By
Jennifer Davis-Adesegha, Nekeisha Danvers & Boniface Okanga
Toronto, Canada, 9 July, 2024.
Self-disruption is essential for leveraging a business’ self-regeneration. Self-regeneration enables a business acquire and develop new capabilities that enable it to perform more effectively in the midst of the constantly changing global market forces. It enables the business evaluate its state of market performance and capabilities vis-à-vis the unfolding market changes to discern the radical changes that must be introduced to bolster its effective performance before being disrupted by rivals(Gans, 2016). Self-disruption holds the business philosophy that in every unfolding market trends, there are opportunities and threats that can easily be converted into opportunities. Given such opportunities, it is therefore upon every business to diagnose the situation to discern whether or not it has the requisite capabilities to respond to the unfolding dynamics. It is upon the business to assess whether it has the capabilities to tap as much value as possible from the unfolding opportunities, and whether or not it has the capabilities to sustainably thwart the emerging threats (Giry-Deloison, 2020).
Frequent analysis of the unfolding dynamics drives the business to evaluate its performance and ask difficult questions as to whether they are offering the best for the market. It calls out businesses to question whether they have the best technology, efficient processes, skills, competencies, innovation capabilities and leadership. If any of these capabilities raise questions, then it calls for the business to review and make the required radical changes before rivals introduce innovative initiatives that improve their internal capabilities to take advantage of such unfolding market opportunities(Hang et al., 2015).
Self-disruption is a business sustainably strategy which is suitable for the incumbent market players who have been in the market for decades and decades. It offers the chance for the incumbent market players to re-evaluate their performance in the context of the changed market forces. This enables incumbents discern the anticipated novel products, services, processes and operational philosophy that must be introduced to regenerate the business and unlock its new potential to disrupt the disrupters before they are disrupted.
Unfortunately, effective utilisation of self-disruption strategy is often a challenge for most of the incumbent businesses. Most of the incumbent market players are often operating from their “comfort zones” with higher market capitalization, profits and brand image. Given such strength, they are often reluctant to rethink and disrupt the existing practices that are still creating money for the business(Jain, 2024). This creates opportunities for the emerging disruptive startups to easily identify gaps that can be used to make inroads into the incumbents’ most lucrative market segments.
Since most of the market incumbents operate as if market forces are static and not evolutionary, it often becomes late to respond to the disruptive startups when the disruptive forces become quite difficult to reverse. To avoid such situations, the concept of self-disruption calls for the incumbent market players to always be alert and responsive to even the minutest disruptive signal that may arise from the market. It calls out incumbent businesses to be alert by adopting a more flexible and agile operational approaches that quickly respond to modifications and radical changes aimed at bolstering the business’ capabilities to respond to any disruptive market trends (Kjellman et al., 2019).
The use of self-disruption business philosophy places the incumbent market operators at par with the potential new startup disrupters that often have nothing to lose. Startup disrupters have not established brand image, operational structures and culture, and are therefore able to take risks without being afraid of losing anything in the process. To therefore counter new startup disrupters, self-disruption business philosophy requires the incumbents to be proactively alert to any signal and take actions to change and transform their businesses to create and offer novel unanticipated values before the startup disrupters are able to disruptively do so.
Undertaking self-disruption before the disrupters are able to do so may require the business to increase investment in the utilisation of novel technologies that unlock new capabilities. It may also require the business to enormously invest in R&D to explore and create new operational approaches of creating and delivering values to its market(Kramer, 2024). It may also require the introduction of completely novel products and services to respond to the completely changed market demand and preferences.
In some of the cases, self-disruption may also require undertaking merger and acquisition for the incumbent to acquire and gain new capabilities from the new disruptive startups. This enables the incumbent to review and abandon its old business practices and approaches to adopt new insights from the potential disruptive startup. It is through such approach that self-disruption aids a business’ self-regeneration to bolster its sustainability in the midst of the unfolding disruptive trends. However, as the Netflix Case indicates, the adoption of self-disruption business philosophy is not a once-off event, but a continuous endeavour analogous to the concept of continuous improvement initiative.
