A few weeks ago we were discussing on this blog, the benefits of the Three Horizons approach to strategic planning. One of the key aspects of this approach is to harmonize your future with your present, and to create optionality regarding small bets with high pay-offs. This week we’re going to be looking at how you can make those bets pay big, by scaling your own disruption.
David Edelman, Nathan Marston and Paul Willmott of McKinsey have written about how to incorporate your own digital disruption into the rest of your business. When your core business is outgrown and overtaken by your one-time future stars, you have to figure out a way to include their success into the rest of the business. Edelman, Marston and Willmot have offered four ways that you can do this. You can find the original article here, but we have gleaned the most cogent insights for you below.
1. Organizational pivot
Essentially, the organization pivot play can be useful when you have legacy structures blocking the development of your future stars. One way to get around this is to change your organizational structure to privilege your digital business. You can appoint digital leaders to key legacy positions and shifting budget priorities towards your disruptive business.
2. Reverse Takeover
During an early phase of your Three Horizons approach you may have ringfenced and protecting new and potentially disruptive elements of your business so that they could develop independently. But there will come a time when it is appropriate to integrate these core businesses into the rest of your business, so that the benefits can be accrued to the whole business. One dramatic way to do this is to envelope the existing business in the new disruptive business in a reverse takeover. In this way, the innovation model is shared with the whole business.
Sometimes where you have built a successful digital business within your existing business, it does not make sense to execute a reverse takeover or even to build this digital business into your key functions. Perhaps, this digital section is focused on different parts of the value chain to your core business, or the digital business isn’t yet strong enough to effect a takeover of the old business. In any case, it can be appropriate sometimes to spin off this part of your business.
If you don’t yet have a mature digital platform within your organization’s portfolio, then you may desire to reap some of the benefits through piggybacking. Your existing business may have a lot to learn and a lot to gain from partnering up with another firm that has strong digital capabilities. One example of this is Home Depot collaborating with Uber to deliver their Christmas trees.
We hope you have enjoyed this Eloquens blog post. If you’re interested to find out more you can find the longer article here.