Once leaders make the call to disrupt their industry, they face the hard work of marshaling support and commitment from employees and stakeholders. Why is it so hard? Basically, it all comes down to trust. Whether it comes from external competitors or internal initiatives, everyone is concerned that disruptive innovation can put the cash cow out to pasture.
Take Netflix, for example. Back in 2013, the company decided to stop struggling to survive in a market where customers wanted to watch streaming videos on demand rather than wait by their mailboxes for its DVD-by-mail service. While this may sound reasonable now, at the time, it was very controversial with stakeholders – especially when you consider its new pricing strategy that was a 60% increase from its traditional model of $10 a month. Netflix’s stock plunged when the announcement came out, so many people thought they moved too quickly. However, creating that burning platform created the motivation for employees to drive the digital transformation it needed for the long run: The digital transition for Netflix was no longer an option; it became an existential imperative. Not only is Netflix providing entertainment choices and media delivery customers want, but it also grew its customer base by nearly 125% since that initial decision.
Was the success of Netflix’s strategy a calculated, long-term vision or pure luck? Really, that’s a tough question. Ultimately, what matters is that the executives had the vision and wherewithal to lead the charge and convince employees of all levels to come on the journey.
I was very fortunate to speak to Alex Atzberger, president of SAP Ariba about his experience with a similar challenge. Although SAP Ariba is part of a much larger business, he understands that its customers demand the agility and innovative spirit of a startup. Yet, Atzberger also knew that he had to get his naysayers and doubters on board to successfully lead SAP Ariba’s disruptive transformation.
Jeff Woods: We’re bombarded with opportunities for transformation. How do you know when to act?
Alex Atzberger: A sure-fire way is to listen to what your customers are doing and pick up on their nascent behaviors, which have become a dominant source of change. In many cases, your traditional competitors might not be the ones who are disrupting you. Instead, it can come from some very unexpected sources.
For example, consumers are spending differently and are using different avenues for commerce. Once there is a trend in the market, sometimes there is no point of return. Once it expands, it’s expanded. Once a customer has a better experience with another brand, they will keep going there. Employees and consumers routinely give feedback about their experiences on Twitter and other channels, and they expect an immediate response.
Leaders must identify the changes people are seeking and determine whether the business can cater to them. It doesn’t make sense to go against the grain if the market is moving on. You need to shape it and go with it.
Woods: How do you make the case to customers, suppliers, partners, and your workforce that the time is now?
Atzberger: Fortunately, there are a lot of response systems that validate and measure any decision a major company makes. On Facebook, Twitter, and other social channels, anyone from anywhere in the world can provide feedback on what has been done, whether it is positive or not, and if the brand can do more. In this always-on, digital world, the response is immediate. Businesses always know where they stand and if they are hitting the wrong or right nerve – or any nerve at all.
It is up to leadership to identify and make those hard calls when disruption is needed. At the same time, leaders need to prove that they understand the urgency of disruptive transformation and how the company – at all levels – is impacted. This requires a full understanding of the disruption and a solid business case for seizing that new dynamic. Leaders must communicate with each part of the business as its own entity and tie the conversation back into the overall picture of the enterprise without losing focus on the individual organization.
Suppose you were a CEO of a hotel chain who is keeping an eye on the disruption Airbnb is bringing. You still have a core business. But, can you do stuff that can make your brand more accessible to people who use digital technology or make it easier for them to find something? Absolutely, you can! I think there you can’t go there fast enough because of the changes in the marketplace. But first, you need to get everyone in your business network on board.
Woods: Any organizational change has both supporters and detractors. Should leaders address their naysayers head on? If so, how do you help the doubters come around?
Atzberger: Over time, it is very dangerous to ignore the doubter. Not only can they slow down the progress of transformation, but they can detract you and your supporters from the purity of that vision. Think about it: Every company is often competing against startups that only have believers supporting its ultimate goal. And if you don’t have all of your people – employees, suppliers, partners, and customers – rallying behind your strategy, you are putting your business in a tight spot. It’s critical to get a clear sense of your network’s conviction.
Luckily, we are all experiencing disruptive change firsthand. In fact, most of us wake up and immediately grab a smartphone every day. Despite that, leaders still need to walk doubters through the logic of transformation in an easy and relatable way. For example, leaders should use social channels where employees and customers are present. Whether you agree with them or not, they are already there developing and sharing their opinions. When you participate in the conversation, you show people you are willing to listen to them. More important, you have a chance to influence their views.