Quotes like these from a company chairman are always somewhat worrying. I see a lot of annual reports where CEOs or chairmen make statements along the lines of “we’ll continue doing what we’ve done in the past since it seems to still be working just fine”.
One that caught my eye recently (and this is not to target any company in particular but just happened to be in a category that I think is in the throes of being disrupted in a big way) was from a global furniture company called JYSK.
Now, while I’m glad the original founder of the company is still happy with the way things are going, I think there are a couple of key trends in this category that all the established players should be worrying about:
- Online retail
- Rental rather than outright purchase of furniture
While the online furniture is still only 5% of the total, that 5% is dominated by ecommerce specialists rather than furniture companies. I’m sure people working in the industry will argue that you have to go to a store and see the stuff before you buy it – today’s online marketplaces don’t necessarily replicate that experience, but the technology to do so clearly exists.
Between the startups experimenting with different retail models and rental rather than outright sales, there’ll be some that focus on delivering a consumer experience comparable to or even better than going to the store.
Once that happens, the online share of total furniture sales / revenue will start changing quite rapidly.
Will one of the existing players get in front of this fast enough to harness the disruption? Or will it be someone new? That depends on how seriously the big players of today consider the impact of technology, consumer trends and the start-up economy on their business.
A lot of people seem to think that disruption is a concept invented just a few years ago, after the internet and mobile phones changed how we live our daily lives.
Companies and industries were getting disrupted a long time ago.
Throw your mind back a couple of centuries – there was a thriving industry
around horse powered transport.
The invention of the internal combustion engine and the automobile disrupted all these industries. The internal combustion engine was, a discontinuous development However, once the engine was invented, it’s remarkable that carriage makers didn’t think of cars – Opel did initially partner with a French company called Darracq that was a carriage maker, there were some other exceptions but by and large today’s car companies did not evolve from carriage makers.
Let’s jump to our beloved 21st century and the example of Uber which also disrupted an aspect of transportation. Again, there were enough existing players – taxi companies, car manufacturers and car rental companies – who could either have done this first or seen Uber, Lyft and the other startups as an opportunity and invested in them or worked with them in some way. (Having said that I have some doubt whether Uber and it’s ilk have really changed the fundamental economics of the transport business – which means they’ll never manage to make a profit, eventually will all disappear and leave the field to the old players who can then pick and choose aspects of the model to apply).
Obviously, there’s a balance – if management spends all its time trying to think about ways to disrupt its business then there won’t be a business to disrupt – but the point is that companies need to find sensible ways of testing out every possible disruptive idea and when they find one that works, make sure they do something with it. Don’t assume that new ideas and startups are inimical to your business – if you think about your core business differently, they become opportunities to leverage change and lead the industry.