Dear Fearless Entrepreneurs, Brave Rebels and Curious Innovators,
You may be familiar with the term “disruption” but it’s possible it has also completely lost meaning (as words often do) from being so overused.
The Engineered Disruption – Vitals Manifesto is designed to serve as a letter to C-Suites and entrepreneurs in an effort to education and inform you on the scary but real truth that companies face now and even more into the future.
This manifesto is divided into three main parts; first, our beliefs on disruption and how to engineer it. Second, our goals for making this innovative transformation for fearless companies and individuals who know their very existence is in jeopardy. And last but not least share some wisdom so you too can see the massive opportunity for those brave enough to engineer disruption.
So what do we mean by engineered disruption?
Engineered Disruption refers to disrupting one’s self in a controlled environment so not to be disrupted by other external sources. So why is this concept important.
Beliefs
We at Vitals Agency believe that as a company you have ultimately two choices, “Disrupt or be Disrupted”… By “disrupt or be disrupted”, We mean that if you aren’t innovating yourself, for your company, then someone else is and will potentially put you out of business right under your nose–with either a lower price point, enhanced technology, innovative thinking, culture, positioning, or their understanding of the way consumers are behaving at this very moment. This is true for every company, in every industry. Right now, at this moment, your company is either disrupting the marketplace, or is in jeopardy of being disrupted. Large companies are literally at war against a force a fraction of their size and with much less resources.
This is the reality of the situation so we might as well come out with it.
Between the pace at which technology advances and the rate at which ideas are generated, disruption is truly a natural cause of the times. There is a constant ebb and flow of disruption and being disrupted.
This philosophy has become an integral part of Vitals Agency and how we work with our clients. Keeping this in mind when we facilitate workshops around the world, we are able to think ahead and keep the scope wide.
We at Vitals Agency also believe that we can engineer disruption in a controlled environment. This is done by facilitating a series of highly coordinated and focused strategic workshops with our clients. We believe if we are able to reveal new truths centered around current consumer behavior we can find areas for growth through engineered disruption. This is a scientific process that requires a tremendous amount of friction within an organization. This is the type of friction that kills old conventions and births true innovation and transformation for companies.
We at Vitals Agency believe that comfort is the enemy. If you’re comfortable in your business, you aren’t thinking of ways to innovate and disrupt your vertical. Engineered Disruption doesn’t happen from a place of comfort but rather from a heroic action and bold execution.
We believe that many companies are missing the big picture on this idea and are getting disrupted for a few major reasons. The short answer is that they are too comfortable. Like the pre-Uber taxi operators, they simply didn’t see it coming. They didn’t think to look around the corner or adopt the advancing technology, and they got bombed by innovation. The long answer is the following:
- Intimidation of new technology
Companies that are intimidated by new technology, or simply ignorant on how to use it, get easily disrupted. If you’re the CEO and you don’t have time to explore something new, ensure that someone in your company is at least looking into it. It’s better to know a little bit about a new technology than nothing and get blind-sided. - Shift in consumer behavior
Consumer behavior is constantly evolving; like technology. People are consuming more content on their mobile device than they are on their TV, computers, and radio combined. The activities you’re doing now in your business should be different than they were last year because things change that fast. What worked a year ago isn’t going to work the same today, tomorrow or next year. Evolve or die. - The inability to be agile
A big problem with larger companies is that it takes way too long to make decisions and implement them. You have to be able to move quickly in order to remain relevant. Become an early adopter of new technology/processes/etc so that you are always ahead of the curve and looking towards the horizon of innovation. - Lack of talent
Hiring or working with people because of cost is absolutely the wrong thing to do. Don’t hire a slew of free or cheap interns that are just getting their feet wet because it’s cheaper. Invest in your company through talent and go for quality. Hire people who are better than you at their trade. Think creatively and strategically. - Lack of alignment between leadership
There are many ways to get to one common goal. Getting all the decision makers in alignment with the goal and the process is incredibly important. Whether it’s a board of directors, high-level executives or just your business partners, everyone needs to be thinking in the same direction, in the same timeframe, towards the same goal. Being disjointed here is the kiss of death.
We at Vitals Agency believe that disruption typically happens from the fringe and not from within the center of a large company. We are the fringe. This is why it’s so critical that if you are a larger company you adopt the is new mindset very quickly. If you’re a smaller company you’re in a better position to disrupt your market even faster.
We at Vitals Agency believe that if you fully understand these idea’s and are open to looking at your business model through a new lense then you have a tremendous opportunity ahead of you. There are many industries that have yet to be disrupted
Goals
Because it is our goal to help companies engineer disruption within their vertical we get asked frequently “How can our company disrupt itself?” As it goes, you’re either disrupting or being disrupted so knowing what it takes to disrupt internally can help put you on a trajectory to innovate from within.