Self-Disruption as a Continuous Improvement Initiative
Self-disruption is a continuous improvement initiative that requires continuous evaluation and re-evaluation for the necessary new improvements to be adopted for as long as the market changes and the business continues to aspire to survive. Initially, Netflix was created in 1998 as a media rental service business that disrupted the traditional video-store model by introducing a business model that mailed out the DVDs to its clients across the United States. Instead of getting customers to leave their homes or workplaces, Netflix from day one was a disruptive startup that focused on improving customer convenience by having DVDs mailed to the customers.
Using such a business model, the customers would search the online DVD Library using the basic internet facilities of the 1990s, select the DVDs and get them mailed through the letterbox a few days later. This business model disrupted Blockbuster which was the incumbent using the traditional brick-and-mortar video rental business model at the time. Though the DVDs would not arrive the same day, the business concept still disrupted the video-store model that required customers to physically visit and select the DVDs from different stores.
As Netflix’s DVDs-Mail Business Model disrupted the traditional in-store video rental business model which was being used by Blockbuster (Dornbrack, 2023), the market leader at the time, it improved customer convenience, lowered the costs of DVDs’ renting and improved the quality of customer service to propel Netflix to a disrupter. However, as Netflix disrupted the traditional video-store model to gain the status of the market incumbent, time also reached for Netflix to be disrupted by the emergence of digital technologies which were being embraced by all the major market players. Instead of waiting to be disrupted by the new disruptive innovators, Netflix assimilated the digital technologies and infrastructure to begin the video streaming services.
The Story of Netflix and Why They’re So Successful
It abandoned the DVDs mailing business model in preference for video streaming services that delighted most of the global consumers. This new business approach propelled Netflix to attain the rating as the “King of Streaming”. Netflix’s self-disruption quests did not just stop with disrupting the DVDs’ mailing model, but also extended to a critical self-evaluation and analysis that informed its decision to integrate its video streaming services with the creation and streaming of quality content films and TV series directly to the consumers’ home devices, smartphones and other forms of mobile devices. This change in business approach delighted consumers around the world to leave Netflix as one of the best players in the global film, TV and entertainment segment.
Netflix’s self-disruption causing a shift from discs-by-post business model to online streaming and then media streaming with original quality content instigated the increment of its overall market capitalization from just $2.9B in 2009 to$292.66B by June 2024. This indicates how self-disruption as part of the continuous improvement initiatives drives the improvement of a firm’s market performance. In turn, this influences the improvement of its financial performance and returns on shareholders’ value.
To attain such outcomes, Kramer (2024) suggests that for self-disruption to be successful, the business must embrace change that comes with self-disruption. It must also encourage a culture of continuous improvement as well as frequent identification and response to new unfolding opportunities by challenging most of the present assumptions. In addition to fostering creative thinking and eliminating complacency, businesses must also embrace risk-taking as part of the normal process and culture of self-disruption.
Some radical changes introduced after self-disruption may or may not be successful and therefore it is upon the business to accept such a risk and take all it deserves to render the change a success. Kramer (2024) also proposes that self-disruption is also part of the organisational learning that informs future decisions and actions that must be undertaken in what kinds of situations. Self-disruption enables a business re-invent itself by re-evaluating its performance vis-à-vis the state of the unfolding market dynamics to emerge with a new business concept that not only creates and offers new values, but also disrupts the disrupters before they are able to disrupt the incumbent businesses.
Through self-disruption, Netflix was able to disrupt the potential disrupters that would use the new digital technologies at the time to disrupt its performance. Just like Netflix, the case of Dominos, a US-based Pizza-Making Company also illustrates how self-disruption can enable a business overcome adversity to gain sustainable leadership. In the global pizza-making industry, Dominos that grew to attain a market capitalization of $18.20B by June 2024 was not a disruptive startup, but a poor startup pizza-making company whose effective market performance was marred by poor quality. This affected its brand image and reputation and subsequently poor market performance reflecting poor sales, revenue, profitability and returns on shareholders’ value.
However, unlike the other poorly performing startups that often close down in the event of persistent poor market performance, Dominos instead re-evaluated itself and responded to the root causes of its poor quality products instigating poor market performance. Through self-disruption exercise, Dominos discontinued its ingredients and introduced new ingredients that led to the making of superior quality pizzas. With pizza quality improved, Dominos embarked on digital transformation that caused the abandonment of the use of extensive traditional brick-and-mortar outlets to using online sale and delivery of its pizza products across the United States.
