Let’s say you run a large and successful business. You provide something that lots of people want – it could be transport, entertainment or pretty much any kind of product or service. Even finance. You’ve seen other players come and go – but you welcome competition because you know it’s good to have one or two peers (not least as you could always move to one if things get sticky). The shareholders are happy and so are you. While perhaps not getting as visibly excited as Microsoft CEO Steve “I LOVE this company” Ballmer, you quietly feel the same.
Then along comes a new outfit doing roughly what you do. It’s got a tiny headcount, has a silly name with no vowels in it and is run by a person considerably younger than you who has never worked in your sector. It’s yet to make a profit, despite using some clever technology to do what you do without the need for the expensive infrastructure you’ve built so carefully. It’s bound to fail, despite being talked up by the press and raising a ludicrous amount of money through an IPO. You very publicly ignore the newcomer while tasking your staff to find out more, probe its weaknesses and (very discreetly) see if it’s for sale.
It isn’t for sale (not yet, anyway). Among the backers is the ex-CEO of one of your rivals and one of your key staff has announced they’re moving over as head of operations. You use the new competitor as an opportunity to cut some costs, get tougher on your suppliers, trim some dead wood and streamline your elaborate distribution network. You try and stop the growing stampede of leaving customers with discounts, loyalty schemes and long-term contracts. What you don’t do is change your business model.
Sound far-fetched? Then what about Woolworth’s? Kodak? Laura Ashley? Washington Mutual? Polaroid? Blockbuster? And so on. Big businesses can (and do) fail, by failing to respond to change. The reasons are usually a mix of ego, denial and inertia – the sense that change is simply too hard and it’s easier to carry on regardless. What you’ve spent perhaps decades creating can be very hard to dismantle, both rationally and emotionally. But to survive, that’s what firms need to do. You need to kill your darlings.
“Kill your darlings” is advice every aspiring writer has been given at some time or another. It’s been variously attributed to Chekov, Wilde, Faulkner and Stephen King (although the less well-known Arthur Quiller-Couch seems the most likely originator). A cherished phrase, paragraph, chapter or entire plotline sometimes has to be thrown away to make a more successful book or film. And if you’re in business, you have to be prepared to change your business model too. The Silicon Valley term ‘pivoting’, meaning much the same thing, is something many tech startups do – they set out with one business model then swap it if a better one comes along.
Twitter was born out of podcast-sharing service Odeo when iTunes started offering the same thing. Mighty IBM has pivoted a few times – away from making ‘business machines’ into consultancy and now cybersecurity. Sectors like retail (Amazon), music (Spotify), cars (Tesla), even cooking (Just Eat) are being disrupted faster than ever. Elsewhere in this issue I’ve written about how peer to peer finance may mean massive change in the finance sector. It is giving banking customers what they actually want – lending at lower cost with more speed and better service.
Will you respond? Of course – you won’t be like that big-business leader we met earlier. You won’t let ego, denial or inertia get in the way of embracing the opportunity financial technology represents. You will listen to your customers. You will pivot, you will kill your darlings. Won’t you?