Praise for Make Disruption Work

‘With outstanding simplicity and deep insights, this book reveals the “how to” of digital disruption.’

Paul Polman, CEO Unilever

‘Disruption is on every business leader’s mind. Alexandra Jankovich and Tom Voskes have taken this complex topic and created a very clear, actionable path. This book is easy to read, and the examples really make the ideas come to life.’

Wiebe Draijer, CEO, Rabobank

‘There is no escaping digital disruption. Make Disruption Work is a very practical call to action: the 5D model proposed is a powerful guide to help navigate those disrupted waters. After reading it, you feel convinced that, yes, corporates can beat start-ups!’

Franck J. Moison, Vice Chairman Colgate-Palmolive

‘Disruption demystified! This book is unique in the realm of digitization gurus and doomsayers: in a typically Dutch straightforward style the phenomenon of digitization is dissected and reduced to its essence. Instead of far out projections this book offers practical perspectives and
a clear manual for every company to master disruption step-by-step.
The short, concise style and many examples are a guarantee that this book won’t remain unread on the bedside table.’

Annet Aris, Adjunct Professor of Strategy at INSEAD

‘Make Disruption Work is an easy-to-digest and visually appealing book packed full of useful advice for senior leaders tackling the challenges of digital disruption. It adopts a very practical lens, with effective solutions to real-world problems.’

Michael Wade, Professor of Innovation and Strategy, IMD

‘Fantastic book!!! Readable format, good overview and many practical examples and pieces of advice. It creates a language that boardrooms and CEOs can use.’

Menno Antal, Managing Partner, 3i Private Equity

‘A must-read for any modern-day business leader in need of practical advice and examples on how to approach digital transformation.’

Rahmyn Kress, Chief Digital Officer, Henkel

‘Digital disruption brings massive new opportunities for growth, even in the most traditional industries. This book sets out a concrete set of actions to get there, backed by real-world experience, not just consulting “fluff.” With a unique visual style, and packed full of engaging, easy-to-grasp content, SparkOptimus has created a winner!’

Jan Derck van Karnebeek, Chief Commercial Officer Heineken

Published by SparkOptimus

Copyright © Alexandra Jankovich & Tom Voskes, 2018

Edited and illustrated by Adrian Hornsby
Cover design and layout by Justine Miller
Illustration support by Deborah Tchoudinoff
A Falcon Windsor team production

All rights reserved. No part of this publication may be reproduced, stored or introduced into a retrieval system, or transmitted, in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without the prior written permission of the copyright owner, except in the case of brief quotations in a critical review or other non-commercial use permitted under copyright law.

Disclaimer
The information in this book is designed to provide helpful information on the subjects discussed. The authors are not offering it as professional services advice. While best efforts have been used in preparing this book, the authors make no representations or warranties of any kind and assume no liabilities of any kind with respect to the accuracy or completeness of the content. Neither author nor SparkOptimus shall be held liable or responsible for any loss or damages (allegedly) caused, directly or indirectly, by the information contained herein. Every company and case is different, and the advice and strategies herein may not be suitable for your situation.

All reasonable efforts have been made to obtain necessary copyright permissions and to ensure that all the information presented is correct. Any omissions or errors are unintentional and will, if brought to the attention of the authors, be corrected in future printings.

ISBN: 978-90-828382-1-3

SparkOptimus
Jacob Obrechtplein 1, 1071 KS Amsterdam, The Netherlands

www.sparkoptimus.com
www.makedisruptionwork.com

sometext | disturbance or problems which interrupt an event, activity, or process.
sometext | what happens when companies harness new digital technologies and serve customers better, thereby breaking open markets and shattering existing orders.

Digital disruption — everybody’s talking about it. It’s going to be the end of jobs, society and human interaction. It’s going to solve all our problems and wake us up with the perfect espresso.

It may not quite do either, but what is certain is that it will continue impacting every sector and industry on earth, and creating new ways for companies to serve customers better, faster and cheaper than ever before. Those companies that adapt and make disruption work for them, win big; those that don’t get boiled like frogs.

This book is about how to make disruption work for you. It’s based on our experience as Europe’s top management consultancy focused 100% on digital disruption. We’ve worked with some of the biggest companies in the world — including Shell, Unilever, ING, eBay, Ikea and many others — building their digital capabilities, and transforming their businesses. Our approach with them, and here, is to be practical, demystifying, and effective.

Disruption needn’t be a threat. It’s a power, and it’s in your hands.

Make
Disruption
Work

a CEO handbook
for digital transformation

Introduction

how not to be a boiled frog

A few weeks ago we were at a business leaders roundtable, and the CEO of a big travel company was reminiscing: ‘When I started as an intern in this industry, my first job was to get waiting times in the agency down from seventy to forty minutes.’ Forty minutes was the ultimate goal — not bad

if you’re the company. ‘Oh,’ he went on, ‘we used to have it so good. We’d send customers off on brutally early flights to places they hardly knew, and then have them catch two buses to arrive finally at a crummy hotel that was miles from the beach. At the end of the season we’d get a couple of complaint letters, and next year do the same again.’

