Five principles to make your business thrive amid disruption

Kathryn Bice - AAP

8 minute read

Every era of change looks like it's going to be the hardest and the most disruptive, says strategy guru Rosabeth Moss Kanter.

But businesses can cope if they remain flexible, the Harvard Professor Kanter told the World Business Forum in Sydney on Wednesday.

Despite her optimism, she conceded there are indeed some things that are quite different about the current era of change.

"Auto manufacturers thought they were selling cars, but now they realise they are selling mobility. We have to ask ourselves, 'What's the ultimate service we are selling in our business?' A car is a big ticket item you can pay for over time. A ride-hailer deals in many, many transactions. It needs a different approach."

Professor Kanter said the retail sector has been hit hard by online retailing, and the true difference is whether the price even remains stable.

"WalMart made a point of consistency, offering everyday low prices. Wherever you went the price would always be the same, and if you found a cheaper item elsewhere they would match the price.

"But how do you compete when the price can change with every transaction? Those small changes in delivery are very hard.

"You have to go from closed thinking, based on the models we've had in the past, and change to thinking differently about your business model. If you can do that you can be very successful."

Professor Kanter told five stories to illustrate her theme and drew from them five lessons to make her point.


1. Verizon and the Kids in Ponytails

June 27, 2007 was the day the iPhone was launched. Verizon, one of the biggest telecommunications companies in the world, was not the network carrier for the iPhone. They had walked away from the opportunity to be the partner. On that day, one of the top executives of Verizon held the iPhone in his hand and said:

"We have no idea how to do this."

But that didn't stop them. They began to do everything differently, challenged every aspect o their way of operating. You can't do that for the whole company, you have to do it project by project.

They realised, 'We can't do this alone.' Verizon was a classic "walled garden", but they said, "We have to have partners."

CEO Ivan Seidenberg flew to Silicon Valley and called on Google wearing his suit. He arrived early to get the flavour and saw all these young people in casual dress, ponytails and said, 'We need you.' 

So they had Google for the software, but they needed someone for the hardware. One day one of the top Verizon executives got a call from Motorola - completely serendipitous - and they became the third partner.

So now they had to share proprietary data, working simultaneously instead of doing one thing and passing it on from one team to the next. Their normal development process took a year and a half, but together they managed to develop the first Android phone in less than a year.

They marketed it with a Star Wars theme, released it at the holiday season, and it became the most popular phone in the market.

They had to challenge all their systems and processes. They had to treat strategy in a different way. It had to become more opportunistic.

In traditional theatre, you write the script, but this was more like improvisational theatre. You have to be open - a key word.

"Strategy can't be about planning like a script, it must be like improvisational theatre."

They also made mistakes, such as inviting people to build apps but not requiring them to use the Verizon network. But now they are saying, We don't want to be just the pipes, we want to have the content. Their business is changing completely. 

2.  Haier and the Kitchen buyers

Chinese appliance manufacturer Haier's radical chairman Zhang Ruimin is creating a company that welcomes entrepreneurs to work inside the company.

Haier sold individual appliances, but it never had any luck selling kitchens. It now has an entrepreneur based within the company who designs and sells kitchens and they are selling far more appliances as a result.

The start-up mentality is sweeping the world. Stockholm claims to have 24,000 start-ups. It's the home of Skype, Spotify and many more.

Encourage people to try ideas inside your company, so they don't have to leave like Jobs and Wozniak did. Let them do something new inside your company.

That's the way to get new ideas and refresh the business. Shuffle the pattern and do it differently.

3.  Uber vs the Ecosystem

Uber as a private company has a market value of over US$70 billion, even before we know whether it's making any money, and yet it has problems with nearly every stakeholder group.

They started with the Silicon Valley mentality that they were disrupters, they didn't have to follow the rules. But every start-up needs partners. There are some stakeholders, like the US Federal Government, that you can't ignore.

You won't have other people making your product better if you don't work with them. Uber's drivers aren't loyal, the company is illegal in many places in the world, they've been sued because they wanted to ignore the ecosystem.

For a long time, the CEO would say, "We're just a technology platform. We don't have any responsibility for anything else."

Now they have changed their tune and are talking about themselves as a "green solution for cities."

That's something stakeholders can get behind. But they have to feel like they're included, like they're treated well, like their needs matter.

If a company is arrogant and won't work with governments, if it ignores the ecosystem, it won't thrive.     

4. The Middle Manager and the Snowball

Getting people behind you is important in every field. If you have a marketing campaign, you want it to go viral. But this can work inside a company too.

A middle manager in a software company in Europe - let's call him Pierre Frankel - was sent to Moscow to turn around the local subsidiary. But rather than making him the number one, the company made him the number two. The new boss, who was part of the problem, was former KGB. 

Their official language was English, but every time a subject that he didn't want to deal with came up, the boss lapsed into Russian. He tried to give Pierre an office in the basement. It seemed like an impossible situation. The culture was so full of mistrust and suspicion, a culture full of cronyism.

So he started a "snowball".

He started with one person at a time, finding the people who might be receptive to a culture of excellence.

He began to find the people who had some sense of excellence, one by one by one, and he found enough people to make one team. They started working on a project and they succeeded and had fun. Other people became interested and word started getting around. The viral principles work inside the company as well as outside it.

He began to win over the people at headquarters because he was making the company perform better. How could they object?

5. Why the For-Profits and the Not-for-Profits Should Be Friends

But you have to be flexible. You start down a road, but if it doesn't work, you try something else, get feedback and try again. You can do that in any realm and really make a difference.

Procter & Gamble decided they really wanted to do something about the purity of drinking water, which is a problem all over the world. They invested a lot and worked with the US Centers for Disease Control, and built a water purification powder. But they found they weren't selling much of it in developing countries, and when they asked why, they discovered that people were saving it for guests.

They partnered with the schools, and when they started teaching children about the connection between water and disease that they started selling more, but still not enough.

So in the middle, they were flexible and again changed the business model totally. They set up their own not-for-profit, called it Children's Safe Drinking Water. They partnered with the UN and donated the product. 

By contrast, children's television program Sesame Street was losing money, so it saved itself by partnering with a for-profit commercial entity. Some of the people who felt that a not-for-profit should have nothing to do with a commercial business went crazy. But now it's working. HBO gets first rights to show all the new episodes, but nine months later public broadcasting gets them for free.

For Procter & Gamble, partnering with a NFP saved their product. For Sesame Street, partnering with a for-profit saved them.