Controlling disruption: the billion-dollar brand question

After decades of working hard to establish themselves as consumer mainstays, many MNCs are finding that their billion-dollar brands are becoming irrelevant, much to their shock and horror.

The culprits? Nimble, cost aggressive local players and start-ups that are not afraid to challenge the rules of their industries. The cosmetic industry is a prime example, where established brands are facing a double whammy of local brands from Korea (Laneige, Sulwhasoo and Neogen) who have upped their ante launching high-quality innovative products, and startups like Karity that manufacture and sell directly to young consumers online at undeniably competitive prices.

These new players are ironically becoming the envy of MNCs, with many setting up incubation or innovation labs in the hopes of stopping the small fish from growing large. Regardless of the agile, entrepreneurial attitude of such a move, it has so far failed to deliver significant results, and we’ve seen quite a few of these initiatives aborted.

Harvard Business School professor Shikhar Ghosh estimated that 75 percent of U.S. venture-backed start-ups fail. Notably, Coca-Cola’s ill-fated start-up incubator—Founders—closed its doors at the outset of 2017. As another billion dollar brand owner put it, “We wanted to bring disruption, but we didn’t want to jeopardize our current business to keep the same level of continuity.”

The crux of the challenge seems impossible to address: radical transformation within a comfortable, revenue-generating zone. Eating while keeping the proverbial cake.

Brand owners are rightfully cautious when it comes to shifting strategy. It has unintended consequences. By the time a new direction is set and executed, the landscape might have changed so much that a yet another new course may need to be charted. While start-ups could be rightly admired for their ability to disrupt, to throw away the rulebook and scale up at speed, the risks attached to such venture make it unsuitable as a practical role model for innovation for large organizations.

Making the jump

What prevents companies from seeing new opportunities are the accumulated expertise that have made them successful to date. Best practices and standard operating procedures that drive efficiency don’t typically encourage questioning the status quo.

As anyone who has worked with one of the large FMCG companies could attest, the threat is as much inside organisations as it is outside—“There are many internal barriers to innovation,” says a global brand director at one of the FMCG giants, “Financial requirements on return on investment and margins, heavy consumer research processes testing on the masses and not the trend-setters, in-house technical teams focused on finding savings rather than innovation.” Without risk there is no reward, and despite their formidable financial resources, the slow erosion of big brands is clear for all to see.

The antidote may well be adopting an intelligently naïve outlook on one’s industry. Consider listening to the voices of outsiders who know little about trends, jargon and keeping up with the joneses, and instead offer fresh perspective from outside the bubble. Think about tapping into the collective creative power of crowds, or inviting experts from other sectors to offer their insight on new challenges.

Cross-functional collaboration is another way to maximise the chance of stumbling across a new opportunities. And stumble all you want. Welcoming outside opinion doesn’t indicate casting caution to the wind and upturning the whole of a business. It simply means opening up to change, stress-testing strategy, and changing your narrative before it’s too late. Disruption isn't about the small fish that grows big and eats all the big fish. It's about the fish that finds a new way to swim much faster than the others and snatches everyone’s lunch.