Retraining “Goliath” to Face Digital David

The well-worn Biblical allegory praises the triumph of the underdog, but what if you’re Goliath? Here’s how the “big boys” can level the playing field.

Every time a technology is introduced, a new crop of innovators step forth from the crowd—agile, ambitious, armed with new technologies and business models and eager to challenge the Goliaths of their industry, who have largely grown the traditional way. The problem is that today’s Goliaths can find themselves caught between two different modes of operation: the methodical, conservative approach that built their enterprises and the disruptive, fast-paced, innovate-on-the fly approach that defines today’s digital startups. So, what course should these enterprises

Many enterprises attempt to meet the disrupters on the wrong terms. The stories are all-too familiar: established players refuse to adapt, innovate too slowly or abandon the business models behind their successes. Any of these approaches can lead to defeat at the hands of a disruptive upstart.

“Rather than trying to evolve into something they aren’t, market leaders should fend off the disruptive threats by capitalizing on their innate strengths, such as financial power, brands and  customer information.”

Rather than trying to evolve into something they aren’t, market leaders should fend off the disruptive threats by capitalizing on their innate strengths, such as their financial power, their brands and their customer information. Industry heavyweights can apply the following strategies to counter the threat from the digital innovators:

In 2011, Allstate took advantage of its financial resources to acquire Esurance, a strategic play that gave the company a foothold in the online insurance market. Thus, they were able to quickly market their products in a fast-growing digital marketplace by capitalizing on financial strength that startups simply don’t have at their disposal.

Sometimes, the smartest play can be not to compete at all, but to collaborate. Large enterprises are surrounded by an ecosystem of customers, vendors and competitors with collective
knowledge and experience that can be leveraged to bring new products and services to market.

A good example is ApplePay, which brought Chase, Citi, Capital One, Bank of America and others together with Amex, Visa and Mastercard. They were able to collaborate to launch a mutually beneficial new service—even though it competes with their own digital-payment initiatives.

Digital channels enable companies to reach new markets and launch new products in a cost-effective manner, and an established brand can be a big success factor. American Express and Walmart worked together to launch Bluebird, a digital alternative to checking accounts. Using a prepaid card model and digital tools like electronic bill payment, mobile deposit and personal finance tools, Amex leveraged its trusted brand to reach a market segment that historically was not served by their products.

Customer information and insight is the most precious commodity in the digital era. The ability to analyze data to derive actionable perceptiveness is perhaps the most powerful, yet least understood, asset for established companies. Nissan was able to leverage data captured on millions of forms submitted through their website to associate customer preferences about car models and features with a geographic region. They are now able to market their products more effectively through customized advertising campaigns and regional websites, and they can intelligently adapt their vehicle manufacturing and distribution based on regional preferences.

Business is more often likened to war than to any other human pursuit. While the strongest most often prevail, disruptive innovation can turn the tide in favor of non-traditional players. This new reality will define winners and losers for years to come; for large enterprises, those that develop a strategy and adapt fastest will come out on top.


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