When disruption strikes, some companies can still survive and some may even do quite well. This is why businesses grappling with how to defend themselves against disruptive threats need to evaluate industry circumstances and assess their role as the competitive environment changes. When the old form of their industry is contracting, companies can easily be too quick to make radical changes, sometimes driven by panic. But, this generally is not the answer to disruption. And, depending upon a company’s situation, the business may even be one that can still do well despite disruption’s onset. Not every company is like Kodak, once thriving, then doomed to disappearing in the wake of disruption.
Granted, the old form of an industry will likely contract when disruption hits. And, some players in the industry will be seriously harmed or may not even survive. But, if there are still advantages to what the old form offers, the old form of the industry may not completely disappear when disruption occurs. And, some companies that are especially well positioned to continue on with the advantages of the old way may even thrive while less able competitors are disrupted away.
Two good examples of forging onward amidst potential disruption were featured in the media in the recent past. These examples are 1.) bricks and mortar bookstores and 2.) print encyclopedias.
Encyclopedias were discussed in the December 4, 2017 issue of Bloomberg Businessweek in the article “Look in Volume B for Buffett: Why Berkshire Hathaway is still in the encyclopedia business.” The article explains that Berkshire Hathaway, the company built by renowned investor Warren Buffet, has a policy of keeping companies intact after they are acquired, as it did when it bought World Book. According to the article, this approach appeals to sellers and enables Berkshire Hathaway to buy more companies by being an attractive, or even the only, choice for sellers. Berkshire had acquired World Book quite a while before digital technology disrupted the print encyclopedia business.
World Book did well for Berkshire for a time, but then faced big challenges when digital disruption hit. The Bloomberg article says the company now “is trying to draw consumers back” with items like “a mobile app and online portal called World Book WOW that packages its voluminous content, along with e-books and games, for third to eighth graders.” But, as the article points out, “A bit of help is coming from an unlikely source: After decades of declines, sales of print encyclopedias rose last year and are projected to do so again. Why? It doesn’t hurt that World Book is the last of its kind, a multivolume encyclopedia that’s updated each year.”
I think it’s worth noting that Berkshire Hathaway had other reasons (such as the beneficial effect on acquisition opportunities) for keeping the print encyclopedia business going whether or not there was attractiveness of the business itself. Eventually, however, the business apparently revived. As I see it, this is an example of how there can sometimes be valid reasons to do what otherwise might not seem like a smart business move. And, it illustrates how a potentially disrupted company that is kept alive may still find opportunity in the marketplace. Often, such an opportunity will be enhanced by integrating the old way of doing business with the new.
Of course, this does not mean that it is always in a company’s best interest to keep a disruption threatened business alive. But, it does illustrate that, when an industry contracts, sometimes those who stay in the game may have a good opportunity to do well since so much of the competition is gone.
Another example of life after industry disruption is bricks and mortar bookstores. Many independent bookstores have done quite well despite Amazon’s disruption of physical bookselling. Now, Barnes and Noble, which for a while tried stocking its stores with more non-book items in response to industry disruption, is returning to its roots in books. According to the November 30, 2017 Wall Street Journal article “Barnes and Noble Wants to Clear ‘Tchotchke’ Clutter, Sell More Books” by Jeffrey A. Trachtenberg, “Barnes and Noble is on a mission to declutter its stores of gifts and games and make room for what it sees as its next big moneymaker—books.” Essentially, there are still advantages of having physical locations when selling books, and even Amazon has opened bricks and mortar stores.
Does all of this mean that companies should ignore the threat of disruption? Of course not.
But, it does mean that when disruption looms, companies should evaluate their options and determine whether their company is, in fact, truly threatened by the disruptive force. Companies should assess whether they possess the strengths needed to live on with an old form of their business despite disruption’s inroads into their industry. They need to evaluate if any of what they did in the past can still have a thriving role. This may mean integrating the old way with pieces of the new. But, it doesn’t always mean the old way is dying. As always, companies need to be alert for ways to modify and improve their businesses. However, they shouldn’t immediately give up on their business when disruption looms. For some, there may still be a promising opportunity in the marketplace tied to the old way of doing things–and with far less competition.