Change is inevitable! However, when it comes to disruptive change, things are a bit different. Disruptive innovation is a change that creates a new market and disrupts the existing and established market leaders. Digitisation has been one such change which wasn’t adopted effortlessly. Naturally, many businesses had to wind up as they could not compete.
Thus such transformations need to be handled with caution by entrepreneurs. If you own a company or are planning to purchase a profit-making business for sale in the United States, then you must know how to deal with this challenge in order to stay relevant and valuable to your customers. So here is how you can deal with disruptive change competently.
What Is Disruptive Change?
The concept was introduced by Clayton M. Christensen in 1995. It summarises the mindset of managers in large companies who fail to change with advancing technology. It primarily affects the big players in the market who are ruling the industry since they are not inclined to change their set-up, which has been generating huge profits for them.
A disruptive change is usually introduced by start-ups or small businesses who want to carve a niche and penetrate the saturated markets. The market leaders do not immediately switch to new ideas because they do not find them profitable at first. Also, the implementation needs modification of the current talent pool, which is required to compete against the present competitors. Plus, it takes a long time to execute a disruptive change which makes the managers anxious about its viability.
How It Affects Businesses?
Before the digital revolution, there were various other disruptive changes that shook the foundations of corporate giants. Although they tried to transform, they could not succeed as they were merely finding the right people for the right jobs but not changing the organisational structures. The reason behind this was their lack of assessment of their organisational capabilities.
They failed to realise that if the entity is not suitable for the change, even the most talented people cannot save it. Thus managers need to determine which changes can be brought about in their organisations and which ones cannot be implemented. It entails recognising the core capabilities of the entity and monitoring their migration as the company grows.
What Impacts Capabilities?
These capabilities are dependent on three factors that decide what can be accomplished by an organisation and what is beyond its potential. These are resources (tangible and intangible including people, equipment, capital, brand, customer relationship, technology, etc.), processes (methods of communication, decision making, product development, etc.) and corporate values (what to implement and what to avoid).
When the company is in its initial stage, the founding members define the capabilities of the business which take the shape of processes. When these processes become recurrent and give rise to a business model, values automatically become a part of the system. As the company starts growing and becomes mature, the capabilities become more reliant on the proven processes and values. So even if the resources are altered, the consistency of operations is not hampered.
This is when the processes and values evolve into a culture which is deeply embedded in the organisation. At this juncture, it becomes difficult to introduce modifications in the set-up. On the other hand, it is easier for start-ups to embrace a disruptive change because they lack resources and processes. They are supported by research and analysis, which allows them to initiate a change.
Dealing With Change By Building Capabilities
Although businesses are supposed to keep innovating to stay in the competitive game, adapting to disruptive innovation is not easy. While the resources can be replaced, altering the not-so-flexible processes and values is complicated. To introduce the new processes and values, you need to create a new organisational structure that allows the development of new capabilities required to implement the change. This new structure can be created in the following three ways:
1. Developing Capabilities Within The Organisation
The moment a company decides to introduce new processes, they need their people to work differently from what they have been doing. They have to bring them out of the established structure and create a new space for them to operate. So they create new teams which work together on the new processes.
Although the existing teams and new teams are positioned in the same organisation, they are working on different processes. These teams help in implementing new processes quickly and launch new products in a swift manner. Many big companies utilise separate units for new processes, such as IBM has a separate unit for disk drives.
2. Building A New Organisation From The Existing Company
If the corporate values of the organisation do not allow the creation of a new unit, then the business can put its resources into a new venture. It is beneficial when the new market requires a new cost structure and a smaller unit to capture the target audience. Otherwise, it is not cost-effective for a large organisation to allocate vital resources to a new entity.
So new processes are created in a separate unit, which has its own values and decision-making processes. It is not affected by the traditional systems of the original business. The new products developed can even compete with the existing products to become popular in the market.
The entrepreneur plays a key role by making sure that the new unit gets all the required resources. A few examples are Zoetis which was spun out of Pfizer and Mead Johnson Nutrition which was created out of Bristol Myers Squibb.
3. Acquiring A Company With Capabilities
Another way of building capability for a disruptive change is to acquire a company with the required competence. However, the entrepreneur must be clear about the requirement, whether it is meant for resources, processes or values. If you are acquiring a company for its resources, then you must integrate it into your existing system and do away with any values and processes it possesses.
On the other hand, if you are acquiring a company for its processes, then you must not ask them to adopt your methods. You will have to let them use their own values and processes while using your resources to grow.
For example, when Cisco Systems acquired small companies for resources, it utilised the engineers and products to develop its processes. A few years down the line, when it acquired StrataCom for its processes, Cisco allowed them to stand alone and utilise their resources for growth.
The success of disruptive innovation depends on the capabilities of the company. If the entrepreneur is not able to look beyond the established processes, it can become difficult to implement the changes. Thus if you are looking for business opportunities in the United States, you must be aware of the ways of building your business capabilities.