Ways to Respond to Disruption 

Ways to Respond to Disruption 
As disruption becomes the norm, businesses are grappling with the crucial decision of how to respond effectively. While some possess the foresight to embrace their leadership potential in the Fourth Industrial Revolution, others find themselves compelled to take action due to declining profits or threats on the horizon. 

The best course of action is to view disruption as an opportunity to seize the many new areas of strength and competitive advantage that will arise due to the inevitable status quo changes. Here we provide tips to help you respond to disruption and regain a leading position. We also provide you with the strategies you need to become a disruptor. 

How to Respond When New Trends Disrupt Your Business  

The transformative impact of disruption is evident in the rise of ride-sharing, e-commerce, and social media, which were primarily fuelled by evolving customer preferences rather than technological advancements. Below we provide five strategies for effectively leveraging emerging customer demands and capitalising on future opportunities. 

1. Win with current customers before chasing new ones 

In the face of declining revenues, many companies often overlook the potential of their existing customer base and instead focus on acquiring new customers. However, new customers can be more expensive and generate less revenue than satisfied existing customers. A more effective approach is creating new services and products tailored to your current customers. 

Amazon provides a great example of this strategy. When the company wanted to boost its revenue, it recognised the value of its existing best customers and devised a new membership service called Prime, offering "free" shipping. While this initiative increased shipping costs, the revenue generated from the membership fees of over 100 million new Prime members more than compensated for it. By leveraging the loyalty and trust of its existing customers, Amazon increased its revenue and strengthened its customer base. 

2. Offer affordable personalisation without a premium  

In the current market landscape, customers no longer desire mass-produced products; instead, they seek personalised offerings at affordable prices. To meet this demand, leaders must leverage available technologies without overcharging customers, establish flexible operations, and minimise waste. 

Affordable personalisation doesn't always require expensive technology or substantial investments. Often, small gestures can leave a lasting impression. Chanel, as an example, goes the extra mile by sending handwritten notes from associates after making a sale. By utilising customer data and preferences, businesses can provide tailored experiences and demonstrate that they value their customers' unique needs.  

3. Speed up the innovative design 

Many companies struggle to meet evolving customer needs and are outpaced by more agile competitors. That's why it is crucial to accelerate both the design process and the supply chain. One effective strategy is exploring new channels and optimising the supply chain for speed and efficiency.  

Zara, a prominent fast fashion company, exemplifies this approach. Zara understands the importance of delivering new catwalk trends to their stores quickly. They have implemented a faster and more responsive supply chain model to achieve this. Unlike traditional practices of locating manufacturing facilities in distant Asian countries, Zara keeps their production facilities closer to the market. 

This proximity enables them to respond swiftly to new design concepts, with new products reaching their stores within a week. By reducing lead times and streamlining its supply chain, Zara can rapidly adapt to changing trends and provide customers with the latest fashionable offerings. 

4. Develop higher quality than simply good enough.  

As consumers increasingly rely on reviews and peer recommendations, the importance of product quality cannot be overstated. Businesses must go beyond delivering products that are just "good enough" and instead focus on developing quality and performance that customers cannot resist, surpassing what their competition offers. 

A compelling example of prioritising higher quality is seen in the automotive industry. Tesla, an electric vehicle manufacturer, has redefined the quality standards in the market. Through innovative design, cutting-edge technology, and meticulous attention to detail, Tesla has created electric vehicles that have captivated customers worldwide.  

By surpassing the traditional limitations of electric cars regarding range, performance, and luxury, Tesla has set a new benchmark for quality in the industry. Their commitment to excellence has brought them a dedicated customer base and forced traditional automakers to re-evaluate and improve their product offerings. 

5. Continuously revisit and evolve or re-invent yourself.  

Businesses must recognise that what works today may become outdated tomorrow. To thrive amidst this constant flux, innovative companies adopt a proactive approach by continuously revisiting, evolving, and even re-inventing themselves as part of their regular strategy process rather than waiting for a crisis to prompt change. 

One example of a company that embraces this mindset is Apple. Over the years, Apple has consistently re-invented itself and its products to stay ahead of evolving customer needs and preferences. From introducing revolutionary devices like the iPod, iPhone, and iPad to transitioning into services such as Apple Music and Apple TV+, Apple has shown a commitment to continuous innovation and adaptation. By regularly assessing market trends and customer feedback, Apple has been able to anticipate shifts in consumer demand and evolve its offerings accordingly. 

Strategies for Responding to Digital Disruption 

McKinsey found that very few companies are adequately addressing the challenges posed by digital disruption. Despite 90% of companies acknowledging their involvement in digitisation efforts, only 16% have implemented a bold and comprehensive strategy. Additionally, a mere 30% of companies are actively exploring innovative approaches to bundle demand or redefine their market segments. To effectively respond to digital disruption, consider the following strategies: 

Harvest strategy 

The harvest strategy is a defensive approach aimed at mitigating disruptive threats and optimising the performance of vulnerable business segments. It involves making the best of a challenging situation by extracting the maximum margin during a period of decline. For example, Netflix, often considered a digital disruptor, initially operated as a DVD rental service before transitioning to video streaming. Even today, Netflix's DVD-by-mail offering serves over 5 million members in the US, contributing to 23% of its US profits in the latest fiscal quarter. While the DVD segment may decline over time, Netflix can still optimise its revenue from this service, raising the question of how long it will be sustained. 

Retreat strategy 

The retreat is a defensive strategy that involves a strategic withdrawal from threatened business segments when the costs of maintaining those segments outweigh the benefits. Market exit is the primary aspect of this strategy, but it may also include targeting niche markets that cater to a small subset of existing customers with unique needs. An example of the retreat strategy can be observed in the retail industry. Consider a traditional department store facing intense competition from online retailers. With declining foot traffic and increasing operational costs, the department store may decide to retreat from certain segments of its business. This could involve closing down underperforming physical stores located in areas with low customer demand. 

Disrupt strategy 

Disrupt is an offensive strategy that aims to seize value vacancies by disrupting an incumbent's own core business or creating new markets. It involves leveraging digital technologies and business models to deliver value to customers. Unlike Netflix, most incumbents are hesitant to disrupt their own successful operations, presenting a significant hurdle for them to become disruptors. 

Occupy strategy 

The occupy strategy is an offensive approach that aims to maintain and extend competitive gains resulting from disruption. Its focus lies in maximising market opportunities and prolonging a company's occupancy of the value vacancy created. Companies often differentiate their disruptive offerings to enhance cost value, experience value, and platform value for customers. However, this strategy brings complexities as incumbents must simultaneously manage declining and growing businesses operating outside their typical scope. Over time, many occupy plays eventually transition into harvest strategy as the market continues to evolve. 

Thrive in Disruption with gigCMO  

Disruptions such as technological advancements, shifts in customer behaviour, and new, non-traditional competitors can significantly impact revenue streams. With gigCMO's expertise, we can help start-ups, scale-ups, and SMEs to stay agile by developing customised marketing strategies that adapt to market changes, identify new revenue opportunities, and position the company for growth. 

gigCMO provides flexible support, aligning with your specific needs and budgets. This enables businesses to access top-tier marketing expertise without the burden of full-time commitments. By leveraging gigCMO's strategic guidance, you can optimise resources, overcome limitations, and maximise growth potential during disruptive times. Our insight will help your business to make informed decisions, refine the marketing approach, and capitalise on new growth opportunities.