ADAPTATION STRATEGIES: SURVIVE THE DIGITAL DISRUPTION
Digital disruption, the radical innovative discontinuity induced by the widespread adoption of digital technologies, seems to have hit hard incumbents and well-established market players.
The beginning of the Internet Revolution dates to the mid-1990s but only 17 of the 2020 Fortune Global 500 ranking companies looking did not exist in 1995.
The perception of this phenomenon has been undoubtedly exaggerated by three myths:
When companies face a disrupter, a competitor that introduces decisive elements of radical innovation, they tend to respond to fire with fire.
A recent study by McKinsey confirms how companies that adopt bold, offensive strategies in the face of industry digitalization improve their chances of being a winner. Yet is this the right strategy for everyone?
1. Fight back!
Challenging the new "star" of the market to its own game is the most instinctive reaction. These are the options:
But the road to success is exhausting and troublesome.
Well-established companies in markets that are subject to the disruptive discontinuities of radical innovation processes have not shown to be able to successfully counter disrupters when having taken up the challenge and have tried to do the same thing better, trying to seek a better and different solution to the same problem instead.
We are all looking at the strategies the major car manufacturers are undertaking to enter the electric vehicle market, competing head-to-head with the innovators.
Counterattack is appropriate – and perhaps necessary – if the innovative technology represents a truly existential challenge for the company. But this is not always the case.
2. Double down!
Building up your muscles and multiplying your efforts are other possible options.
In this scenario, all the company’s assets, that may benefit from a well-established brand, solid long-term relationships, and a qualified presence in global markets, allow to raise barriers to entry and mobility, which are difficult to overcome or circumvent.
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In the already tumultuous entertainment sector and starting from its proven ability to produce movies and video content, Disney secured an additional unique volume of content by acquiring Pixar, Marvel and Lucasfilm. So, they used their undisputed negotiating powers with major players, Netflix on all, to position themselves and take all the time to launch their independent streaming service.
And establish themselves in this new market.
3. Retrench!
By setting the strategy on defense, traditional businesses can gain ground to new entrants by using contingent tactics and gain short-term survival. It is common for companies going through troubled times to maintain their market position through M&As.
Another widely used tactic is to seek help from governments and regulators and justify the creation of barriers for new entrants.
Considering Porter’s Five Forces framework, downsizing is a strategy to
Today, several commercial banks are putting pressure on central banks and policymakers to regulate cryptocurrencies.
Diversify!
Get out of danger and move away quickly to new opportunities.
Maurizio Fappani
maurizio.fappani@hfp.it
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