It demonstrates Apple’s determination to trade a highly lucrative product for an unknown future that, as Jobs said, “If you don’t take your own market share, someone else will take your share. friend”.
For a long time, Silicon Valley’s business model has been hailed as an extremely effective alternative to the heavy operations of large corporations in the United States. Many expect new generation technology companies to change the old way of doing business by aging corporations. Today, the number of startups worth over $ 1 billion (unicorn) is a staggering number. Fortune calculates that there are more than 170 such “unicorn”. In 2015, an average of one “baby” was born each week. Back in 2009, there were only 4 such companies at that time.
In reality, though, this breakthrough hasn’t always been as fast as people think. Value more than 40% “unicorn” has issued shares that are standing still or falling. Meanwhile, tech giants like Amazon, Google and Facebook continue to grow impressively, especially in terms of size. So what is the key to helping these corporations win the startups that want to outdo them?
The answer is too simple: accept self-competition. Self-competition occurs when a company actively replaces one product or process with another less valuable product or process. Visionaries find the need to compete with their own products, rather than startups.
However, it is not always possible to discuss how to replace profitable business activities. But there are four principles that can help managers in a company apply these principles to their work:
1. Create new products that compete with old products
Tencent was founded in November 1998. Currently the company has successfully developed the largest and most widely used service portal in China. In the process, Tencent also became the world’s largest gaming company.
In the desktop era, Tencent dominated online instant messaging with its QQ service. However, the development of smart phones and mobile technology, QQ has failed to attract new users. Tencent’s board of directors quickly formed a new team in Guangdong, far away from the corporation in Shenzhen. The engineers in this group were tasked with devising another social media platform that could compete with the current QQ product. That was the beginning of Wechat.
Since then, Wechat has continuously launched new services, from mobile payments to appointment with doctors, taxi calls, from video conferencing to mobile banking services. Currently, Wechat has more than 690 million active users and that number is still growing. Recently, Wechat has started rolling out a series of impressive new games globally – another move aimed at disrupting Tencent’s core product.
The company’s willingness to grab market share of the company’s existing products before it wanes is also what Steve Jobs did. In 2005, when the demand for iPod Mini was still very great, the ipod Nano generation was launched, completely surpassing the sales line of the current product. Then, when iPod sales were still soaring, Jobs launched the iPhone. Three years after the launch of the iPhone, the iPad was first launched despite the risk of gaining market share for the Mac. It demonstrates Apple’s determination to trade a highly lucrative product for an unknown future that, as Jobs said, “If you don’t take your own market share, then someone else will take your share. friend”.
2. Find the balance between derivatives, upgrades and innovations
Self-competition occurs at different levels. It could be replacing existing products and platforms with better products and platforms, or with a completely different product and platform. Most companies find it more difficult to replace completely different things, but the most successful companies pursue both ways.
Recruit Holdings is a Japanese advertising and publishing company founded in 1963. Its advertising serves and targets a wide range of audiences, from restaurants to beauty salons to wedding venues. Since the early 2000s, many of the company’s publications have been digitized.
Instead of simply digitizing magazine content, management built several web platforms. Managers are empowered to launch derivative products to best serve individual segments. In the process, those products also compete with each other. Then again, they have multiple platforms upgrading to better serve customer needs. To do this, Recruit also had to eliminate many overlapping services, leaving a few profitable jobs to have a more unified overall product portfolio.
3. Create a mechanism to present ideas to company leaders
One challenge for companies that want to compete on their own is that good ideas are easily dismissed because proposals have to go through multiple departments within the company. To correct this, Recruit organizes concept presentations so that business directors can present proposals directly to senior management, completely bypassing the management hierarchy.
30% of each division’s sales come from products launched in the last 4 years.
A manager at Recruit has repeatedly called for the development of an online training business that his boss thinks cannot apply to the current business model. But when presented to the board of directors, this business project was formed into a department and funded for the implementation. Since then, this new division has focused on providing exam preparation “schools”, helping students with college exam preparation.
4. Set a goal of spending 1% of revenue on new product development
Edward Deming (father of the quality movement) believed that something that cannot be measured cannot be controlled. This is true for development. 3M is a well-known mining company that applies the 30% rule: 30% of each division’s revenue comes from products launched in the last 4 years. At companies like Tencent and Recruit, similar metrics are closely monitored and employees are rewarded based on the performance of this goal.
Such addition of metrics makes it easier to follow Rule 1. But even with this metric, the balance between derivative products and disruptive innovation is still important.
The major advantage of large companies is the ability to integrate and reshape products and services based on the availability. Startups can grow fast but lack experience. By contrast, large companies have a lot of knowledge and methods. Accept that self-competition is the right principle, by following this simple principle your company can proactively overcome the “unicorns”.
* Source: Economic lifestyle