Through improved pizza quality as blended with digital operations that also improved the overall quality of customer services, Dominos significantly differentiated itself to disrupt not only its telephone and in-store ordering business models, but also the traditional in-store ordering business models of the other operators in the US pizza-making industry. Through its digital operations and innovativeness, Dominos introduced better ways for interacting with its customers as well as for its customers to impressively interact with its products. To entice customers’ appetite to drive increment of orders, Dominos introduced the digital delicious pizza visual representation and tracking software that offer insights about the pizza’s preparation journey from mixing, ovening and delivery using motorbikes upto the customers’ plates. As this turned around the negative reputation that Dominos had for poor quality, Dominos also introduced the AR Pizza Chef Application that customers can use to develop their own pizza from home or anywhere else like picnic sites.
These innovative changes turned around Dominos’ performance to emerge as one of the leading disrupters in the global pizza making industry. The implication is that though Dominos’ core business activity is the making and the delivery of quality pizzas to its multitudes of customers around the world, it instead prides itself as a tech-company. Dominos considers itself as a tech-company due to the more innovative approaches that it has used to optimise the utilisation of technology in its various aspects of pizza making and delivery to the final consumers. In that process, Dominos not only used superior quality pizza, but also more advanced technology and more disruptive marketing approach to reshape the rules of the game in the global pizza-making industry to its advantage.
Why Domino’s Pizza Is Successful: How Domino’s Pizza Took Over the World
In the self-disruption exercise that aims to change and transform its business to a high performing entity, Dominos adopted the continuous improvement initiative which is based on a customer-centric business philosophy. Usage of a customer-centric business philosophy enables Dominos to undertake self-disruption in a way that it creates its products to create and deliver outcomes that surpass its customers’ expectations. Through its customer-centric business approach, Dominos maps its customer journey to discern the bigger events like Sunday film night, sports events or outdoor political campaigns where multitudes of consumers can be easily enticed to order pizza through live steaming of various pizza-making exercises. Coming from a tainted image for poor quality, to one of the leaders in the global pizza-making industry that has 80% pizza sale from its UK e-commerce, 70% from Australia and New Zealand and digital sales of $4.7 billion in the US market, these facts illustrate how the embracement of continuous self-disruption business philosophy can change and transform a business’ performance to bolster its overall sustainability in the midst of all disruptive market trends. It also implies self-disruption is a critical catalyst of a business’ self-regeneration.
Self-Disruption as a Catalyst of a Business’ Self-Regeneration
Self-disruption requires businesses to think and rethink to change and introduce new business models that unlock new capabilities to disrupt the disrupters before they are able to interfere with the business’ present state of performance. In a study titled: “How to self-disrupt before you’re disrupted”, Clarke (2019) argues that businesses using self-disruption business philosophy should never focus on improving their competitive advantage against the existing rivals. Instead self-disrupters must focus on exploring new capabilities that must be unlocked to create and deliver novel values never anticipated before.
Through such approach, businesses subscribing to the self-disruption business philosophy may tend to disrupt and abandon not only their former practices, but also the entire industry. This places the self-disrupting businesses in the comfortable position where they recreate, control and influence the rule of the game(Luigi et al., 2020). Self-disrupters are never industry followers. They are market leaders that strive to continuously think and rethink to create and deliver the best.
Businesses like Toyota, BMW, Ford, Coca-Cola and others that have been in the market for decades and decades are in one way or another self-disrupters. That implies that though the notion of self-disruption has just become a buzzword, the concept has been in existence for long as the concept of business management. As Clarke (2019) notes, businesses that use self-disruption business philosophy tend to ask questions when confronted with difficult situations. When the sales are no longer flowing in like before, new customers are not signing in, the market share, market capitalization and profits are starting to decline, the businesses subscribing to the self-disruption business philosophy pause and ask difficult questions as to whether they are doing the best.