The travel industry has now changed dramatically. Customers know that early flights mean discounts, they know exactly where the hotel
is — and if it’s got a TripAdvisor rating of less than 3.5 then forget about it — and waiting times are counted in milliseconds. And the provider landscape has changed too: the frontrunners of today are all digital players that 20 years ago didn’t exist (Airbnb, Expedia, Booking.com, etc.), and the previous incumbents have all either followed them online, having lost large swathes of market share, or been eaten.

But the most striking thing of all is that the actual changes involved (e.g. better choice of flights, decent hotels) aren’t particularly digital or technological in character. Rather they arise out of what the digital technology facilitated, namely:

enhanced transparency: customers can now access more information about what they’re buying, meaning the knowledge asymmetry travel agents used to enjoy, and indeed exploit, has gone.

enhanced accessibility: customers can now access products and services from anyone, from anywhere, 24/7, meaning incumbents are no longer protected by owning key physical locations, and there is a constant swarm of competitors all ready to make the customer service improvements that are there and begging to be made.*

The point of this story is that digital isn’t about digital — it’s about using digital to serve customers better, faster and cheaper than before. And importantly, it’s also not about travel. Digital disruption is playing out in one industry after another, leaving none untouched, and in much the same way every time. This is because, regardless of sector or specific technology, digital is almost always just a catalyst for industries to get better at doing what they’re supposed to do – i.e. serving customers.

There are good and bad things about this. The good is that if digital really is just about improving your product or service offering, it follows that you don’t need to be a flip-flopped millennial tech start-up to do it (in fact if you’re getting beat by millennials you were probably doing a bad job before). If you are an existing company, you’ve got valuable customer links and data already, and you absolutely should be able to tackle digital yourself, hiring some coders along the way.

The bad is that the changes digital demands are likely to be much more profound than just some minor tech problem you can fix and declare done. Enhanced transparency and market accessibility pose massive challenges that go to the core of every company, and ask, essentially, ‘How good are you?’ And the truth is, many large traditional incumbents are still deeply sub-optimal. They have over-sized, inefficient departments, bad internal communications, and leaders who neither know nor care about their customers, but just want to keep doing what they’re doing and cashing in the revenues. For such companies, the gas is on and the water heating up.

How to avoid the fate of the boiled frog? It’s counter-intuitive perhaps, but the solution to digital disruption is often not some radical new model, but a return to the fundamentals of good business sense. You need to be able to use digital to create value for customers in smarter ways, but crucially this means being customer-first — not digital- or technology-first, and not product- or company-first. And this in turn means you need to:

know your customer (and care!): you need to appreciate for example that a 40 minute wait still sucks, and look to improve relentlessly. And you need to understand what more transparency is going to look like to customers, and what they’ll consequently start to expect (regarding pricing, choice, reviewing, etc.).

have a little humility: this is not a quality always found in boardrooms, or business books, but for being an effective servant to customers, it is in fact very useful. You need to be able to ask, genuinely, what does your customer need or want, and be prepared to change accordingly. You need to come up with new ideas about how to serve those needs, and test your ideas, and be wrong. You need other people in the company to come up with ideas too, which may be right. This implies a form of internal transparency that isn’t always the most comfortable thing in traditional business environments. It will however get you a better result, which in the fast-moving, hyper-competitive landscapes that digital throws up, you’ll need if you want to survive.

We were talking about all this recently to the CEO of a bank.
‘Yes I see,’ he said. ‘But the thing is, we’re just not ready for that level of transparency.’

‘Mm,’ we said. ‘Get ready.’

*
Notably had the digital players entered travel with the same offering only over the counter, and no online presence, they would still have disrupted the incumbents. The logical extension of this, and which we see in many sectors, is that once digital players have established themselves online, they often expand into brick-and-mortar and continue capturing market share.

†
A frog that’s dropped into boiling water will leap out, but if a frog is already in a pot of tepid water, and then brought to the boil, it will sit around and get cooked … or so the fable goes. Biologists have commented that frogs generally don’t sit around nicely, making the experiment hard to perform.

About this book

Digital disruption is going to continue its sweep across all industries. What’s more, the disruption we’ve seen to date has been just the first wave. Digital behemoths like Google, Amazon, Facebook et al., have all sprung out of online and mobile, but a host of further technologies are already on the brink: robotics, self-driving vehicles, AI, IoT, blockchain. Every one is potentially as revolutionary, and in their combinations, even more so. We are entering a future of ceaseless disruption.

This presents risks, but also a tremendous opportunity for you to change your company — and indeed the world. New technologies allow you to think big. At the same time, you need to think practical. If the environment’s moving fast, you have to have strong fundamentals, but also to be agile, adaptive, and data-driven. There is now a clear, evidence basis for defining how to do this in relation to online, and we firmly believe it will hold true for future waves of digital disruption.
This is not least because the principles involved, e.g. serving the customer better, and organizing effectively, are timeless. What’s new, and what this book provides, are the models and blueprints as to how to be timeless in digital landscapes. How do you organize to serve the customer better in digital? How do leading digital businesses do it? What rules do they follow, and what strategies do they apply?

