Articles

Asia’s perfect storm of opportunity and disruption

Asia Pacific, Future markets, Innovation

Will you be the next Alipay or Kodak?

If someone was bottling Disruption who would buy it? It seems to get bad press despite the fact it’s improved life for millions of people. One of the reasons is that disruption has become an overused term that’s stretched way beyond its original intended usage. I’d ban it – too often people use the term when what they actually mean is change, development or improvement.

Disruption has always been with us – it’s at the root of humanity’s development and explains how we can land people on the moon and fly across multiple time zones in a few hours. What has changed is the speed of development/disruption and nowhere is this truer than in Asia where there is a perfect storm of opportunity around income and population growth, societal change, trade infrastructure, deregulation and consumer sophistication and expectation.

Here today, gone tomorrow?

72% of CEO’s are worried that their brand will lose relevance in 3 years and data supports their concerns. In the 1960’s the life expectancy of a company was over 60 years. Today it is around 18 years and declining. Just a decade ago, if a brand was winning in its marketplace there was a sense of confidence that the future would be similarly successful, today many worry about finding themselves in their own ‘Kodak” moment.

Yet according to a recent report over 90% of CEO’s have identified innovation performance as something that is integral to the future success of their business while also identifying it as an area where their business underperforms.

Over 90% of CEO’s have identified innovation performance as something that is integral to the future success of their business while also identifying it as an area where their business underperforms.

Even companies that dominate the new global economy, must continually evolve to stay relevant, otherwise new players will find opportunities to challenge and supplant them. The solution for many CEO’s is to actively disrupt their own sectors but how given that many organisations, either at the macro or department/individual level find it difficult to let go of practices that have previously served them well.

Faster horses?

Companies must focus on innovation through identifying current consumer frustrations and developing products and services that turn these frustrations into positive rewards – this is the surest way to achieve commercially and long term viable innovation. Henry Ford’s famous quote “If I’d asked people what they wanted, they would have said faster horses,” neatly demonstrates the issue that  many companies face – create a new sustainable business in areas that are not merely extensions of current products.

Across Asia this issue is even more acute. In the past securing distribution or presence was enough to guarantee success on the back of bourgeoning spending power of populations. Think of all of the brands that rushed to open hundreds of retail outlets across China but were then forced to rethink their strategy when consumers changed their buying habits. Who would have thought that on Singles day alone over 100,000 cars would be sold online.

A Kodak moment

So what can business leaders do to avoid becoming the next Kodak?

There have been many studies that predict how quickly a particular industry is going to be disrupted – so it’s not surprising that most companies see the disruptive forces affecting their industry.  They also often allocate sufficient resources to participate in emerging and new markets – this is certainly true in Asia. So far, so good. Where Companies usually fail is their inability to fully embrace new business models that the disruption opens up.

Kodak created the digital camera, invested in the technology to further develop it and they even understood that photos would be shared online evidenced by their expensive acquisition of Ofoto. Where they failed was in realizing that sharing photos online was the new business and not just a way to expand their existing printing business.

So create your customers future – Like Henry Ford’s quote or adopting Steve Jobs mantra – work out what your customer needs before they do. That’s quite a task but we have found that the best way to do this is to identify areas of frustration in consumers lives in each category and find products and solutions that remove that frustration.

Arguably Jack Ma’s most impactful innovation is not Alibaba or Tabao but Alipay, an easy to use, free, online payment system that took away the frustration that many Chinese consumers felt about using credit cards. The result – Alibaba and Taobao saw off the competition from ebay and Amazon  and China became the largest online marketplace in the world with sales over $1 trillion.

Arguably Jack Ma’s most impactful innovation is not Alibaba or Tabao but Alipay, an easy to use, free, online payment system that took away the frustration that many Chinese consumers felt about using credit cards. The result – Alibaba and Taobao saw off the competition from ebay and Amazon  and China became the largest online marketplace in the world with sales over $1 trillion.

Whatever you want to call it innovation or disruption – there are a lot of buzzwords around and companies and consultants love talking about innovation but often that’s as far as it gets.  True innovation must be based on data or insights from consumers and developments inside and outside of a category.

These insights can then inform discussions about what the future could look like. These ideas must then be developed through a proof of concept phase and then seen through to commercialization. If any of these four areas are skipped, the likelihood of failure grows exponentially.

It’s an investment of resources and time – but ultimately the only way to ensure that a business or brand stays relevant and on top of the many growth opportunities that continue to develop across Asia. Its a recipe for more to enjoy the success of Alipay and avoid the mistakes of Kodak.