Disrupt or Die: Why Legacy Brands Continue to Go Bankrupt
The future has finally caught up with Sears, who after 132 years in business, filed for bankruptcy this week. And while many are waxing poetic about the “good old days,” when their families could be found ordering everything from toys and tools to appliances and even houses from the iconic Sears Catalog, the fact remains: as a business, Sears was doomed. After years and years of ignoring the marketplace and failing to anticipate the changing needs of their customers, it was only a matter of time before they were pushed out of the very industry they came to define.
How is it possible for the former largest retailer in the World (and largest employer in America) to fall so far from grace?
Simple: they failed to innovate.
Sears is part of a long tradition of legacy brands failing to innovate. In fact, if you look at the Fortune 500 list from 1955 and compare it with the list from 2016, you’ll see that only 12% of the companies listed in 1955 were still listed 60 years later. 12%…a mere 60 out of 500!
This means that in less than the expected lifespan of human being, 440 billion-dollar businesses found a way to go extinct, or at the very least, become irrelevant. And as innovation across industries continues to accelerate, it’s clear that no legacy brand, regardless of size, is immune to going out of business.
So, what’s the key to survival? Disrupt or die.
Brands need to consistently disrupt and innovate if they want to survive. They need to change the game and rewrite the way they serve their customers.
Now, many would like to believe that innovation and disruption are job descriptions, reserved for a few creative departments within their organization. But this couldn’t be further from the truth. For businesses to survive and thrive, everyone in the organization needs to be thinking creatively. Everyone should be focusing on ways to innovate and disrupt.
Easier said than done, right? Not so. If there’s one thing I took from my time serving as the Vice President of Innovation and Creativity at The Walt Disney Company, it’s this: creativity is not a trait possessed only by some. It’s the result of putting yourself in a position to be creative. It comes from building an environment and culture where everyone at your company is primed for innovative thought and disruptive action. It’s a matter of giving yourself and your organization to tools to start disrupting.
What sort of tools, you ask?
Well, one of the most powerful tools of disruption is called the “What If” exercise. At its core, this simple exercise is designed to push your brain further and further down the road of innovation and disruption, by refusing to accept the status quo of the industry.
No one played the What If game better than Walt Disney himself…
In 1940, Walt Disney released his masterpiece Fantasia. In addition to pioneering “Fantasound”, which was a groundbreaking new way to experience audio in a movie setting, Disney sought to heighten other audience senses by changing the actual environment: adjusting the ambient temperature, pumping in mist during rain sequences, and anything else that would leave guests feeling fully immersed in the film.
But there was a problem. Disney didn’t own any movie theatres. And when presented with this idea, theatre owners across America balked at the cost associated with such a production.
Walt was stuck…
In the end, Fantasia was released as-is. And even though it was met with much acclaim, Disney couldn’t shake the idea that his films could be so much better. That the future lied in creating a multi-sensory experience for guests. One that really immersed them into the story.
Unable to give up on this idea, Disney walked himself through the What If exercise:
First, Walt listed the rules of showing his movies in the movie theatre:
•Guests have to go at a set time
•Guests have to sit in a seat
•Guests have to watch previews
•I – the movie creator – can’t control the environment
The last point was of particular significance to Disney, as it was the crux of his campaign for Fantasia. He decided that was the rule he was going to break…what if I could control the environment? What if I took my movies out of the movie theatres?
Now this was a very radical thought, because as mentioned before, Disney did not own any theatres. In order to control the environment, he’d have to take his movies out of the theatres. And in order to do such a thing, he’d need to imagine a whole new way to immerse guests in his films.
Imagine If…the final step in the What If process.
Disney began to imagine what it would be like to take his movies out of theatres: •They’d have to be 3-dimensional, since they were no longer on a movie screen
•They’d have to be interactive
•The characters would need a place to live
•And if characters had a place to live, they’d need to be separated, since mixing princesses with pirates would make it difficult to become immersed in each story line •And if they had to separate characters into different places to live, they’d need to develop whole different lands based around certain characters and stories
And that’s exactly what Walt Disney did, opening the doors to Disneyland on July 17, 1955. The most creative innovation of the 20th century, all because Walt Disney dared to ask “what if?” when he was told “no” by the theatre owners of the day.
