Insight

Managing Disruptive Innovation Part 3: Incumbents’ inability to compete with speed and agility of startups

Digital Strategist & Product Owner
Valtech, Toronto

October 14, 2019

The disruptive scale and rise of venture-funded start-ups are forcing the incumbents to operate in this unpredictable world at this new speed. Learn what this means for your business

READ PART 2 

The speed at which industries are transforming is accelerating both domestically and around the world. We live in a hyper-connected world (Internet of Things (IoT) connected devices are projected to amount to 75.44bn worldwide by 2025) where talent, customers, and competition can come from anywhere in the world.

This trend is setting the speed at which these industries are transforming. So, it is imperative that all companies must understand what is causing this acceleration and how to maintain or grow their market capitalization. The disruptive scale and rise of venture-funded start-ups are forcing the incumbents to operate in this unpredictable world at this new speed. It is also important to clarify that this acceleration and disruption are not limited to technology companies typically associated with Silicon Valley but all other sectors such as oil & gas, retail (consumer goods, fashion), auto, hospitality, and more.

An example of such a disruptive company is Zara (a brand of Inditex, one of the world’s largest fashion retailers), where they pioneered the principles of speed in their entire operations to meet the needs of the ever-changing fashion clothing industry. Since 1963, Inditex has maintained its relevancy in the industry by closely nurturing its customer relations, empowering its retail store managers, connecting their designers to customer-facing staff and via cutting-edge systems creating industry’s shortest lead times in scalable manufacturing and deliveries. If you can move much faster than your competition by incorporating speed and agility, then you have a better chance of sustaining market relevance.

Scaling a company with speed and agility is the secret by which Silicon Valley and China have built globally massive businesses at lightning-fast rates. What it does is, take a set of techniques in growing a company, like the size of the organization, size of the customer base, revenue, financing, and to essentially create a dominant global position in the market at speeds which were not possible before.

According to Reid Hoffman (Founder, LinkedIn), the key to understanding scaling at speed is that it is the pursuit of rapid growth by prioritizing speed over efficiency in an environment of uncertainty (source).

That’s why scaling is so challenging — it requires a lot of courage to take on that risk that has a huge potential of failure to achieve that massive success. It is about figuring out how to do certain things really well and not do the things that will affect the growth stage of a venture.

Lastly, it is not just about first-mover advantage but the first mover that scales is what matters most. For example, Airbnb faced Wimdu that launched as a European competitor to Airbnb in 2011, raised over $90M from top venture capitalists such as Rocket Internet & Kinnevik AB. Wimdu quickly became AirBnB’s main competitors in key locations, was backed by a large venture capital fund and threatened them in some of their core markets such as Europe. Airbnb launched in 2008 but during 2011 with similar funding, they responded to the competition faced by Wimdu by establishing scalable market ecosystems around the world (any country, deploying local talent, gain local market traction), while Wimdu despite the knowledge of existing market opportunity and risks was not able to figure out tactics that will capture greater market share.

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Article was originally published on Medium blog

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