It’s no secret that the business world can – and does – change rapidly. With each successive wave of changes it seems that new challenges approach us at a quicker pace.
This acceleration of change has been under way for many years. One way of looking at this is by comparing the increasingly rapid rate of adoption of new technologies as far back as the introduction of the television in the 1930’s, as shown in this chart.
The big questions for the owners of small and medium sized businesses are:
- How do I know what will happen?
- What can I do to protect my business from change?
Let’s address the first question first…
How to predict change and threats to your business
In a recently published book called No Ordinary Disruption, the authors (three directors at the McKinsey Global institute) have presented the 4 major forces behind the next waves of change as being:
1) The shift of economic activity and dynamism to emerging markets like China, combined with increasing urbanisation.
2) The acceleration in the scope, scale and economic impact of technology.
3) The aging population, a worldwide trend. The planet’s population will plateau in most countries for the first time in history.
4) The changing concept of economic “flows” (in trade and capital). The lines of trade that used to connect the major trading hubs in Europe and US have morphed into a sprawling web with Asia becoming the epicentre.
These large-scale trends will continue to shape global forces, which will in turn affect national markets and local businesses.
Forecasting the future is always fraught with difficulty. However all businesses need to look ahead into the foreseeable future and determine which factors are likely to affect their business.
Rather than just look at what’s happening right now, and who the industry disruptors are, it’s important to have a broader perspective and look at the underlying factors that might influence where the next series of changes could come from.
- Is there information that could be available to customers that they didn’t have before? (like TripAdvisor.com for travel reviews)
- Is it possible to remove steps from a process to provide quicker response or faster provision of a service? (like Netflix.com for immediate access to movies)
- Is there an opportunity to give customers more direct access to how your service or product is delivered, making it more customised for the buyer? (like Institchu.com for custom made suits online)
- Are there regulations currently protecting the provision of products or services that could be bypassed by new companies taking a different approach? (like Uber.com for on-demand transport)
- Are there assets sitting unused that people could use if they knew how to find them? (like Airbnb.com for accommodation)
And yes, technology is often an integral component of change, because it enables people to do things they couldn’t do before.
If you’re not up-to-date with technological changes in your industry, and for technology used by the population in general, then you need to make an effort to learn about it. Alternately, allocate this responsibility to someone on your team.
Looking into the future can be scary and confusing. But what is even scarier is having someone else – such as your competitors or new start ups – create your future for you. The best approach is to be proactive and assess sources of possible change before they become reality.
Now for the second question…
How to protect your business from disruption
In a recent article on the Evolution of Luxury four global prestige brands explained how they have taken steps to remain relevant for their customers, while their customer base has continued to evolve.
One of the first points to note is that each of these businesses actually made changes in advance of being hit by major disruptive forces. They took action while they still had choices.
Here is a summary of what each of these companies did:
1. Rolls Royce (automobiles)
Has found their average customer age is dropping quite quickly – down from 53 to 45 years old in just 5 years, with increasing numbers of women customers.
- Starting in 2009 they introduced less formal models of cars, such as the Ghost, and more recently the 4-seat convertible Dawn.
- Younger owners want to actually drive the cars, so Rolls Royce has focused design to ensure the cars are as good to drive, as they are to be driven in.
- Utilising social media has become the norm, quadrupling their Instagram followers to more than 700,000 in 2015.
2. Insight Vacations (tourism)
Their group travel customers have much higher expectations now than they did 20 years ago.
- Changed the focus of tours from regimented excursions to a choice of engaging and educational experiences, including meeting local people and celebrities you wouldn’t usually meet such as chefs.
- Started to add travel events suited to the Gen X and Millennial age groups such as Oktoberfest or the Venice Carnival.
3. Grenson (footwear)
Having manufactured footwear for 150 years, this UK-based business was still making shoes only for men into the 1980’s.
- From 2005 they made a decision to re-brand, keeping (things that were good) quality heritage, specialisation, English humour, while eliminating other (not so good) things such as being stuck in the past and being afraid of change.
- They expanded overseas to previously small markets such as Australia and South Korea.
- Started making shoes for women and grew that to 25% of all sales within 4 years.
- Has a goal for the next 10 years: to have 70% of customers outside the UK and 50% of those being women.
4. Christie’s Luxury Division (auctions)
- Has found they have many more private buyers (not institutional buyers) than previously, with the proportion of sales to private buyers growing by 35% over the 20 years to 2015. And more buyers are coming from China, the Middle East and Russia.
- Recognising that some of these ‘newer’ nationalities have much stronger demand for particular items, such as the Asian preference for vintage watches.
- The introduction of online auctions – with all live auctions also being broadcast online – enables them to have auctions throughout the year.
- Introduced fixed-price shops on their website to offer handbags and watches, as handbags have become collectible items.
The common thread throughout these companies is they understood their customers and planned for the change.
They didn’t expect overnight success – they undertook a process of strategic change
Another example is the introduction of the Kindle (ebook reader) by Amazon in 2007. Selling books has always been a core part of Amazon’s business. They wanted to encourage people to read and buy books, yet the sales of paper books were declining for many years. So they designed, launched and continue to upgrade the Kindle reader that makes it easier for customers to consume Amazon’s huge list of publications available in a digital format.
While it is important to understand your customers, the twist is that customers often don’t know what they want themselves. But you can be sure they will take it when it is offered.
It’s famously reported that if Henry Ford had asked his potential customers what they really wanted they would have replied “faster horses“.
However once he launched his Model T automobile in 1908 it was an instant success, just like many of the latest technology-based innovations that no-one knew they wanted until it was available (like the iPhone with touch screen, released in 2007).
Protecting your business comes down to:
- Understanding the underlying factors that affect change in your industry.
- Gaining insights into what the new options might look like for customers.
- Making decisions about how you can modify your business operations and business thinking to adapt to those change factors.
Managing change isn’t easy
Often it’s the human factors that create the biggest obstacles. And that includes the fact that most people don’t like change, unless it is their own decision to make the change.
Implementing change can be a difficult balancing act. Business owners must carefully consider the impact of changes and make plans to implement suitable strategies without upsetting staff or customers.
If you need help to understand and plan for the future growth and development of your business contact us.