Professor Ranjay Gulati talks about the forces of disruption
In this volatile, uncertain, chaotic and ambiguous world we live and work in, the likelihood of many organizations getting their businesses disrupted is much greater.
So how can business leaders these days prepare their companies to survive at the very least or, better yet, become successful in this environment?
John Clements organized a senior leaders program titled “Re-Imagining Leadership in The Age of Disruption” with Harvard Business School Professors Ranjay Gulati and Richard Vietor.
Professor Ranjay Gulati offered insights into how leaders can develop the essential skills to survive in the disruptive business world.
First and foremost, we need to understand what disruption is and why it happens.
Based on the discussion during the workshop, people have different definitions of disruption and its occurrence.
Disruption in essence is a disturbance that interrupts an event and a common understanding was the presence of technology precipitating it.
But technology is only one disruptor.
There is the aging population that has changed consumer needs, emerging markets where price and quality need to be balanced, rising demand for natural resources which creates massive opportunities and the growth of services offered by corporations.
Technology is only one of many disruptive forces leaders have to consider in the current marketplace.
Hence learning #1: Technology is not the sole disruptor of businesses but only one of several factors leaders need to be aware of.
Prof. Gulati then discussed how Netflix disrupted Blockbuster Video’s business of movie rentals.
In the 1990s, Blockbuster was the place to go to if one wanted to rent the most recent blockbuster movie. Their blue-and-yellow stores proliferated in America’s cities. The company addressed the impulse need of consumers to watch newly released movies and maximized the number of days the movie was being rented, charging late fees if they were not returned on the due date. When the demand for the movie waned, they would then sell them for a fraction of the cost of acquiring the movie title.
But due to limited quantities and unreliability of returns, customers did not get the titles they wanted. At that time, though, it was the place to go for movie rentals and leadership perhaps thought it would remain that way.
Enter Netflix in the late 1990s.
The founder, Reed Hastings, looked at this new format of copying movies—the DVD—and saw the opportunity to rent it out by mailing it to consumers who recently purchased DVD players. Hastings saw that stores weren’t carrying a lot of DVD titles at that time and saw an underserved segment of movie enthusiasts, those who are not just looking for blockbuster titles but other types of movies as well.
The company decided on a subscription model using a search engine to indicate the movies the subscriber would want to watch for succeeding mailings. Due to complaints coming from consumers about their late fees, the company decided to eliminate those fees. There were other issues as well such as late delivery, so the company turned to movie streaming which enabled its customers to have movies all the time for a monthly subscription price. This helped expand its market to include those customers wanting to watch movies all the time.
The company also incorporated recommendations from its clients that helped in spreading the word about older movie titles that might not have been in the movie radar of its customers.
Additionally, the company also went into producing its own movies and series which further expanded its market base. Netflix became the go-to-place for people wanting to see a movie at home, thus eroding the dominance of Blockbuster.
Although there was technology involved, the success of Netflix emanated from understanding the pain points of consumers—not being able to get the titles they want, paying late fees and being able to see a movie without having to drive to a rental store.
So lesson #2 was businesses need to truly understand their customers so that they can continue to offer them the services that they value and willing to pay for.
Another topic Prof. Gulati discussed was how innovation had to be redefined so that the investments companies make in their R&D could become more productive. In today’s challenging world, increased competition and commoditization of services offered have diminished returns on innovation. So companies need to re-assess where they would allocate their resources.
So Prof. Gulati suggested the following:
Keep core businesses healthy as long as possible.
Invest in new disruptive technologies while the core business is still healthy.
Focus on what is important.
Companies such as Kodak, Motorola, Nokia dominated their markets for a while but failed to adapt to the changing business landscape.
Lesson #3 would be to not be complacent. You may be at the top now but there is always another company who is looking to take you down.
The last topic Prof. Gulati discussed was how to build organizations that could grow and survive the ever-changing business landscape. He stressed how leaders need to understand how to lead during disruptive times.
There are several attributes leaders should have: a growth mindset, being aware of decision blind spots, playing to win, being proactive instead of being complacent especially when they are on top, resilience and being able to manage oneself to understand one’s purpose in life.
He also touched on how extremely difficult it is for start-up companies to achieve growth because the founders do not know how to grow their business. They become the hindrance because of their inability to adapt to the changing needs of their organization. They need to evolve in their role and bring in professionals who can actually build and grow the business. Although they do not necessarily have to leave the company, these entrepreneurial leaders need to set aside their ego and accept that the company does not have to revolve around them. Admitting that there are others who can grow the company better could be the first step to scaling their company to newer heights.
Meanwhile, the second part of the program will be led by Harvard Business School Professor Richard Vietor, who will talk about geopolitical and economic trends. The capstone will be a discussion of the new Harvard case study on the Philippines on Aug. 7 and 8 at the Rizal Ballroom A of the Makati Shangri-la. Professor Vieto will discuss case studies on Asean countries (such as Singapore and the Philippines), countries that will directly impact our future (such as China, Saudi Arabia, and the U.S.), and a country that holds lessons for several Asian countries (Colombia).