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Disruption is inevitable, being disrupted is not

Disruption is inevitable, being disrupted is not

Tech, changing consumer concerns impact most categories

Ancentry.com appeared in 1996 with original online tools to help people explore their family’s past, sometimes stretching back generations. A new insight propelled the launch of 23andMe 10 years later. Along with their interest in the past, people want to learn about the present and future, and how their genetic markers can help them better maintain and predict their health and wellness.

This development underscores the state of business life today—perpetual disruption. Categories are blending, and consumer are resetting standards, expecting brands to operate responsibly and deliver flawless customer experience.

Many of the most disruptive trends seem connected to a major cultural shift—our ever-increasing concern about health and wellness, which encompasses both the condition of ourselves as individuals and the planet we all share. These concerns relate to consumerism: what we buy, how we buy it, and how we dispose of it.

Accelerating the pace of disruption are the ease of market entry and the possibility of scaling quickly. The most disruptive brands impact markets in ways that address or anticipate cultural shifts and trends and meet the resulting consumer needs in meaningful ways.

In facing inevitable disruption, brands have two options: lapse into denial, or acknowledge that the brand landscape is changing, and prepare to disrupt and be disrupted. Brands that choose to engage need to understand what is required to disrupt a market and, in anticipation of that disruption, how to disrupt themselves.

Defining disruption

But first, it is important to understand disruption. Based on research and observations across categories, WPP brand experts assembled characteristics of a disruptor brand, which form this general definition:

A disruptor brand begins with a clear proposition or purpose that is scalable. The brand is anchored in the cultural moment and relevant to consumers. Its timing is impeccable. It executes with speed and communicates with consistency across touchpoints. A disruptor brand impacts and entire category or at least the category brand leaders, and it creates new behaviors among consumers. And when a brand gets all of this right, it needs one more element to become a successful disruptor—luck.

The most extreme disruptors, brands that change the world, include Amazon, Apple, and Google, the BrandZ Top 3 Most Valuable Global Brands. Other major disruptors would include Facebook, ranked No. 6, and Uber, No. 53.

Disruption comes in many guises. It can be about an original product or service, like the iPhone. Or the disruption can be a new business model. For example, Jio entered the Indian telecom provider category with discounted prices on data, forcing competitors to lower prices. Having driven category consolidation and organized a large audience of around 300 million subscribers, Jio potentially could add revenue-generating content and advertising.

Disruption also can be operational as with Alibaba scaling technology to provide radical convenience and delivery. Brand renewal, as illustrated by Gucci, can produce disruption. Other factors, like communication, can be disruptive, too. Examples include Kylie Jenner leveraging social media influencers to build a personal care brand.

The newest generation of disruptors are able to assemble ecosystems to accelerate growth. Once they have traction, these brands are not afraid to press the accelerator. And, when privately-owned, they are less pressured than public companies to show a profit. Venture capitalists typically are more concerned with future potential than quarterly results.

Disruption and disruption-proofing

The cultural shift toward concern with health and wellness—our own and the planet’s—has caused disruption across categories. Our avoidance of sugar preciptated the decline of carbonated soft drink consumption over the past decade. Category leaders have rebalanced their product portfolios to include healthier options and they have realigned their brands.

In recent bold moves, Coca-Cola Co. bought the UK coffee chain Costa Coffee and PepsiCo Inc. acquired SodaStream, an in-home soda-making device. Similarly, beer consumption has declined because of the health-related drinking habits of Millennials and Centennials. And the major brewers have introduced no- and low-alcohol beers.

To reduce carbon emission, car brands are preparing for a future of electric vehicles and other mobility alternatives, while struggling to drive revenue from combustion engines today. Their efforts are complicated by the societal values shift from ownership to sharing, enabled by the technology that produced Uber, Lyft, and Didi Chuxing.

Having spent decades perfecting the art of packaging, major consumer products companies, including P&G, Unilever, and Nestlé are advancing a global recycling initiative. Fast fashion brands lost value partly because they were out of sync with an ethos that questions disposability and the environmental impact of manufacturing and transporting merchandise.

Given today’s pressures, it may not be possible to prevent disruption, but it is possible to anticipate and prepare for it. That requires sometimes looking over the parapet to see the world outside the fortress of a well-protected category or brand.

From that vantage, the bracing vision of changing realities can prompt some new questions. For example, if consumer eating habits are changing, and more people are choosing to be vegetarian, should a meat producer be asking how to make a more marbleized sirloin, or how to be in the protein category?