We’ve worked with some of the biggest companies in the world — including Shell, Unilever, ING, eBay, Ikea and many others — on transforming their businesses in the context of disruption. Together with them, we’ve built digital capabilities, launched new disruptive ventures, and seen the success. These initiatives are now growing fast and booking profits. The advice we give is practical, demystifying and effective, and — the ideas underpinning it are crystallized in this book. This is stuff we’ve done with multi-billion dollar operations, and it works.

Our approach is structured around 5Ds: Discover, Define, Determine, Drive and Delight. All five need to be addressed, sometimes in parallel, and hard work is involved. There is no magic bullet here, and as with any kind of change, strong personal leadership is required, and in particular, a readiness to act, learn, and, when called upon, take tough decisions.

Being a company on the brink of disruption, or in the midst of it, is tough. Shareholders can be hesitant, and it doesn’t help that digital often presents lower margins, and business cases that are negative in the short term. We understand why some companies don’t want to change. We also understand why some frogs stay in the pot.

5D model

sometext
1. Discover the new world
CEOs ask us: ‘How is my industry going to be disrupted?’ Start by looking up.

sometext
2. Define how to act
The game has changed. There are six new rules, and strategies to match.

sometext
3. Determine what you need
Organize to deliver speed and disruption, and approach tech right.

sometext
4. Drive the change
Get your capabilities, get your team, go!

sometext
5. Delight in the new world
Lead, act, and tell the story.

We have studded the argument throughout with real-world examples in blue infobubbles like this one. The final section of the book presents three detailed case studies showing the 5Ds in action.

1. Discover

the new world

sometext | Look up
sometext | How it works
sometext | And it’s only just beginning

sometext
Look up

CEOs ask us: ‘How is my industry going to be disrupted?’

The typical internal response is for companies to research their own industries and look for strategic threats. The problem with this however is that disruption often goes unnoticed until it hits hard. A second option is simply to wait for the hit, at which point the threat is apparent, but it’s already too late — disruptors are making vast inroads into the market.

A better strategy is to look to other industries, and especially those where disruption is more advanced, and see how it has played out there. Common patterns can be extracted (discussed in greater detail over the following chapters), and used to inform a forward-looking, industry-adapted response.

The disruption curve shows the state of disruption for a range of industries and their points along the journey. The steep section shows the moment at which disruptors are growing exponentially and things changing very fast. It is critical to have a response in operation before this, which means starting well in advance.

Always be looking up the disruption curve, rather than at your peers, to gain insights into what might happen next. How did disruptors enter those markets, and what did they target?

*
SparkOptimus conceptual curve

sometext
How it works

it’s about customer needs
Disruption occurs when companies — often new players, though they needn’t be — harness digital technologies to serve customers better, faster and cheaper. Notably this is only possible if service was poor before, and it follows that the true driver of disruption is not technology, but unmet customer needs.

The travel industry, as discussed in the Introduction, provides a spectacular example. Disruptors presented a new booking channel with better options, and the fact that customers then switched so fast, and en masse, proves that a lack of demand didn’t hold anything up.

demand is already there
The same thing happens in one industry after another. Once the online channel opens, market share switches to it in big chunks, driven by demand that is always already there, only waiting to be unlocked.

poorly met customer needs | offering made better, faster, cheaper
long waits in travel agency | fast and easy booking
no independent advice | price comparisons and customer reviews
high cancellation fees | free cancellations

travel dinosaurs of 2000: Tui, Thomas Cook, All Leisure, Cox & Kings (all have either gone bust or followed online having taken a big hit)
digital disruptors of today: Airbnb, Expedia, Booking.com, Skyscanner, TripAdvisor (now dominant and capturing the financial rewards)

how travel was disrupted

market share of sales via online channels

industry | barrier | removed by disruptor
clothing | people need to try things on | Zappos: free 365-day return policy
bedding | people need to lie on a mattress | Casper: free mattress try-out for 100 days
consumer electronics | people need expert advice | Coolblue: expert tutorials and customer reviews on the website; third-party tech review sites and affiliate marketing

disruptors remove barriers

Shipserv entered marine trading with an online platform in 1999, was disregarded by incumbents as tiny, and grew exponentially. By 2015 it had 20% of the market ($3bn in trade); competitors were scrabbling, and had no technology to match. It is now the largest marine procurement platform in the world.

just remove the barriers
So why are some industries ahead of others? Because there are often barriers to online.

Incumbents typically mistake these barriers for insurmountable walls, while disruptors innovate and remove them. For example, in the clothing industry, many retailers initially ignored online, reasoning that customers need to try things on before purchase. Zappos blew the barrier away with free 365-day returns. Suddenly market share started switching in great chunks, and incumbents were several years behind the technology.

Barriers are different for different industries, as well as at different times (e.g. trust in online payments was once a barrier), and in different markets (e.g. payment by credit card in places where many people don’t have one). Think about barriers in your own industry and how they may be removed — possibly in ways similar to what’s happened already a little way up the disruption curve.