is named Satan, or the fellow who cut in front of you to claim the last possible parking spot in all of SOMA. No, here I am referring to Systems of Business. Whereas SOEs instantiate new operating models—streamlining interactions to make them more effective and efficient—SOBs instantiate new business models—truly disrupting the status quo.
When United Airlines lets me check in to my flight and check flight status on my smart phone, that is a System of Engagement. The underlying business model is unchanged. When Uber lets me summon a “limo” on demand, and then follows that up at the end of the ride with a new system of payment and a system of ratings, that is a new System of Business. That’s what has the transportation system in an uproar. When retail stores personalize their offers to me based on analyzing my purchase history and public social media, that is a new System of Engagement. They still want me to come into a store and to shop. When Amazon invites me to subscribe to Prime and to shop exclusively on line, that is a new System of Business—no brick and mortar, no inventory on display, no associates, no shopping—only buying. When Netflix assembled the backlists of movies for rent, and then took their whole business to online streaming, and then entered the content creation arena, they were changing the System of Engagement enormously, but they have not really disrupted the System of Business. They may be better than Comcast, but they are not categorically different. Contrast that with YouTube which has a categorically different approach to content creation, content distribution, and content monetization.
Okay, you get the point. Now the punchline. Is your company investing in SMAC technologies to modernize your business? Let us hope so. There is so much trapped value in traditional operating models, it is crazy not to tap into the liberating effects of digitally enabled systems. But the real question is, are you modernizing your operating model—something safe, sane, and with a high probability of success—or are you disrupting your business model—a high-risk, high-reward gamble that will send some careers soaring and derail countless others (need I mention J.C. Penney?).
In this context, Systems of Engagement, which will still look to many like a disruptive innovation one should put off adopting until the train is truly leaving the station, should now look more like a no regrets move. Yes, you will dislocate a whole lot of operations, including unfortunately both employees and partners, but at least your General Ledger will remain intact.
Systems of Business represent a whole other challenge. It is virtually impossible to incubate them inside an established enterprise because not only can they not leverage the existing infrastructure, they actually contradict it, not to say mock it. The brand dissonance is excruciating. Customers, partners, and employees simply cannot and will not get it. The antibodies will reject the transplant.
So now what? What do you do when some mutant organism enters your ecosystem with a novel, and at the outset apparently irresistible, business model, one which you cannot emulate without forsaking your established enterprise’s most prized assets?
Well, first off, realize you are in a fight for your life. The new business model is not a competitive threat, it is an existential threat. That means anything goes. So, your first call is to whatever regulatory authority you can think of that might classify the new business model as non-compliant. Now this is outright protectionism, but hey, we’re fighting for our lives here, people. So declare Airbnb non-compliant with the Americans with Disabilities Act. Protest Uber with massive strikes to clog the streets of Paris or London. Go for it! Of course, protectionism never works as a long-term strategy, but it will slow the opponent down in the short term, and right now you are just trying to buy time. The question now is, what do you do with it?
Your best bet is to deploy next-generation Systems of Engagement in ways that build on your legacy assets to create new user experiences that can compete with the novel business model. This is not a perfect answer either, but it will serve for the middle term, a period during which the world will determine just how much it wants to adopt the new model and how much it wants to stay the course with the old one. Are we talking about film here, or phone calls? Overreacting too soon gives too much credit to the disrupter. Let the contradictions in its business model emerge, and let the world pass judgment on it then.
Until then, of course, it is the Golden Child, and you are at best a ham sandwich. Console yourself. People still need to eat. Just tighten your belt and realize the era of juicy profit margins, predictable revenues, and even more predictable competitors is over. Drink a toast to nostalgia, and then batten down the hatches. You’re in for some rough seas.
That’s what I think. What do you think?
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Geoffrey Moore | Zone to Win Book | Geoffrey Moore Twitter | Geoffrey Moore YouTube
Image: Author's
“Let your impact talk, not your ego.” Empowering Peak Performance in Every Arena / Unlocking Your Limitless Potential. Education executive. High Performance / Mental Performance Coach. Keynote speaker.
8 年Looking at the world as ecosystems and not isolated systems is a very wise approach.
Entrepreneur
8 年Geoff, as always, insightful. If I may, your SOE has been somewhat limited IMHO as you cite the key topology being the unique part; social and mobile. As Esther Dyson once said to me in '96, "saying its an internet app is like fish first walking on land extolling the marvels of oxygen.... Over time, all apps have become 'Interneted'". So too will all future apps be delivered with mobile and modern UX. You're getting closer with SOB. At Sipree, Inc. we're finding the libertines in enterprises and Government who share your view of " trapped value" in a block of function/need now being verticalized and sold as a service. Vertical SaaS, outside the budget limits and NIH of IT, outside the product box of aging systems of record (SOR) and with the pliancy demanded by mashups of multiple SOR/expert systems CAN ONLY be done this way. Its SOP/biz logic and incremental function that get sold and shipped in a SaaS jar, that's the acronym ya need. Always a delight seeing you! More in 2016.
Begun work on my 2nd book. This one is focused on insurance and cyber. 1st book: “Stone Tablets to Satellites: The Continual Intimate but Awkward Relationship Between the Insurance Industry and Technology".
8 年I think Uber is an instantiation of Gypsy Cabs. But I could be persuaded that mixing in mobile, including mobile payments, "moves the gypsy cab" needle to a new SOB. Additionally, I like the concept of SOB ... it moves the discussion from SOE and SOR (Systems of Record) and SOI (Systems of Intelligence/Analytics) up to a macro, strategic industry discussion. And with an emergent IoT (last acronym in my comment, I promise) ecosystem that will be layered planet-wide impacting every industry, I believe that more (all?) companies, regardless of industry, need to (re)think their SOB, including the concomitant evolving market and competitive dynamics.
I help others harness opportunities to create change, as an advisor, consultant, entrepreneur, public speaker, educator, and author.
9 年While I absolutely, unequivocally agree with the point that businesses which are being disrupted are fundamentally "fighting for [their] lives", the idea that a business should spend time, money and other resources first fighting using regulatory methods (i.e. lawyers), seems like a losing strategy. In almost every single modern case where an incumbent has helped to bring regulatory pressure on a company with a disruptive SOB, the incumbent has also provided further attention and PR (and perhaps even fuel for the fire) to the disruptor. Sure Uber is being sued all over the place. But, the company has not slowed down. In fact, as a major disruptor, Uber has also been able to raise and use use funds that enables the company to straight arm opponents while running toward the goal line, in most cases without even losing speed. From my experience, it is always better to design a long term strategy whereby the incumbent company creates and tests several of its own SOEs as well as SOBs. Based on what the company learns, it can implement SOEs and SOBs that will provide its own disruptions and longevity in the markets it serves.