The Seven Habits of Highly Effective Disruptors

Learn the traits required to survive digital disruption

If you think your company or industry is immune to being digitally disrupted, you’ve already rendered yourself obsolete. All industries will feel the effects of digital disruption. And in the words of the Borg, resistance is futile. 

The real question here isn’t when your industry or company will be disrupted, but rather how well you’ll survive the disruption. To find the answer, learn from the handful of organizations that have embraced disruption over the years and continue to generate steady year-over-year revenue growth.

To identify the companies that achieved such growth, Rita McGrath, professor of management at the Columbia Business School, scoured the S&P Capital IQ database.1  The findings? Over a 10-year span, less than half of 1 percent of 2,347 businesses experienced 5 percent annual revenue growth. That’s just 10 companies total. 

Why such a small figure?

Turns out, McGrath and her team were able to identify common attributes shared among the 10 companies — or disruptors — and credits their success to those traits. And fortunately for enterprises in the throes of disruption, those same traits can be adapted into a digital-disruption survival guide of sorts. Here are some of the attributes, along with their disruption-related implications:

1. Experimenters and Innovators

Bid adieu to your fear of failure. Embrace the missteps and make mid-course corrections as needed (Amazon Fire Phone, anyone?). Stop talking and start doing — the new product life cycle demands it. As Jeff Bezos, CEO of Amazon, puts it, “If you think that’s a big failure, we’re working on much bigger failures right now — and I’m not kidding.”2

2. Informed Risk-Takers

Make small, calculated bets early. Launch minimum viable products in order to get to market quickly. Upgrades and revisions can be released as needed. Nest Labs started with a smart thermostat. That same thermostat can now detect when you’re home and turn on the lights for you, as well as maintain a comfortable temperature.

3. Unabashed Adjusters

Ditch organizational rigidity when it comes to internal processes. Take incremental steps and make adjustments along the way. Reallocate resources and people to projects that need them most. Zappos has removed the traditional concept of bosses in favor of organizations built as teams, wherein employees’ roles shift based on customers’ changing needs.3

4. Measured Acquirers 

Disruptors make calculated investments in organizations that offer products and services that are truly aligned to their objectives and customer needs. For example, Apple recently invested $1 billion in a China-based ride-sharing app, gaining access to the data collected about Chinese consumers — a huge market for the tech company.4 Conversely, pass up opportunities that deviate from your core capabilities. In a similar vein, avoid lurching from one business area to a completely unrelated one. 

5. Open Innovators 

Encourage everyone within your company to share ideas and suggest solutions to problems. Disband siloed “innovation units” and be open to forward-thinking ideas — wherever they come from, including your customers. HBO adapted the Central Intelligence Agency’s Team B, which “tasks groups of smart people with challenging conventional wisdom and consider all options with an open mind.”5

6. Agile Adapters 

Strive for speed and flexibility, even if it means executing less-than-efficient internal processes. Spain-based retailer Zara created a model called “fast fashion” that allows products to go into final form at the last possible moment, making it easier to respond to market changes, thus reducing the need for expensive markdowns as clothing stays in season and on trend.6

7. Grounded Doers

Surviving disruption is dependent on having stable company management, strategies, culture and long-term customers that are equally agile and adaptable. Banco Garantia puts a limit on the number of corporate objectives it sets each year, and the C-suite distills those objectives to employees, ultimately aligning on three to five individual goals for each person that ladder back up to the company’s annual objectives.7  

While the disruptors in Professor McGrath’s research shared all of the aforementioned attributes, it’s unreasonable to assume enterprises can adopt the whole lot in one fell swoop. Instead, identify the traits that make the most sense for your business and its offerings, and take the necessary steps to implement them.
 

Open Innovators at Work 

The seven attributes outlined here reflect the experience of HPE’s software innovation team headed by Ahi Gvirtsman. “We failed in our first attempt at reigniting innovation, and it taught us valuable lessons,” he says. “The first mistake was in creating a distinct innovation team. It created the impression that innovation was somehow the realm of a select few and that everyone else was by inference working on the ‘boring stuff.’ It actually hurt morale and creativity badly, not to mention the innovations that did surface stalled commercially and organizationally, as they had no one to ‘catch’ them as they were ready for launch. 

“I completely revamped the way the team functions. My team’s charter is to build a culture of education, enablement and sharing. Everyone is welcome to submit ideas; some of our best innovations have come from non-R&D employees. There’s really only one critical criterion — you have to have invested your time in the idea. It’s not good coming to me saying, ‘I’ve got a great idea.’ You have to have invested enough of your own time to have written a really solid outline, maybe even done some basic prototyping or mock-ups, market research, etc. Having demonstrated their commitment, management’s role then becomes to put a support structure around the innovator’s energy to help them progress toward it.”