Power of brand

Brand helps protect against one of the inevitable consequences of successful disruption—imitation. After the iPhone launched, a new category soon filled with a wide range of smartphone options. It was possible to copy phone technology, even design, but not the love generated by the Apple brand. When Lululemon created the yoga wear trend, it quickly faced competition from national brands including Amazon. With many options for purchasing yoga wear, consumers still were willing to pay a price premium for the Lululemon brand, which scores high in being seen as Different, a BrandZ metric of brand equity,

Craft beer Brew Dog illustrates the power of brand as a protector. Brew Dog disrupted the beer category in the UK when it launched over 10 years ago. As the category filled with other craft options, Brew Dog opened bars, invited its customers to become shareholders, planned to open a hotel, and in other ways created a community around the brand. It remains among the UK’s leading craft beers.

Ultimately, the key to being disruption-proof is willingness to be self-disruptive. This is a major challenge for large companies with the means to place big bets. They also face the great risk of the bet failing and the share price plummeting. Even when large companies recognize the merit of a potential opportunity, they may reject it as too small to be of interest, given the scale of the company, or too much of a distraction from the core money-making businesses.

At the same time, big companies are vulnerable to being seen as too lethargic by younger consumers attracted to more energetic brands. It is possible for big companies to change. But it usually takes an unmistakable wake-up call or a leadership change. At Coca-Cola, for example, it took more than a decade of steadily declining volume sales of carbonated soft drinks before the bold acquisition of Costa Coffee.

Operational changes brands can make to anticipate disruption or cause disruption, include:

  • Putting innovation at the core of the business;
  • Hiring and retaining a workforce that embraces diversity of people and ideas, so the business can be more relevant to its customers and potential customers; and
  • Linking the disruptive idea to the brand, not simply to an individual product that may surge in sales but not grow steadily over time.

Ironically, large companies potentially may be the greatest engine of disruption. They employ and train smart people, give these employees the tools to create new products and services, but sometimes deny them the possibility of launching a good idea that seems inconsequential relative the revenue of the core business.

Some of those frustrated employees stay with the company anyway. Some of them leave to join different organizations. And others—because they are driven, self-confident, quirky, ambitious, tone-deaf, or just incredibly stubborn—start businesses that disrupt markets, or at least create a lot of new headaches for their former employer.

Brand Building Action Points

  1. Think long-term

Large organizations need to find the right balance between short-term thinking (satisfying shareholders quarter-by-quarter) and long-term thinking (placing bets on ideas that reassure shareholders that the company has a future). The long-term thinking requires risk. It means valuing and rewarding both the people in the organization who reliably make their quarterly sales quotas, and those whose ideas that are less easily quantified because the outcome is more long-term and uncertain.

  1. Institutionalize disruption

Empower a multi-discipline group to think long-term. The group needs to be more than an incubator bolted on more for appearance than impact. Its existence—and, ultimately, its ideas—will need buy-in from the top and from throughout the organization. A mechanism for thinking and acting on disruption needs to be a core part of any business.

  1. Seek diversity

It may not be helpful to employ a company full of disruptors. But it is necessary to employ people who understand and are excited what they are doing. Creativity, a prerequisite for disruption, requires diversity of thought. In an organization where everyone comes from the same background ideas are more likely to be ratified than challenged, and less likely to drive disruptive change.

  1. Remove the blinders

When companies look at the world through blinders of category framing, they are more likely to be disrupted by something outside their peripheral vision. It is necessary to disregard category borders and focus on the consumer and how the consumer’s needs and behaviors are changing. Standard solutions—adding another variant to the shelf—will not work as well when a lot of shopping is done online by consumers who are more mindful about their personal health and the impact of packaging on the environment.

  1. Take risks

Companies cannot avoid risk. Choose which risk is greater: not doing anything and continuing to think and operate short-term; or investing in new ideas, with the likelihood that more will fail than succeed. Choose between comfort—feeling good about the business and making decisions to keep it healthy as consumer needs change—and complacency. Choose between leadership—defining purpose and direction and the need for disruption—and management.

  1. Self-disrupt

Disruption is inevitable. The only question is whether to wait to be disrupted or to preempt a disruptor with self-disruption. Two-day delivery for Prime members seemed unassailable when Amazon introduced it. Amazon has announced plans to introduce one-day delivery, raising operating challenges and costs for its competitors. Facebook was popular and could have remained in its comfort zone when in acquired WhatsApp and Instagram, which is the fastest-rising brand in the 2019 BrandZ Global Top 100. Disruptors disrupt markets—

and themselves.

  1. Build a brand

Disruptors attract other disruptors. If an idea is good enough to disrupt a category another organization will want to make money from it. A larger organization will figure out how to make a product cheaper and faster and distribute it more widely. To be sustainable, the disruption needs to be about more than a product. It needs to be about a brand, and the meaning and distinctiveness that the brand conveys.