- Be user centric/customer centric
“As the business owner you’re the judge of your business. But at the end of they day the consumer is your jury and executioner. The consumer holds your fate.” If the decisions you’re making aren’t inline with your customer’s needs then they don’t matter. Understanding what they need, what makes them buy, what makes them return, and what keeps them coming back is being customer or user centric. It’s all about the customer. - Go big or go home mindset
You can’t operate in a mindset of scarcity. This inhibits the creative process and handicaps your entire flow. You need to dive all the way in to measure the results. Take calculated risks and invest in them fully. Baby steps are for babies not for brands. - Stay agile and lean
Keeping things in-house and ensuring that you’ve hired experts assures that you’ve got the tools and people you need right under your roof. Just as I mentioned above, if you’re too big you can’t move quickly or change direction on a dime. You’ve got to give your company the space to move how it needs to move when it needs to move. - Experiment, and experiment again
Experimentation is something you can do that doesn’t actually get implemented. Pricing models, headlines, marketing tactics. Think outside the box and do something that other people in the industry aren’t already doing. Typically a creative and innovative pricing model is one of the fastest ways to disrupt. - Find creative thinkers, give them authority, find the right talent
Encourage innovation and transformative thinking from your employees. Ask them what they need to be able to work better and what would make their job easier. Change starts from within and these people know more than you do about the specific vertical (and that’s the point). Empower them and see what they can create. - Encourage continual education
Go out and learn something new. Give your employees access to webinars, conferences, courses and resources that will fuel advancement. As quickly as things change, it is absolutely vital to be continuously learning. Find out what’s hot and get educated on what people are doing right now. You won’t get the same results from doing the same thing.
Invest in yourself, invest in your team and you’ll be able to come up with innovative ways to disrupt your current business model. Bring more value to the marketplace and ask yourself “how can this be done better?”. If you focus on disrupting from within, chances are you’ll prevent disruption from the outside.
Wisdom
So we’ve just taken you through true reality and hopefully given you something to think about. We would like to leave you with some wisdom in the form of stories.
The Story of Blockbuster
Blockbuster Video was the number one video rental service in the world and was sitting on top of the best well oiled machines by early 2000. With a total 8.3 billion dollars worth of assets, 1.1 billion in revenue and a staggering 60% of gross profits. With thousands of stores worldwide and a business model that had made the company billions. At the peak of its success, Blockbuster was disrupted by small company called Netflix. Blockbuster’s failure to recognize its new competitor and its effect on the market caused its imminent implosion just 10 years later.
The biggest tragedy is that Blockbuster could have avoided all this had it been open to new alternatives and had it understood the power of networks of unseen connections. This refers to how how ideas spread and are adopted by networks of people worldwide.
In early 2000, Reed Hastings, founder of Netflix met up with Blockbuster’s CEO John Antioco and proposed a partnership where Netflix would run Blockbuster’s online business. Hastings’ proposal was met with laughter and an adamant refusal by Antioco and his team. This marked the beginning of Netflix’s rise and the fall of Blockbuster. Netflix became a 59 billion dollar company by 2017 about 7 times the size of Blockbuster at its prime.
John Antioco a prominent business man with a great deal of experience in retail, who had managed to double the company’s net-worth during his time as CEO. He had implemented a business model based on late fees for movie returns and unlimited memberships to avoid them. Blockbuster’s leadership could not see how an online video streaming service would compete with them. Blockbuster had the advantage and convenience of the retail stores and fast distribution of its videos. It also believed that the in-store experience was something people would not get when using online services. Blockbuster’s board swore by this business model and eventually fired Antioco when he started making changes to adapt to the competition. He removed the late fees and implemented Total Access which was its response to Netflix. Once Antioco was out, the board went back to the original business model which ended up sending the company into bankruptcy by 2010.
Many articles have been written about Antioco and his team for making what appears to be such a foolish decision. It is absolutely unimaginable that such a big company could be disrupted in such a way and sent into bankruptcy almost overnight.
The truth is that this is not such a rare case and just like Antioco most businesses meet similar fate when they fail to recognize the power of networks and disruptive ideas. Netflix’s business model may have seem insignificant at first, but it proved to be disastrous to the video giant. It was in the way Netflix disrupted the market and how networks of people came together that built the momentum where the company not only disrupted an entire industry but became the dominant player in just 10 years.
