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  • The Value of Not Giving in to Disruptive Threats
  • Many businesses have concerns about possible disruption these days. As changing technology fuels potentially disruptive threats, more and more companies need to determine how they'll respond. And, there can be tremendous value in avoiding a defeatist approach.

    The retail sector is an area that has been dealing with these kinds of issues for a while now. With the growth of ecommerce, bricks and mortar retailers had to figure out what to do in order to avoid being disrupted, although it's a myth that traditional retailers are being completely disrupted by ecommerce.

    Often the companies that are hardest hit by disruption are those that seemingly give up, essentially abdicating their previous position and giving in to disruption. These companies seem to take a defeatist approach to their business, rather than continuing to compete based on their prior strengths and finding ways to take advantage of combining the new with the old. I've written previously about how businesses facing disruption need to act in ways so that they can be transmuted, rather than disrupted.

    In contrast, companies that avoid defeatist thinking and instead are proactive about defending and building their business can be quite successful despite disruptive threats. The July 23, 2018 article about Best Buy in Bloomberg Businessweek offers an excellent example of this. The article is "Best Buy is Back" by Susan Berfield and Matthew Boyd.

    As the article explains about Best Buy, "Everyone thought we were going to die." This kind of thinking is something I see as a common problem when an industry is ripe for disruption. If a company thinks it's ready to be killed by disruption, it can easily end up acting in ways that turn dying into a self-fulfilling prophecy. But, as the article describes, Best Buy saw dramatically improved results when it stopped acting like it was dying and started competing seriously.

    The article talks about how Best Buy built up its team of home advisors. According to the article, "The advisors act as, in Best Buy's language, personal chief technology officers, helping people make their homes smart or merely more functional." The article says that these advisors get extensive training in areas such as building rapport with the customer and respecting the customer's property, for example by offering to remove their shoes while in the customer's house.

    As the article explains, Best Buy reinstituted employee discounts, which had previously been cut. Best Buy also decided to match Amazon's lower prices. And, Best Buy improved its distribution system. Best Buy has tapped the value of its physical locations by using them as showrooms and featuring boutiques for major tech players like Apple and Microsoft. Additionally, Best Buy offered in-store pick up, which many customers use. Thus, Best Buy is competing rather than giving up, and this was the answer to disruptive threats.

    As I see it, a major takeaway here is that bricks and mortar retailers do have strengths that ecommerce does not. Paying attention to those strengths and making use of them to compete can pay off. So can merely taking basic steps to compete, like matching Amazon's prices and reinstituting employee discounts to help motivate workers. Doing these kinds of things, instead of acting already defeated, allows a company to do well rather than being swallowed up by disruptive forces.

    Companies that are disrupted are often those that cannot harness their strengths to compete. They often give up on their core business. Furthermore, they may attempt to diversify into new supposedly high growth areas. This may be done because they've been encouraged to panic about disruption, and incorrectly think that pursuing something entirely new is better than building on their core, but so called disruptable, business. But, abandoning the business and pursuing something new often fails to work and, thus, can easily help foster disruption. In contrast, sticking with the business, tapping its strengths, and competing rather than laying back and dying, can often enable so called disruptable businesses to live on. That's what Best Buy is doing. And, it can work well. On the other hand, treating the business as dying and doing little to compete, merely paves the way for disruption.

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