In fact, upon closer look, the movie industry has caused a lot of innovative companies to ask, “what if?” throughout the industry’s lifespan. Though this shouldn’t be surprising. Even with the growth from single screens to multiplexes and megaplexes, the movie theatre experience hasn’t evolved much in 50 years, save the intermission and cigarette girls. They’ve been iterating, not innovating.
And so, brave businesses like Disney have taken advantage and disrupted. The entire home theatre industry grew out of asking the simple question: “what if I didn’t have to go to the theatre to see my favourite movies?” And of course, companies such as Blockbuster rode this wave of innovation, redefining the home theatre experience by asking “what if I didn’t have to pay $20-$40 to buy the movies I want to watch once?”
But, as we’ve learned, even companies as massive as Blockbuster are not immune to disruption.
Reed Hastings, founder of innovation powerhouse Netflix, employed the What If strategy to disrupt the Blockbusters of the world. Like Walk Disney, Hastings’ story started with a grievance: he was late returning a copy of Apollo 13 to Blockbuster, which resulted in a late fee of $40.
Frustrated by the whole sequence of events, Reed began listing the rules of the movie rental industry:
•I have to have a membership card
•I have to get in the car
•I have to go to a physical store
•If I don’t plan ahead, I end up having limited movie availability on popular nights •I can only rent so many movies at a time
•I have to rewind it when I’m done
•I have to get back in the car and return the movie •If I’m late, I have to pay a fee
Hastings zeroed in on the rule of going to the physical store. What if I didn’t have to go to a store to rent a movie?
The year was 1997, so at the time this concept was absolutely absurd. But Hastings continued to imagine what it would be like with no stores:
•We could make it a subscription service
•There could be no late fees or due dates
•We could stock a greater inventory by keeping it all in a centralized location •It would cost less, because we wouldn’t have to pay for stores or employees
Hastings followed the classic What If pattern to create disruption:
1.He listed the current rules of the industry
2.He chose one key rule to break
3.He imagined scenarios where that rule could be circumvented
By asking “what if?” Hastings and Netflix began shipping their first DVD rentals via mail in April 1998. And the rest as they say, is history…
EXCEPT FOR ONE SMALL DETAIL: Netflix could have easily gone the way of
Sears and Blockbuster within its first few years!
While Netflix was incredibly innovative at the time of its launch, the whole concept of DVDs and physical media was about to become obsolete as well. The industry was ready for yet another disruption: streaming.
And so, Hastings went back to the What If exercise. Only this time, he did it to his own business model, eventually homing in on the rule what if you didn’t need a physical disc to watch a movie?
After the exercise, Reed knew that the next innovation was to remove the physical component of the DVD altogether. And in 2007, less than 10 years after they had launched as a DVD rental business, Netflix began the transition from physical media to digital streaming.
While it may seem crazy that a company as large at Netflix had to disrupt its own model less than 10 years into its existence, this is exactly what’s done by companies that succeed. They see an opportunity for disruption and they take it, even if it means disrupting their own model.
By being laser focused on disruption and innovation, companies like Disney and Netflix not only survive; they thrive. And it’s a focus they keep every single day.
Disney continues to ask “what if?”, creating new park features to match the evolving needs of their guests. Netflix continues to ask “what if?”, launching innovations such as original content (eliminating their reliance on major studios), and crowdsourced content (creating a more customizable, immersive user experience – much like Disney aimed to do in the 1940’s).
It’s a never-ending cycle. A constant look in the mirror, identifying all of the ways in which they can become better versions of themselves. The ways in which they can innovate. Disrupt or die.
Unfortunately, Sears abandoned this disruption cycle long ago. Once an absolute industry leader, with fresh, innovative ideas that seemed to flow like water, the company eventually rested on its laurels. Decided that they were big enough where they didn’t need to disrupt anymore. And like many legacy brands before them, they were forced to pay the ultimate price.
What would happen if you applied the What If Exercise to your industry? Check out my Workshops page to get a full look at how I teach this disruption tool to companies around the globe.