The Story of AirBnB
This is the story of a 24 billion dollar startup that went on to disrupt the entire hospitality industry worldwide, becoming the biggest hotel service company in the world and surpassing household names such as Hilton Hotels on nights booked. It has a staggering record of 10 million guests and 550,000 properties worldwide. The name of this startup is called AirBnB and it has achieved all this without owning one square foot of real estate. This was all made possible by the adoption of a new business model that democratized the entire hospitality industry allowing regular people from around the world to turn their properties into small hotels. Although this story may sound like a once in a lifetime lucky hit, it is not. It is simply a cautionary tale of the power of engineered disruption.
One of the most amazing things about AirBnB is not just how it disrupted the industry but how easily it happened. In 2007, Brian Chesky and Joe Gebbia couldn’t afford rent on their San Francisco apartment. To make ends meet, they came up with a creative idea to turn their apartment into an airbed and breakfast that would cater to out-of-town visitors attending local events.
Brian and Joe realized there was a big opportunity as there was a part of the market being left out as hotels were quickly losing vacancy leaving many attendees without viable options to stay nearby.
The evident need in the market combined with their need to make rent was what gave Brian and Joe the idea to pursue Airbed and Breakfast. They decided to scratch their own itch and ended up creating their own website to advertise their services.
It was soon after their first visitors started staying at their place that people from around the world began visiting the site, asking about when the website would be available in other parts of the world.
Brian and Joe quickly realized the viability of this business and decided to form a company and thus creating the biggest peer-to-peer nightly room rental network in the world.
It is easy to mistake AirBnB’s success for luck but upon closer inspection, it follows some of the principles of success experienced by other companies in similar cases.
AirBnB’s success came as a result of being a technology based business leveraging the power of the Internet as its main distribution channel. And by the 4th degree of separation formula it created the perfect conditions for the company to be adopted quite rapidly.
Property hosts suddenly could monetize on their available space and property guests found themselves enjoying unique experiences that allowed them to rent anything from rooms, apartments, tree houses, light houses to medieval castles. AirBnB’s peer-to-peer room rental network and its untapped benefit into a growing share economy put the company into a fast train on the technology adoption lifecycle highway attracting innovators and early adopters that helped the business spread like wildfire throughout the rest of the population.
AirBnB filled a need in a niched market that was currently underserved and neglected by the industry leaders. Its unconventional business model tapped into the share economy allowing its users to benefit in ways they had not benefit before. It made it one of a kind and therefore by law of the category becoming the first one to offer such services.
AirBnB not only disrupted the hospitality industry worldwide but put a lot of hotels out of business. The success of this newly formed company serves as another great example of the power of engineered disruption to bring about massive gain when adopted or striking failure when ignored.
The Story of Hotels.com
Hotels.com is a company owned by Expedia, Inc. and it is one of the largest lodging booking websites currently serving over 60 countries. Although, Hotels.com does not follow the zerto to one innovation principal by creating something that had never been done before; Its diruptive business model has allowed it to become one of the industry leaders. The inception of its business model has helped increase Expedia’s bottom line by 14% which represents a staggering one billion dollars in annual revenue to the conglomerate.
THE CHALLENGE
Hotels.com was faced with a tough challenge trying to stand out in an industry that is considered one of the most competitive markets on the web. Consumers are price conscious and often bombarded with too many options and choices from competitor websites.
ENGINEERED DISRUPTION
One great strategy that Hotels.com used to stand out was to leverage the power of social proof by enabling hotel guests to upload their own pictures and reviews of their experiences. This innovative platform helped the company reinforce the sense of trust among consumers making it the default buying platform for most. Today, Hotels.com has over 19 million verified customer reviews and photographs of people who have used their services.
The second powerful strategy came from formulating a user centric formula where they paid close attention to the pains of their target audience and were very agile in implementing products that solved those problems. With the help of outside strategy and consulting firms, They implemented a customer experience management system (CEMS) that monitored user behavior in real-time. A special system that would monitor their users navigating through the site, going through the registration and buying experience process. This approach helped them quickly resolve issues further refining the user experience on their website resulting in an increase in customer conversion and retention that translated into a multi-million dollar gains.
Hotels.com did not need to be the Uber to the hospitality industry to make an impact. All they had to do was to engineer a disruptive strategy that paid close attention to the consumer market meeting its needs in innovative ways. By enlisting the help of key strategists that helped them implement the right technology. They managed to turn their website into the most trusted platform by creating a singular customer review experience. This simple but well executed approach was what turned the company into a 1 billion dollar per year powerhouse.
Summary
Invest in yourself, invest in your team and you’ll be able to come up with innovative ways to disrupt your current business model. Bring more value to the marketplace and ask yourself “how can this be done better?”. If you focus on disrupting from within, chances are you’ll prevent disruption from the outside.
