As I am writing this post, Apple is announcing among other products a new version of Apple TV. What should we make of it and who should be paying attention?
As a product, the new Apple TV might appear to be essentially an upgrade to an established product with intelligent voice control, universal search, an improved remote and a few other attractive features. Perhaps no big cause for concern though except to other set top box competitors?
But what about their statement that “The future of TV is apps” and the community of 11 million developers who will be producing them? Perhaps game system makers, shopping sites and music producers should be paying attention too.
And what about rumors that it may be a platform for Apple to launch its own video streaming business and even its own video content production? Perhaps not so incremental after all then, and maybe Hollywood should be paying attention.
And then there is the speculation that the Apple TV may become Apple’s hub for aggressive expansion into home automation? If true, this could affect players in a wide range of industries ranging from white goods to lighting to security systems.
Such (potential) disruptions have become commonplace in almost all industries. Electric cars from Tesla, self-driving cars from Google and ride sharing from the likes of Uber threaten to disrupt the automotive and transportation industries. The hospitality industry faces disruption from players like Airbnb. And a reassessment of China’s economic climate – as presaged by the recent dramatic swings it the world stock markets – potentially affects all industries.
And these are not selective examples. Our research shows that fully one third of all public companies will be out of business within the next five years because they failed to adjust to these turbulent dynamics. The ones that succeed and thrive will have learned how to constantly renew their business strategies in the face of relentless disruption. This renewal approach to strategy refreshes the vitality and competitiveness of firms when they are operating in harsh or dynamic environments.
When the current way of doing business cannot be sustained – caused sometimes by technological disruption, sometimes by other external or internal shocks – strategic renewal may be the only way to not merely survive but to eventually thrive again.
Though a firm may not notice the distress signals immediately, smart money pouring into maverick start ups taking bets against your business model is a first strong warning sign. Eventually this leads to declining competitive and financial underperformance – an indication that the long-term survival of the firm may be at risk.
An astute CEO will recognize these signals early and promptly begin the process of strategic renewal. Or better still they will preempt the disruption by becoming the disrupter themselves.
Reacting to the deteriorating environment as early as possible improves the odds of success. First, the firm needs to free up resources to address its immediate impediments to financial viability. To do so, the company must often focus the business, cut costs, preserve capital and redirect resources to fund the next part of the renewal journey. The firm then needs to reset its strategic compass and pivot to a new strategy based on innovation and growth. Strategic renewal is so commonplace that we may underestimate what is at stake: a typical renewal can bet the enterprise value of the firm, with only a 25% chance of success.
Apple’s announcement may set this process in motion in many companies, from broadcasters to advertisers to equipment manufacturers. Others will likely fail to see the signs and later begin a struggle to survive in an industry no longer hospitable to the way they’ve always done business.
Those that choose to renew their strategy early will likely be among the survivors that we will still be talking about in 5 years time.
Martin Reeves is senior partner at The Boston Consulting Group, and director of BCG’s Bruce Henderson Institute. His new book, “Your Strategy Needs a Strategy,” was published by Harvard Business Review Press.