When a new threatening technology comes in, the self-disrupters often ask hard questions. They ask difficult questions that can call for the change and abandonment of the current business practices and nature of operations even if it is still generating some revenue for the business. They ask difficult questions that require the commitment of enormous resources towards the improvement of R&D capabilities. Self-disrupters when confronted with adversity ask hard questions that may require the abandonment of the existing products and the introduction of novel ones that even the product developers had never anticipated before(Masetti, 2019).
In the face of adversity, self-disrupting businesses tend to ask difficult questions that may even call for the merger and acquisition of potential disrupters. Businesses may also be forced to ask hard questions that explore whether or not the present leadership must resign if they are not doing their best. Self-disruption that emphasises the use of iconoclasts that ask hard questions never anticipated before is a self-probing and analysis exercise. This enables the business to discern that given the current market condition, the business will continue survive and thrive without taking the required radical changes. If the answer is no, then the business must opt for change and transformation before it is too late.
In most of the cases, most of the business leaders fear undertaking early changes for fear that in case it does not work out, the business will plunge to complete failure. However, Clarke (2019) cautions that instead of procrastinating, businesses using the self-disruption business philosophy must take bold actions and risks to change even if it appears risky to do so. They must take the risk and put all their best to ensure that the change succeeds. They need to recognise that given the changing market conditions, if the business fails, there would be no fall-back position. Once such insight is communicated to all the work teams, it becomes easier for the business to undertake the unified effort to ensure that the business succeeds. For fear of undertaking the required changes, most of the businesses often opt to defend their market position from potential disrupters(Nagy et al., 2016).
Instead of engaging in the risky self-disruption game to emerge with new products and novel business concepts that disrupt the potential disrupters in their early stages, most of the businesses often opt to defend their market position. The risk is that it often becomes too late by the time the disruption sets in for the incumbent business to disrupt its performance and invent new capabilities to counter or even disrupt the disrupters. To avoid such situations, Clarke (2019) suggests that for businesses using the self-disruption business philosophy, the focus should not be on enhancing competition against rivals. Instead the business must focus on attacking. They must strive to use more offensive market strategies to create and deliver the previously unanticipated novel values that displace rivals from the existing market.
Through such approach self-disrupters not only disrupt their performance, but also rivals to recreate and dictate the nature of industry game. It is through the control of the game that the business gains the industry leadership that enables it to rest from struggling to outwit competitors(Teece et al., 1997). By focusing on using offensive market strategies to attack and dislodge rivals from the market, businesses using self-disruption business philosophy can usually strive to create and deliver the best.
When rivals are directly attacked using offensive market strategies, they are forced to retaliate. It is such retaliations that force the attacking business to think and rethink to emerge with the best to respond to the retaliations not only in the way that bolsters it competitive advantage, but to completely obliterate the retaliators from the market. Self-disruption is unique change management process that requires businesses to initiate and undertake radical major changes and transformation just from the slightest form of provocation or signal of possible future disruption (Whitney, 2012).
Self-disruption as a Proactive Change Management Process
Most businesses often do not change unless it is proved that it is necessary to change or the business may not survive. In that process, the change process tends to take the reactionary approach. The reactionary approach that seeks to respond and remedy some of the damages already done by the unfolding disruptive market trends. But for the logic in the self-disruption business philosophy, that is often not the case(Zheng et al., 2022). In the application of the self-disruptive business philosophy, the business must be the first to disrupt and change its operational approaches, methods, strategies and thinking before change can force the business to do so. On detecting the slightest signal for a potential major disruption to occur in the near future, the logic in the self-disruption business philosophy requires the business to be the first to assess the situation and disrupt its operations before it is disrupted by the emerging disrupters. Instead of being led, self-disruption requires the business to take advantage of the situation to change and re-generate itself to develop new capabilities that can enable it to lead the industry disruption.
Apart from creating and delivering the previously unanticipated novel values that disrupt the existing industry, self-disruption also enables the business to re-evaluate its capabilities to discern the new industry that it can join using its existing capabilities and knowledge repositories. Such trends are reflected in the Fujifilm Case. Due to its innovativeness, Fujifilm had been the leader in the global photography industry for decades and decades until the disruption from digital photography industry set in.
