The Holy Grail of Competing
By Mark Chussil
Disruption and blue ocean are the holy grails of competing. With them, you don’t even have to compete.
Blue ocean is pacific. It’s gentle, as grails go; it doesn’t bother anyone; it’s just wonderful and new. Disruption is the bad boy of holy grails. It sees the party going on at your house and lures everyone away to the party at its house.
Disruption is the ultimate buzzword for raising capital. Starting Walmart merely makes you rich. Starting Google makes you rich and cool.
But we strategists demand more than generalities and bad-boy metaphors. Is disruption really the holy grail of competing? I’ll conclude that it is, but of a different variety.
In a sense, all extant companies were disruptive at least once. We know that because they successfully lured customers to attend the party at their houses. But that’s about as useful as remarking that all extant humans breathe air. “Disruptive” must mean more than arriving and breathing.
In 2021 Walmart is number one (again) on the Fortune 500 list. (It won’t be in 2022.) Its revenues top the combined budgets of California, New York, and Texas, with enough left for Virginia. Its revenues top the annual budget of Spain and are approaching Canada.
Is Walmart disruptive?
They certainly disrupted the previously largest retailers in the USA. They have stuck to a highly focused low-cost business model since opening their first store in 1962. They’re so disruptive to incumbent retailers that some people have conducted protests to keep Walmart out of their communities.
Walmart didn’t set out with “Now Disrupting the Retail World.” They set out with “The Lowest Prices Anytime, Anywhere.” They certainly reshuffled retail with their low prices but it’s debatable whether they intended what we’d call “disruption” today. And that’s the point: it’s debatable. Is Walmart disruptive?
Apple is #3 on the 2021 Fortune 500. They’re surely as good an example of disruptiveness as any other company on the Fortune 500. Just ask BlackBerry, Motorola, and Nokia. Just ask anyone who makes laptops, or used to. Apple disrupted, but is it still disrupting? The first-generation iPhone in 2007: wow! The latest… well, here’s how Rene Ritchie began his review of the iPhone 5s and 5c way back in 2014:
“The iPhone 5s launched roughly 6 months ago. It was greeted with the usual ennui over its unchanged design.”
The latest iPhone of 2014 might have been innovative and competitive, but when the second sentence of a review yawns over “the usual ennui” you know you’re not disrupting any more.
FedEx was definitely disruptive when it took off in 1971 with express mail. They’ve added services, such as FedEx Ground (1985). But what disruption have they delivered lately? By the way, United Parcel Service, which initially seemed to have been threatened by FedEx, is bigger and more profitable than FedEx.
Many putatively disruptive companies have little revenue or profits, or none at all.[1] That’s somewhat to be expected: Startups begin at $0, and some web-based hopefuls pursue business models that they expect to monetize in, um, the future. Again, we face the question: Beyond the buzz, what, exactly, is disruptive?
By the way, when is Facebook’s disruption officially over? I’m not sure anything should still be called disruptive once 1.3 billion people use it. It should be called normal. Also, Facebook was not the first in its industry. Microsoft was not first with spreadsheets, word processing, or presentations. Apple was not first with cellphones. Kodak was first with digital photography, but it chose not to pursue that business because it would harm its profitable film-based products and services.
Okay, I’ve raised a bunch of judgment-call, shades-of-grey questions about disruption: what qualifies as disruption, how long does it last, does it make money, and so on. No matter what the answers, the usual rules of competitive strategy still apply. Disruptive or not, a company has to satisfy a genuine need, has to generate more revenue than costs (eventually), and so on.
However, I began this essay by saying that disruption is a holy grail, though of a different variety. So, of what variety is it?
In 1981 IBM introduced the personal computer. It was a remarkable event, but not just because of what the PC did.[2] It was remarkable because of what IBM did.
IBM introduced a product that would compete with its own products. IBM disrupted itself.
The word people use when they talk about competing with themselves is cannibalization. (That’s what had Kodak worried.) Why would we want to cannibalize ourselves? And that’s what separates managing from competing.
Someone skilled in competing recognizes that “why would we want to cannibalize ourselves?” is not the right question. The right question is, “are we better off cannibalizing ourselves or letting someone else cannibalize us?”
Every businessperson has the courage to disrupt someone else’s business. It takes clarity of thinking, commitment to vision, and courage in decision-making to disrupt your own. The willingness to disrupt yourself, as IBM did (and others have done), is the holy grail of competing.
[1] The presence of revenue does not mean a company was disruptive. It does not follow, though, that the absence of revenue means a company is disruptive. Instead, the persistent absence of revenue means a company is dissolving.
[2] Some might say that IBM’s PC wasn’t the first “personal” computer. Altair, Apple, Commodore, and Tandy preceded it. However, IBM announced its 5100 Portable Computer in 1975. That machine weighed about 50 pounds (“portable”?) and cost between $45-100,000 in 2021 dollars.