Disruption can come from anywhere. Companies that are nimble can adapt and conquer, but leadership is the key to success.
From eBay to Uber, from Airbnb to Trivago, we live in a time where disruption is changing the face of established industries at a pace never before seen. In their highly influential book, “No Ordinary Disruption,” McKinsey Global Institute directors Richard Dobbs, James Manyika, and Jonathon Woetzel detail the “four global forces that are breaking all the trends.”
These trends are the growth in urbanization; accelerating technological change; challenges of an aging population; and greater global connections. Each of these trends challenges traditional thinking and behavior and the authors make it clear that business leaders will need to reset their intuition because what used to work in the past is no longer relevant in this expanding, interconnected world of consumers.
Urbanization means a rethinking of marketing, sourcing, product development, and supply chain operations. As emerging nations work their way out of poverty, the annual consumption in these markets will reach $30 trillion by 2025, according to the authors. And established companies will be competing against local, smaller, more nimble upstarts that may understand that emerging market much better. That means established companies will need to “innovate and localize research and product design, and re-think supply chain management and financing.
Accelerating technological change enables startups with minimal capital and a great idea to compete against the most established entities. Airbnb and Uber have sent shock waves to the hotel and transportation industries, and the impending legal suits and attempted regulations show just how concerned traditional industries are. These companies saw a need that was not being fulfilled. It’s incumbent upon established companies to constantly question where the gaps are and how to fill them. That means leaving a comfort zone and moving into a realm that’s filled with potential sinkholes. But if you don’t do that, someone else will. The pace of technology will also create an ever-widening skills gap. Companies today should always be in a training mode, making sure their employees are up to date on the latest tools and techniques. The US falls far behind other countries when it comes to college graduates in the science, technology, engineering, and mathematics (STEM) concentrations. A 2008 survey found that only 15% of US students majored in these fields as compared to 54% in Singapore, 42% in China, 28% in Germany, and 27% in Mexico.
An aging population could be a global time bomb, especially since the fertility rate in developed and developing countries continues to fall. Think healthcare and pensions. But, along with the problems come new opportunities for enterprises willing to look beyond age itself. As people are living longer, they’re also living healthier, more active lives. That’s an entirely new demographic group to create new products for and market to. The Clapper may still be important to a very elderly person; however, an active 65-year old may be looking for tailored products and services that fit their lifestyle: from dating sites to travel groups to educational opportunities.
Globalization has opened up markets in places that may have never been considered before. But, as we all know, globalization also means that a catastrophe that occurs in a country you’ve never heard of can actually roil the markets. Successful companies will try to diversify their risk. As the authors note, “Companies that invest in preparing for, detecting, and being able to respond quickly to sudden crises will have a vital competitive advantage.”
The recurring thread in all of these trends is that companies, and the leaders of the companies, need to be agile. They need to be willing to accept that these tectonic shifts in commerce mean old intuition needs to be replaced with new intuition. That can be extremely difficult for major corporations that have seen consistent growth by following a heretofore successful, proscribed, predetermined path. That is simply no longer true. The book notes that McKinsey’s own research suggests that 50% of efforts to transform companies fail due to senior leaders clinging to the status quo or failing to drive change. Leaders have to change the corporate mindset, starting with themselves.
Leaders and companies that are nimble, those that can effectively ‘turn on a dime’ are most poised for success. Those leaders will recognize the threats and pitfalls new moves may entail, but they’ll also be able to see the opportunities these moves can afford. Companies that wait for others to succeed first fall into the ‘me-too’ category, and that never bodes well. The trends that are disrupting the world are not going away. Companies will need to decide how to deal with these trends.