There’s a new way of doing things now that is a clear threat to the established order. Billion dollar companies emerge from nothing within years or months and rapidly make old titans obsolete - businesses like Facebook, Google and Instagram.
It took 13 years for TV to get to 50m users, Facebook did it in 3.5 years, and Instagram reached 50m users in just 6 months.
For organisations clinging to the old ways, such as Blockbuster, this new business landscape means rapid obsolescence. Netflix changed the game by reacting to the way the customers now want to do things. They realised where and how to serve the customer and just did it.
Failure to react equals disaster
Big companies sometimes operate with false sense of security. They think that they are safe because their customers need the services and because disruption always happens to others but never to them.
When Blockbuster was a still a dominant $5b company in their sector they didn’t take Netflix seriously. They even missed the chance to acquire Netflix for just $50m! Blockbuster’s board woke up too late when, just a couple of years later, Netflix was the $5b player and Blockbuster was going bankrupt.
The moral of the case of Netflix and Blockbuster is that the companies that react to the way customers want things done nowadays, not yesterdays, will run away with the market share.
Do you know what is happening in your backyard?
There are start-ups in your industry focused on trying to find your weak spot. Do you know who they are and what they are doing? While you are busy doing things the way they've always been done, the contenders are investing all of their resources trying to find that small crack in your shield. This can be turned to your advantage because big corporations are able to attract smaller players willing to cooperate in return for support. Even a tiny start-up could deliver competitive advantage. The Citrix Acceleratorhttp://www.citrix.com/startupaccelerator is a great example of a large corporation teaming up with small start-ups to incubate new ideas that are relevant to the corporation’s core business.
#1 Start-ups for faster go-to-market
Large organizations are big and complex structures, with a hierarchy not always suited to fast decisions. They can lose months and even years before all stakeholders approve a decision to go. Start-ups are lean organizations with only a few decision makers, allowing quick decisions on a daily basis. Start-ups can have several iterations, and launch multiple products or services, during a short time scale – using the ‘fail fast and fix it fast’ method.
By partnering with start-ups large corporations can use them to test new products and services and bring them fast to market. Costs can be lowered while maintaining brand values.
#2 Diversification of opportunities
Getting products or services on the market is expensive. Large corporations have many employees but often cannot afford to run smaller projects due to organizational constraints. By partnering with multiple start-ups, corporations can simultaneously test several similar products or services. Based on market feedback, they can then choose the best performing ones to offer through the parent company. Timeframes and risk of failure are both reduced.
#3 Testing new and innovative business models
Large organizations often have conservative business and pricing models. They won’t readily risk experimenting with exotic solutions. This offers start-ups a great opportunity rob big corporations of their markets – often seemingly overnight. Corporations lost in a world of red tape, short-term profits and quarterly reports are easy prey to the start-ups that constantly test and adjust their business models to build a strong and direct connection with customers.
#4 Acquisition of advanced technology
Large organisations have to serve mass markets in order to reach scale and do not always invest enough resources developing advanced technology. Start-ups are obsessed with the cutting edge and are always betting big on the latest technology developments. Big organisation can find it easier to buy in the latest advancements - now, rather than take too long to develop them expensively in-house. It is vital that the industry incumbents keep a close eye on the disruptors emerging in their industry – because they represent both a threat and an opportunity!
#5 Preventing churn in core business
Established corporations, such as the telecommunication industry, face a decline of usage and revenues from their core business. By partnering with start-ups, existing businesses can find attractive new services and more efficient ways of doing things that enable them offer better value to their existing customers. This helps to retain customers and reduce churn.
React now – before it is too late!
React now while you still have the advantages of market share, customers, reputation, strength of brand and access to cash. Don’t be a Blockbuster and allow yourself to be pushed out by an upstart fast and brave enough to respond to market changes.
There are big opportunities for corporations working with start-ups that are still in their early stages. Especially as it is time when the start-ups need the finance, logistics, market reach and even office space a big corporation may be able to offer.
The old order must use their advantage while they still have it, before startups use them as weapons of disruption and run off with the market.
Do you know who is trying to disrupt your business? Have you spoken to them yet? Time is on their side – act now!
This article is written as a guest blog post for Orange Business Blog