Last night I was lucky to be invited to speak to the 360° Club at a hotel overlooking St Paul’s Cathedral. here’s roughly what I said…
So here is my starting proposition:
“You’re less likely to be disrupted if you are in sync with your customers’ view of your value proposition.”
I think that most of the classic cases of organisational extinction through disruption can be framed in this way: Kodak thought their value was in film and cameras. Their customers wanted to capture memories. Kodak missed digital (even though they kind of invented it).
3 Case studies
I’ve done quite a bit of work with legal services firms this year. I think it’s a sector ripe for disruption because it’s not generally aligned to the client’s value need.
Most law firms think of themselves as delivering legal services. Usually legal services delivered by the hour (or minute…) but what clients are looking for is a broader service- a merger or acquisition, protection in the case of litigation. They also want to have those services with manageable costs.
In fact, as in domestic law, fixed cost models are increasingly common in corporate law. Unfortunately it seems most law firms have their staff reward mechanisms geared still based on chargeable hours. Incentivising your people book chargeable hours when they are working fixed cost jobs is the road to margin hell…
Meanwhile law firms are making a lot of noise about introducing disruptive technologies (in particular natural language processing and machine learning) but it seems exclusively as sustaining innovations to streamline their backend cost model. Ultimately clients will expect to see those savings, so this risks being a fast and expensive race to the bottom.
So what might be a disruptive business model in law?
What might realignment to the client’s value need look like?
How about “We help organisations collaborate with one another.” which in essence is surely what having contracts is all about? Framed in that way, there is all sorts of ways in which a law firm could diversify its services.
(It’s worth noting that this sort of diversification is exactly what had been done by the big accounting firms. Big law firms, however, are still merely big law firms).
Or alternatively “We help you to effectively manage your legal costs.”
I’m not aware of any legal firm that years treats its billing as a core business service…
What could they learn from the emerging domestic power companies – companies like Ovo & First Utility who it appears have picked up on making billing core business…
What these companies have realised it’s that we aren’t actually buying gas or electricity from a domestic provider. We are buying a hassle-free billing experience. So Ovo and others have built their own billing platforms, whilst the likes of British Gas moved theirs to SAP, (with much pain & gnashing of teeth).
Ovo is the only utility company I’ve ever eulogised about. I get efficient billing, data to understand my consumption patterns and be able to budget ahead. If I’m in credit on my account they even pay me interest on any balance held…
The thing is, though, no business model is impervious to time… Smart metering & IoT will no doubt change the game again (and with IoT devices like those from Nest, domestic power companies are now competing with Google…)
So let’s look at one last case -Healthcare. It’s an industry that is mired in regulation to keep us safe (or maybe to keep medical practitioners safe from lawyers). To get a new product to market commonly can take a decade. That’s not much comfort to patients with chronic diseases.
But with the means of production in everyone’s hands, maker communities are starting to disrupt healthcare. OpenAPS.org – whose hashtag is #wearenotwaiting – is an amazing case in point. A group of hackers, geeks and type one diabetes sufferers have banded together to create a closed loop Artificial Pancreas. This is the power of the makers.
I was doing some work with an NHS clinical commissioning group, and introduced them to OpenAPS.They initially thought “that’s not proper medicine”. The stock response of the disrupted.
But now we’ve shifted the conversation to how can fostering maker communities become part of community healthcare? How could maker communities be created to help support things like mental healthcare in the community. Still early days, but that’s massive business model transformation…
So what do we learn from all this?
- You need to be horizon scanning to what your value proposition is with your customers. Things like NPS (net promotor score) are not enough. Likelihood to recommend will be fine up until you’ve been disrupted.
- You also need to be horizon scanning for how technology can help create new value for your customers, not just how it might streamline your cost profile (that’s of course important, but long term not sustainable). You need to learn to play in new ways.
- Forget the idea of the endstate, and work out how you can help your people deal with that ambiguity. The next change won’t be the last change. Help your people to shape the future, don’t spend your time trying to predict it (believe me, you can’t).
Big thanks to James and Matt at 360° Club for allowing me to prattle on, Chris W for introducing me, and all the people at Netsuite who paid for the wine and beer.