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Disruption in the Making

Updated: Dec 30, 2020

by Ulises Pabon

I remember, not too long ago, seeing a graph that showed the decline in sales of film cameras together with the increase in sales in digital cameras. The two lines, projected into the future, appeared like a sideways "V" - with electronic cameras diverging upward and film cameras sinking. Years later, mobile phones delivered the final blow to film photography (and to digital camera sales, as well) as high-resolution digital photography became a standard capability in these devices.

It's one thing, however, to disrupt a product; it's another, to disrupt a company. Companies can pivot and reinvent themselves. They can deliberately abandon product lines, shift resources to new enterprises, invest in new lines of business. But this is easier said than done. Disruption is easier seen when you study it in a history class. It's harder to see when you're living through it. Disruption is also easier to digest when you are not invested in the legacy paradigm; when you have nothing to lose with the disruption. And, for sure, it is far easier for the disrupter, a lot harder for the disrupted.

Last week, I ran into the following graph published by PwC in their report titled: Perspectives from the Global Entertainment & Media Outlook 2020 - 2024.

The sudden drop in 2020 box office revenue is understandable; one of the many aftershocks of COVID-19. But what called my attention to this graph was the same sideways "V" pattern I had seen years ago in the film and digital camera industry.

This is not the first frontal attack on the cinema industry. The cinema industry survived television, it survived the Betamax and VCR assault, it survived home theatres and DVDs. All of these technologies threatened the status-quo. The industry leaders found ways, however, to continue adding value. New technologies enhanced the movie-going experience - Dolby Sound systems, IMAX technologies and 3D, and digital projection, to name a few. And, in addition to technology, cinema owners got creative in reinventing the movie-going experience - comfortable seating, dine-in services, etc.

While predicting the demise of the big screen is uncalled for, ignoring the forces of change can be fatal. The whole movie value-chain is undergoing a transformation. Amazon and Netflix walk the red carpet with the same ease that Universal, Paramount, and 20th Century Studios do. Amazon and Netflix! Gone are the days when movie theaters held a 90-day lead to alternate channels. WarnerMedia just announced that all of its 2021 films will be released simultaneously in theaters and on HBO Max. And while mobile devices will never substitute the big screen, we don't know what the convergence of streaming, virtual reality, augmented reality, and other emerging technologies will do to movie theatres.

Mind you, this is not a story about the movie industry. It's a story about disruption. Hard, real, tough, and unforgiving disruption. The details may change and the context will be different, but there's no way around it. If you haven't been disrupted, you're next in line. And if you've been disrupted, don't wander too far because disruption strikes twice and thrice.

So, what do we do? Do we surrender to disruption in despair? Or do we hang our hopes on the status quo? We do neither.

There are two keys to surviving disruption. One is to protect your current business model from it. The other is to become a disrupter yourself.

The first key is accomplished on two fronts. One front focuses on strengthening the profitability of your current business model. A solid play is to update your current value proposition while strengthening productivity and profitability. A strong business may not be immune to disruption but provides a strong foothold to weather the storm and channel cash to new ventures. The other front is to study the larger ecosystem your business plays in to identify and develop strategic and operational safeguards against disruption. What customer segments do you need to tie knots with? Who do you need to partner with? What hidden assets do you need to leverage?

The second key to surviving disruption is to become a disrupter yourself. Here, the key is to allocate resources to experiment and try out new business models and potential revenue streams. Your innovation process needs to expose these ideas to the harsh reality of the market through frequent hypothesis testing. And you need to insert these ideas into an iterative business model redesign process.

A balanced portfolio of businesses you exploit and ideas you explore is a good defense against disruption. For sure, there's more than meets the eye and this short synthesis doesn't do justice to the twists and turns businesses fall into when disruption is in the making. Give us a call or send us a note and we will gladly lead a dialogue with your executive team about reducing disruption risk and increasing your business' longevity.

You don't have to be in the movie business to notice the signs of disruption. No sector or industry is exempt from it. Yet, disruption is not an invincible foe. In fact, it's organizations that, by their very nature, have the seed of invincibility. Go for it.

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