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Thriving on disruption

Position your business for a sustainable future by becoming indispensable within a broad and diverse network of partners.

INTRODUCTION

It has become conventional wisdom that you need to find a way to disrupt your own industry before a startup, a competitor or a company from a completely unexpected corner of the business world renders your primary business model or core product obsolete.

It’s true that a few companies make industry disruption look easy—even routine. Technology giants like Apple, Google and Amazon have proven willing and able to disrupt industry after industry with new products, services and platforms that are cheaper, better and more convenient (often all at the same time) than anything that’s ever been available before. But these are the exceptions.

For the great majority of companies, devising and executing an industry disruption is exceedingly difficult—and it may even backfire. The risks are huge, and few organizations have the will to walk away from established business and operating models.

Does this mean incumbents are in a no-win situation? Or can they still thrive in a world of digital disruption without being disruptors themselves?

SURVIVAL STRATEGIES

To answer that question, we studied the survival strategies of major incumbents across a wide range of industries to see what works—and what doesn’t. We found that although companies should always be alert to opportunities to disrupt, they have another option that takes them out of their constricting industry roles and positions them for a more sustainable future.

Incumbents that weather the storm successfully are able to continually remain at the forefront of disruptive innovation—regardless of where those disruptive forces originate. This enables them to hedge against sudden industry disruption and pivot toward new opportunities. We call this “thriving on disruption.” Doing so doesn’t render companies invulnerable. But it does prepare them to adapt when cataclysmic industry change threatens.

To thrive on disruption, successful incumbents channel their capabilities into broader “market activities.” Their goal: Become indispensable within a diverse network of partners. Even as industries and technologies change, these market activities are sufficiently core to business in general that they will almost certainly remain relevant.

That’s what makes a market activity different from—and more advantageous than—a traditional industry role (see chart). An industry role takes a static view of key players—for example, who the customers are and what they want, who the logical partners would be, where to find suppliers and how to contract with wholesalers. By contrast, a market activity is defined by a core set of capabilities that can be adapted in other contexts beyond today’s product, service, customer or partner focus.

After studying the strategies of successful incumbents, we came to realize that there are only four activities that matter today in any broad network of partners: Inventing, producing, designing and assembling. To protect against being disrupted out of existence, successful incumbents are choosing to become world-class in one or more of these four activities.

KEY MARKET ACTIVITIES, EXPLAINED

Here’s how these roles often look in practice:

  • Inventors specialize in breakthrough innovations, often discovering better and cheaper materials and components for finished products. They draw on partners both for market insight and manufacturing scale, and then pioneer new features and original product categories. Materials innovator Corning, for example, thrives on the smartphone revolution as the inventor of scratch-resistant Gorilla Glass. Still, that’s just one of many industries to which Corning contributes leading-edge technologies.

  • Producers manufacture and distribute component parts at scale and speed. They work closely with Inventors to bring innovations to market, and they fashion components of final, finished products to required specifications. Auto parts manufacturer Delphi Automotive, for instance, collaborates not just with their OEM customers but also with chip designers, software companies and Silicon Valley technology firms. Doing so allows them to stake a claim to computing, safety and infotainment activities—profitable innovations that lie at the intersection of industries.

  • Assemblers gather and combine components for the purpose of bringing a product or service to market—at scale and on demand. Singapore-based Flextronics, for example, manages product assembly, supply chain, distribution and aftermarket services for technology companies. Their focus on this role allows them to span industry boundaries; the company is engaged with both fast-changing consumer products and advanced telecommunications infrastructure.

  • Designers use their awareness of customer wants and needs to conceptualize high-value and differentiated offerings. They draw on existing off-the-shelf components as well as leading-edge innovations to create novel blueprints that satisfy customers. Toy company Lego, for example, far from being just a manufacturer of plastic components, is today a design firm at its core, engaged in conceiving experiences that extend physical play into virtual and digital worlds. To bolster its design capabilities, the company now routinely collaborates with retailers, academics and technology inventors.

THREE-STEP SHIFT

Despite being a more reasonable proposition than instigating an industry upheaval, changing your strategy to thrive on disruptive innovation is still a major challenge.

Companies that have made the shift have often done so in three steps.

First, they consciously decide how to position their capabilities to stay continually relevant. They prove willing to forget the present when planning the future, focusing on roles and capabilities that appeal to a broader and more diverse array of potential partners. Often, this means abandoning the “competitive landscape” for the “partnering landscape”—in other words, thinking differently about competition within and beyond traditional industry boundaries.

Take a well-known print and copy chain recently acquired by a global logistics firm. The parent company worried that too many parts of the print and copy business were increasingly incompatible with accelerating workplace trends like cloud storage and digital collaboration. Rather than seeing this as a competitive threat, the company managed to stay relevant by partnering with cloud providers like Google Docs and Box to digitize its quick-print offerings. Today, the company sees its print and copy centers as assemblers of digital office solutions.

Second, companies that successfully thrive on disruption adapt their business models to exploit their capabilities within a broader network. The goal is to become indispensable, the enduring partner of choice. In some cases, this means divesting or spinning off parts of the business that are too industry-focused, and at the same time using new acquisitions to access the talent and capabilities they need to appeal to a broad array of partners.

Consider innovative chipmaker Intel. In the past, the company had viewed its fabrication plants as being intrinsically linked to its innovation pipeline. But today, Intel monetizes spare capacity in its plants by experimenting with a “foundry” model. Other chip designers (and thus potential competitors with Intel on the chip design front) can now contract to utilize Intel’s spare manufacturing capacity, thereby cementing Intel as a key player within a broader network both as an innovation partner of choice as well and as a producer partner of choice.

Third, these market activity players adopt digital solutions to foster real-time collaboration with partners, customers and even competitors. In doing so, they reexamine both their entrenched business processes and also their corporate culture in order to make external collaborations simple, effective and routine. And, most important, they adapt their operating model while staying focused on their long-term success.

The Dow Chemical Company, for instance, has over the past 10 years increasingly moved away from manufacturing low-margin commodity chemicals and toward being a higher-margin, “solutions-oriented” partner of choice. To execute that strategy, the company embraced collaboration as an essential part of its operating model. For example, Dow’s Film Applications Development Center in Freeport, Texas, offers customers and other partners in the value chain a cutting-edge testing lab where they can experiment with new packaging applications—without the expense of using their own production facilities.

CONCLUSION

Companies don’t have to choose between an inevitable future in which a “big bang” blows up their industry, and their own high-risk attempts at industry disruption that can amount to playing with dynamite. By shifting their strategy to focus on key market activities, companies can thrive on disruption. Let others worry about whether they can disrupt their industry, or whether they’ll be disrupted.

OUTLOOK: ACCENTURE’S JOURNAL OF HIGH-PERFORMANCE BUSINESS

As a showcase for the most innovative thinking on high-performance business, Outlook focuses on six core themes: Redefining Competitiveness, Digital Disruption, Global Operating Model, Open Innovation, Sustainability and Workforce of the Future. We feature original content devoted to these topics as well as a selection of unique insights offered by professionals throughout Accenture.​​​​


AUTHORS

 

 

Paul F. Nunes

Paul F. Nunes

is the global managing director of the Accenture Institute for High Performance. He is based in Boston.

Joshua B. Bellin

Joshua B. Bellin

is a research fellow with the Accenture Institute for High Performance in Boston.



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