Following the advancement of digital technologies and its increasing adoption for digital photography leading to the emergence of digital cameras, the demand for digital photography and cameras increased as it lowered costs and offered better products as compared the film-based photography. Fujifilm’s competitors like AGFA and Kodak failed to detect the early signal of industry disruption calling for the need for early self-disruption and change. By the time it became apparent that AGFA and Kodak would be obliterated by the changes induced by digital photography, it was difficult for AGFA and Kodak to turn around their performance to thrive in the midst of the disruption induced by digital photography.
Why Kodak Failed – Rise And Fall of Kodak
As contrasted to AGFA and Kodak that were obliterated for failure to change and transform their business thinking, approaches and technology, Fujifilm was able to spot the early signal of the need for change. In the early 1980s when computer innovations by the likes of IBM and Apple’s Macintosh Computers improved, Fujifilm detected that with time, such innovations would in one way or another disrupt the photography industry. Though Fujifilm did not spot how, it still attempted to develop the digital camera technology and abandoned it. Using the same photography knowledge and technology, it later engaged in the attempt to change the nature of its business and diversify into other industries like printing and medical imaging technologies.
Fujifilm engaged in self-disruption as a proactive change management process even before the disruption from digital photography became real. In addition to developing and maintaining high quality digital cameras to respond to the needs of the consumers dissatisfied with the smartphone cameras, Fujifilm also diversified into printing. It teamed up with Xerox to engage in the development and sale of better photocopiers and other imaging machines and technology. Using its advanced knowledge and understanding of photography technology, Fujifilm also ventured into the production of medical imaging machines and technologies.
As compared to AGFA and Kodak that disappeared from the market due to complacency, Fujifilm’s case depicts how engagement in self-disruption enables a business to undertake proactive change and transformation to insulate itself from disruption before the business is disrupted by external disrupters. However, just like any other strategic change management process, self-disruption also requires business leaders to develop and build a sense of urgency as to why self-disruption is immediately required as compared to waiting for a future opportunity.
Without building a sense of urgency, business leaders can easily face resistance and stiff opposition from all corners even from the fellow internal business leaders and shareholders for trying to change the direction of the business which is still doing well. For self-disruption to be effective, there must be a general consensus among business executives, managers and even employees. They need to be informed that all the market indicators are insinuating that if change is not urgently undertaken, then it will be too late for the business to reverse the magnitude of the disruption that may arise later (Zheng et al., 2022). To attain that, it is essential for the business to build and nurture the development of a culture of flexibility and agility.
From the beginning, all the senior managers and leaders must be made to recognise that no superior or even poor market performance is permanent. They must be made to recognise that periodic change and transformation is a critical part of the overall business philosophy that defines it overall level of superior performance. Employees must be developed and trained to be prepared all the time to undertake the operational changes that are required for a business to disrupt its existing capabilities by conducting thorough analysis to introduce new capabilities that bolster its sustainability despite all the unfolding discontinuities (Whitney, 2012).
To avoid a chaotic approach, the process of self-disruption must also be guided by a clear strategy highlighting the areas that will be disrupted and changed and the ones that will be retained. In most of the cases, it is not all the aspects of a business’ operation that may require disruption, change and transformation, but may be just a few areas. Hence, a critical analysis during self-disruption is essential for discerning the areas that will be disrupted as well as the goals and objectives that the self-disruption exercise must be directed towards attaining (Giry-Deloison, 2020). Clarity of the goals of self-disruption exercise helps to make it easier for the business leaders to explain to the ordinary employees some of the difficult questions as to why some of the business processes, technologies and methods that are still making money for the business are being disrupted, changed and abandoned in favour of the new approaches or even technologies.
References
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Authors:
Jennifer Davis-Adesegha is an International Banker, Specializing in Bank Risk Analysis and Crisis Management, working for an International Bank in Barbados, Caribbean. Jennifer is also a Research Associate with Cloud Analytika-London-UK. E-mail: jdadesegha20@gmail.com
Nekeisha Danvers is Management Consultant and Researcher Based in Toronto-Canada. E-mail: nkdanvers@gmail.com
Boniface Okanga is a Professor of Innovation and Entrepreneurship as well as a Research Associate at The Business School, Edinburgh Napier University-Scotland, United Kingdom. Okanga is also a former University of Johannesburg’s Associate Professor of Innovation & Strategy. E-mail: boni@cloudanalytika.co.uk
