Innovative Defense: How Incumbents Can Co-opt Disruption

The story is all too familiar. One day, they’re poster children for business excellence. Markets love them, their CEOs grace the covers of Fortune and Forbes, in pin stripes against regal blue backdrops. Flash forward, and these Adonises are filing for bankruptcy and making walk of shame headlines, blamed for ego, poor leadership, institutional failure – too little, too late. They’re memorialized in Harvard Business School cases and used in turnaround strategy pitch decks by McKinsey and Bain. You know their names: Blackberry. Blockbuster. Kodak. Sears. MySpace. etc. etc. etc.

The Internet is causing incumbents to be chewed up and spat out at an even faster rate. It reduces the barriers to entry, so once a good idea is spotted, competitors can enter the market with speedfire aggression, innovating in the wake of the early leader’s follies.

How can businesses survive amidst the competition? Know thyself, and welcome change.

Take ConEdison and the other heat and gas utilities. Perhaps some of the most difficult markets to penetrate, even these utilities will have to start questioning business as usual once smart home technology starts to take off. Some already have.

Nest, the device maker behind smart thermostats and smoke detectors recently acquired by Google, has partnered with “progressive energy providers” to incent adoption. It’s smart for Nest, as it can target potential customers at the peak of their interest  — when looking at high heating bills. And it’s smart for the upstart energy companies, differentiating from the established players and reinforcing their positioning as a partner versus wallet stealer.

Why doesn’t a ConEd partner? Because it will make them lose money in the short run. But it will give them gains in the long run, and perhaps circumvent their demise when adoption of smarter home tech peaks.

Clay Christensen wrote in the Innovator’s Dilemma that in order to survive, companies must cannibalize themselves. Despite his well-known warnings and prescriptive advice, most big players remain fat and happy. For now.


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