Disrupt your business model, before someone else does

"You need to disrupt your own business model fast, before somebody else does it for you," according to Matthew Key, CEO of Telfonica Digital, in a recent article in The Times (subscription needed). I posted here about the risk of brand leaders like Kodak and Blockbuster Video failing to respond to disruptive market changes. Matthew offers some interesting insight into how Telefonica, owner of fixed and mobile phone networks including O2, is trying to disrupt its own business model before someone else does.

Challenge 1: Overcome inertia

Matthew agrees with my earlier post here that the issue most companies face is not “marketing myopia”, when they don’t see change coming, but rather inertia. He comments, “Every business has inherent inertia as the company and, more significantly, the people within it are successful because of the past model, not a future one.”

Challenge 2: Source ideas from outside

Telefonica are following the example of P&G in sourcing ideas from outside their own business. P&G’s Connect+Develop program means that half of new product initiatives involve significant external collaboration. As Matthew says, “A company’s in-house R&D facility remains important, but you also need to identify disruptive innovation from outside your company and outside your industry.”

Challenge 3: Invest time and talent

Telefonica is investing big time to identify new technology. Matthew was previously CEO of Telefonica Europe, so naming him as head of the new Digital Innovation unit sends a powerful signal about how important this is. Telefonica’s technology accelerator programme, Wayra, is also getting serious support. It is incubating 170 start-ups across 11 countries, with Telefonica taking a 10% share in each one. The purpose is to create new innovations for the company’s 300 million customers.

Examples of new ideas include

- Helping people with serious health issues share results of heath monitoring done at home in real time with their doctors, improving the quality and cost of healthcare.

- Installing SIM cards in cars so insurance companies can see when, where and how somebody drives. Insurance policies can then be tailored to individual needs and behaviours. 

In conclusion, Matthew shows how to react to the significant changes happening in technology: “move fast, embrace the opportunities, create new ecosystems and build stronger businesses and a better society”

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