With a track record of six successful years behind them, Gvirtsman’s team is now confident to share its knowledge outside of HPE. “We have customers from all over the world, of every scale and industry wanting to learn more about what we’ve done. The best part is that it’s a mutual exchange. We often learn as much as we teach,” Gvirtsman says.  

How to Cheat Digital Death

It’s true that digital disruption is coming for you. And while you can’t hide from it, you can start to prepare for it by asking — and answering — the following questions about the current state of your enterprise.

  • What steps can you take to identify and encourage innovation, regardless of its origin?
  • How can you change your approach to failures at both a micro and macro level?
  • How do you raise awareness of the frustrations your customers have in doing business with you and using your products or services, and turn those into innovation opportunities?
  • What internal processes can you change to foster flexibility and customer focus?
  • What systems do you need in place to produce and launch minimally viable products?
  • What’s the right time to cannibalize an existing product or service in favor of a new offering that is better for customers?


The Growth Outliers

Here are the 10 growth outliers as identified by Professor McGrath. They hail from a variety of industries all over the globe.

1. Infosys Ltd. 

  • Headquarters: India
  • Industry: Information technology
  • Market Cap: $31.9 billion
     

2. Yahoo Japan Corp.

  • Headquarters: Japan
  • Industry: Internet search and navigation 
  • Market Cap: $20.3 billion
     

3. HDFC Bank Ltd.

  • Headquarters: India
  • Industry: Banking
  • Market Cap: $16.5 billion
     

4. ACS S.A.

  • Headquarters: Spain
  • Industry: Construction
  • Market Cap: $15.5 billion
     

5. Cognizant 

  • Headquarters: United States 
  • Industry: Information technology
  • Market Cap: $13.3 billion

6. Tsingtao Brewery Co. Ltd.

  • Headquarters: China
  • Industry: Beer
  • Market Cap: $7.2 billion
     

7. Indra Sistemas S.A.

  • Headquarters: Spain
  • Industry: Information technology
  • Market Cap: $3.7 billion
     

8. Krka d. d., Novo mesto

  • Headquarters: Slovenia
  • Industry: Pharmaceuticals 
  • Market Cap: $3.2 billion
     

9. FactSet Research Systems Inc.

  • Headquarters: United States
  • Industry: Information collection and delivery 
  • Market Cap: $3 billion
     

10. Atmos Energy Corp.

  • Headquarters: United States
  • Industry: Natural gas distribution and marketing 
  • Market Cap: $2.6 billion

 

Sources
 

1Rita McGrath, “How the Growth Outliers Do It,” Harvard Business Review, January-February 2012, https://hbr.org/2012/01/how-the-growth-outliers-do-it (accessed May 25, 2016).

2Monica Nickelsburg, “Amazon’s Jeff Bezos on the Fire Phone: ‘We’re working on much bigger failures right now,’” GeekWire, May 19, 2016, http://www.geekwire.com/2016/amazons-jeff-bezos-fire-phone-working-much-bigger-failures-right-now/ (accessed May 31, 2016).

3Sarah K. White, “What Is Holacracy and Why Does It Work for Zappos?” CIO, August 5, 2015, http://www.cio.com/article/2956721/staff-management/what-is-holacracy-and-why-does-it-work-for-zappos.html (accessed May 31, 2016).

4Yoni Heisler, “A Closer Look at Why Apple Just Made a $1 Billion Investment in Uber’s Chinese Rival,” BGR, May 16, 2016, http://bgr.com/2016/05/16/apple-ride-sharing-didi-chuxing-investment/ (accessed May 25, 2016).

5Nicole LaPorte, “Most Innovative Companies 2015,” Fast Company, February 9, 2015, www.fastcompany.com/3039575/most-innovative-companies-2015/hbo (accessed May 31, 2016).

6Steve Denning, “How Agile and Zara Are Transforming The US Fashion Industry,” Forbes, March 13, 2015, http://www.forbes.com/sites/stevedenning/2015/03/13/how-agile-and-zara-are-transforming-the-us-fashion-industry/#29e1a8d1c557 (accessed May 31, 2016).

7Donald Sull, “Competing Through Organizational Agility,” McKinsey Quarterly, McKinsey & Company, December 2009, http://www.mckinsey.com/business-functions/organization/our-insights/competing-through-organizational-agility (accessed May 31, 2016).