How to Save Your Business When Your Industry Gets Disrupted

SOE is our acronym for Systems of Engagement, the next generation of edge architecture, dominated by Social and Mobile on the client side and Analytics and Cloud on the server side. We’ve talked a lot (I would prefer it if you didn’t say incessantly) about Systems of Engagement and how they present architectural challenges to enterprise IT architectures. It’s a big deal, and it will remain so for some time to come. That said, it is not the biggest deal.

SOBs are the biggest deal. No, not your new boss, even if he is named Satan, or the fellow who cut in front of you to claim the last possible parking spot in all of SOMA. No, here I am referring to Systems of Business. Whereas SOEs instantiate new operating models—streamlining interactions to make them more effective and efficient—SOBs instantiate new business models—truly disrupting the status quo.

When United Airlines lets me check in to my flight and check flight status on my smart phone, that is a System of Engagement. The underlying business model is unchanged. When Uber lets me summon a “limo” on demand, and then follows that up at the end of the ride with a new system of payment and a system of ratings, that is a new System of Business. That’s what has the transportation system in an uproar. When retail stores personalize their offers to me based on analyzing my purchase history and public social media, that is a new System of Engagement. They still want me to come into a store and to shop. When Amazon invites me to subscribe to Prime and to shop exclusively on line, that is a new System of Business—no brick and mortar, no inventory on display, no associates, no shopping—only buying. When Netflix assembled the backlists of movies for rent, and then took their whole business to online streaming, and then entered the content creation arena, they were changing the System of Engagement enormously, but they have not really disrupted the System of Business. They may be better than Comcast, but they are not categorically different. Contrast that with YouTube which has a categorically different approach to content creation, content distribution, and content monetization.

Okay, you get the point. Now the punchline. Is your company investing in SMAC technologies to modernize your business? Let us hope so. There is so much trapped value in traditional operating models, it is crazy not to tap into the liberating effects of digitally enabled systems. But the real question is, are you modernizing your operating model—something safe, sane, and with a high probability of success—or are you disrupting your business model—a high-risk, high-reward gamble that will send some careers soaring and derail countless others (need I mention J.C. Penney?).

In this context, Systems of Engagement, which will still look to many like a disruptive innovation one should put off adopting until the train is truly leaving the station, should now look more like a no regrets move. Yes, you will dislocate a whole lot of operations, including unfortunately both employees and partners, but at least your General Ledger will remain intact.

Systems of Business represent a whole other challenge. It is virtually impossible to incubate them inside an established enterprise because not only can they not leverage the existing infrastructure, they actually contradict it, not to say mock it. The brand dissonance is excruciating. Customers, partners, and employees simply cannot and will not get it. The antibodies will reject the transplant.

So now what? What do you do when some mutant organism enters your ecosystem with a novel, and at the outset apparently irresistible, business model, one which you cannot emulate without forsaking your established enterprise’s most prized assets?

Well, first off, realize you are in a fight for your life. The new business model is not a competitive threat, it is an existential threat. That means anything goes. So, your first call is to whatever regulatory authority you can think of that might classify the new business model as non-compliant. Now this is outright protectionism, but hey, we’re fighting for our lives here, people. So declare Airbnb non-compliant with the Americans with Disabilities Act. Protest Uber with massive strikes to clog the streets of Paris or London. Go for it! Of course, protectionism never works as a long-term strategy, but it will slow the opponent down in the short term, and right now you are just trying to buy time. The question now is, what do you do with it?

Your best bet is to deploy next-generation Systems of Engagement in ways that build on your legacy assets to create new user experiences that can compete with the novel business model. This is not a perfect answer either, but it will serve for the middle term, a period during which the world will determine just how much it wants to adopt the new model and how much it wants to stay the course with the old one. Are we talking about film here, or phone calls? Overreacting too soon gives too much credit to the disrupter. Let the contradictions in its business model emerge, and let the world pass judgment on it then.

Until then, of course, it is the Golden Child, and you are at best a ham sandwich. Console yourself. People still need to eat. Just tighten your belt and realize the era of juicy profit margins, predictable revenues, and even more predictable competitors is over. Drink a toast to nostalgia, and then batten down the hatches. You’re in for some rough seas.

That’s what I think. What do you think?

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Geoffrey Moore | Zone to Win Book | Geoffrey Moore Twitter | Geoffrey Moore YouTube

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