Want to be a digital success? Cannibalise your own business. Constantly.

Derek du Preez Profile picture for user ddpreez October 7, 2015
If you don't cannibalise your existing business, when your customer's expectations change, you risk dying out.

The key message coming out of the keynote session at NetSuite’s Cloud Tour stop in London this week is that cannibalisation is key.

NetSuite took to the road this week in Europe and invited customers, partners, journalists and analysts to its London event to discuss the latest developments in cloud, ERP, omni-channel, ‘servitization’ and retail. The keynote session, as we covered earlier this week, was full of customers taking to the stage to discuss their rolling out and scaling of the NetSuite platform.

The stories are interesting in their own right, so you should take a read of Stuart Lauchlan’s story. However, there was another theme that recurred throughout the event from a number of speakers. It’s a theme that I’ve heard discussed before, but one that I think is worth highlighting to those focused on ‘digital transformation’.

Essentially, a number of the speakers argued that in order to consistently have a successful digital business, you must constantly be cannibalising that business. If you’re not cannibalising, you’re just iterating on a product that will eventually not be relevant to your customer’s expectations.

The point was argued well by Brian Solis, Principal Analyst at Altimeter Group, who referred to the example of Blockbuster and Netflix. There is no reason that Blockbuster couldn’t have started a streaming service, but it failed to recognise that that’s what its customers wanted. In fact, when offered a deal with Netflix, Blockbuster turned it down. Serious levels of inertia.

He also looked at how Kodak ignored the trends towards digitisation. Solis said:

We look at technology. Or we look at people. But rarely do we look at bringing all these things together. In 1979 an engineer made a presentation to the executive board [of Kodak] and said that he had discovered that the future of photography that was digital. Basically the C-suite told him that was a cute idea and to never bring it up again. There was a fear that digital was going to cannibalise the film business. And they were absolutely right. It did.

So what used to be a beautiful moment, the Kodak moment, one that invokes emotion and nostalgia, now means something else in business school. The Kodak moment is that moment you fail to recognise how your customer is changing. And how they want to make decisions. The kind of experiences that they want. What we learned along the way is that if we keep making decisions about all of this new amazing technology, based on legacy perspectives and legacy systems and legacy rules and legacy boundaries...we are not actually innovating. We are iterating.

We are not just being disrupted by not just all of the technology that’s out there, but by the behaviours and the expectations that your customers have. I call this digital Darwinism.

The idea is that technology and society evolve. We have the choice about which side of it we want to be on. We either adapt or we don’t. The real struggle here is that every day you don’t compete for relevance, you are by default competing for irrelevance.

Throwing out the business model

Andy Chalkin, CIO at food chain Pret-a-Manger, took to the stage to explain how the company is rolling out NetSuite OneWorld to deal with mission-critical business processes across the UK, US, France, Hong Kong and China, including procure-to-pay, credit-to-cash, global financial consolidation, multicurrency management for five different currencies, including the Euro, US dollar, and British pound, and multi-language capabilities, including English, French and Cantonese.

Pret A Manger operates 390 shops in five markets, serving over 450,000 customers,and needed a financial management system that could support expansions into new markets.

However, Chalkin also explained that the founders of the chain grew to success because they decided to cannibalise. He said:

The founders were running what was a single deli down in Victoria. It was a traditional deli, where you walk along, you pick your bread, you pick salt beef, pickles, whatever. It was doing very well, but they were bound by that format. They couldn’t actually get more people through, there was a line out the door.

One of the things that the founder does is that he is very committed to change. One night he threw out all of the equipment and made his top 12 best selling sandwiches and put them customer side. It invented wrap and go food as you see it today. You have to be quite brave to throw away your whole business model and change it on the hoof. But he did it and it was the foundation of Pret today.

It will get you in the end

George Berkowski, Founder & CEO of IceCream, who was also one of the first employees to join and consequently grow Hailo, also agreed that if you don’t cannibalise, your customers will change and disruption will happen to you. If this doesn’t happen soon, it will happen eventually. Berkowski said:

Hailo has done incredibly well, but is experiencing some challenges now. It’s a five year old company, which in internet terms is relatively old. It has not innovated as fast as Uber has. Uber allows you to go from A to B. It doesn’t care how because that’s up to the customer. They understand that the user will tell them exactly what kind of service they want. Hailo on the other hand has stood hard and fast by taxis.

You really have to cannibalise your own business. Because someone else will anyway. If you’re not doing it, then someone else will. I think ignoring the customer and focusing too much on your suppliers or any other component, is ultimately going to ruin you. Either in the short term or the medium time. Constantly cannibalise. It needs to be adopted as part of the culture.

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