3 great disruptors, and the executives who failed to see them coming

Which brand leaders denied the coming disruption from innovators like Amazon, Tesla and PayPal, and what were the insights they failed to take into account?

Key Takeaway

The last few years have seen significant disruption across a number of traditional industries, from PayPal’s takeover of the e-payments and P2P transaction space, to Tesla forging ahead with self-driving and electric cars, to Amazon’s impact on nearly every vertical imaginable. But from the beginning there have been naysayers within competing companies who failed to take note of the indicators hiding in clues that could be found in their external competitive data.

In his book Outside Insight, Meltwater Founder & CEO Jorn Lyseggen tells the story of some of the world’s most spectacular business failures which occurred in large part due to internal bias caused by executives who failed to note coming threats and changes in their market.

Antonio Perez during his time at Kodak, for instance, missed the mark on the coming threat of digital cameras and failed to recognize how technology was transforming consumer behaviour, instead focusing on the promising internal metrics he saw in the brand’s film division. Meanwhile Blackberry’s team ignored forward-looking insights that indicated why the iPhone would pose a significant threat to their handset’s dominance with corporate mobile users, blinded by their promising internal data on user growth and revenue.

“At its heart, [Blackberry] remained too focused on what it used to excel at – physical keyboards and security – and was not able to adapt quickly enough when the market changed,” Lyseggen said. “In spite of impressive growth, the company was losing market share because the competitors were growing faster….[and] didn’t embrace the new user demands, such as browsing the internet and apps for consuming media and services.”

These are far from the only cases in which executives have ended up with a foot in their mouth after failing to recognize the potential impact of rising market disruptors. Those looking out for indicators in external data can see the significance of these events and take action far before they become imminent threats to their business.

Amazon narrows in on e-commerce, shipping and healthcare

Even in its early days, Amazon’s competitors, including fashion brands and retailers, logistics companies and manufacturers, have scoffed at the possibility that the e-commerce engine that could would close in on their market dominance. But with each passing innovation, Jeff Bezos and his team continued to push past expectations.

IBM Chairman Louis V. Gerstner Jr. is recorded saying on an earnings call in 1999: “Amazon.com is a very interesting retail concept, but wait till you see what Wal-Mart is gearing up to do.” He went on to highlight that the previous year’s Internet sales at IBM were five times greater than Amazon’s and boasted that IBM “is already generating more revenue, and certainly more profit, than all of the top Internet companies combined.”

Logistics companies like FedEx, even into 2016, have denied what was possible, claiming there was no way that Amazon would be able to replicate a network they had been building for decades. Executive Vice President Mike Glenn noted in an earnings call in 2016 that building a new shipping network, as Amazon set out to do, would be a “daunting task requiring tens of billions of dollars in capital and years to build sufficient scale and density.”

Fashion brands relying on brick-and-mortar continue to remain skeptical of the brand’s potential to cause significant disruption, despite consistent indicators that customers are looking for a more customized and cohesive online and offline experience, innovations in which are being driven by AI.

“When you think about the online versus the offline experience, we don’t need AI in our stores,” Saks Fifth Avenue president Marc Matrick said on CNBC earlier this year. “We have ‘I’. We have living, breathing, 4,500 style advisors in our stores.”

Saks Fifth Avenue parent company Hudson Bay has seen a steady decline in market cap since 2015.

This week, Amazon became the second company ever to break $1T in valuation.

Tesla and the autonomous car revolution

Despite Musk’s success in his previous ventures, the idea of creating the first successful, commercial autonomous vehicle was one that a number of major automotive companies were skeptical of. Today, the race among Tesla rivals is on – from the Mercedes EQC to the Porsche Taycan and Audi E-tron.

Back in 2015, Jaguar Land Rover head of R&D Wolfgang Epple told the press, “We don’t consider customers cargo. We don’t want to build a robot that delivers the cargo from A to B….People want to use the emotional side of the brain, and autonomous driving does not generate that experience.”

Today, Jaguar Land Rover has joined the race to build an autonomous vehicle in full force, even releasing the Jaguar I-Pace, a prototype with built-in eyes that makes eye contact with pedestrians.

Even more ironically, Dan Akerson, former CEO of General Motors who today is pumping $100M into their self-driving car production, had vocally warned Apple about the danger of getting into the car business back in 2015. He stated, “If I were an Apple shareholder, I wouldn’t be very happy. I would be highly suspect of the long-term prospect of getting into a low-margin, heavy-manufacturing” business.

While the promise of self-driving cars has yet to be realized, the Tesla team has reached some significant milestones, celebrating over 1 billion miles driven on autopilot earlier this year.

PayPal redefines online payments

Speaking of Elon Musk. Back when PayPal was beginning to amp up traction, at a time when eBay and its auction model was the e-commerce giant of note, PayPal faced a number of competitors who failed to see the impact the online payments innovator was going to have on an industry as staid as financial services.

“People tend to overestimate new technologies’ impact on financial services in the short term, and underestimate it in the long term,” Antony Jenkins told WIRED in a September 2001 interview. Jenkins was at the time the COO of C2IT, a pay-anyone-by-email service that had been developed by Citibank. “’We think that’s what’s going to happen here.’ In other words: We’re in the game, we’re not going anywhere, and no bootstrapped tech company is going to scare us.”

C2IT officially shut down in November 2003.

PayPal’s most significant early competitor was BillPoint, a joint venture between eBay, who shortly after acquired and later split from PayPal, and Wells Fargo. “We have a different strategy,” Janet Crane, BillPoint’s CEO said of PayPal in the same 2001 interview. “Because of our connection with eBay,” Crane explains, “we know a lot about our sellers – the amount of business they’ve done and their feedback profiles. That lets us do a number of things, like charge lower fees to our biggest customers and lower the amount of fraud.”

Billpoint, however, overestimated the value of their own relationship with eBay, and ultimately, the hold eBay would have on the ecommerce market in the longer term, banking too heavily on that relationship as a value proposition.

What PayPal did to overcome Billpoint’s initial advantage, according to LinkedIn Founder Reid Hoffman in his book The Alliance: Managing Talent in the Networked Age, was to leverage network intelligence via direct conversation with Billpoint’s customers to learn about the brand’s strategy as well as what eBay’s customers valued. Essentially, they manually gathered early Outside Insight, which the Billpoint team ignored. PayPal’s insights team, led by Hoffman, found that while Billpoint depended on the value customers placed on their deep banking relationship with Wells Fargo and its ability to prevent fraud, in reality this was not a key driving factor for customer loyalty.

“Even more amazing? During these direct conversations, the Billpoint people never bothered to ask the same questions of PayPal’s people. PayPal’s strategy explicitly emphasized network intelligence; Billpoint’s did not.”

In 2002, eBay agreed to acquire PayPal and in turn shut down Billpoint.

The value of gathering Outside Insight, according to Reid Hoffman

Hoffman goes on to describe the importance of gathering network intelligence, or what he considers insights gleaned by leveraging employee networks and seeking consumer feedback, and characterized how this information advantage is what ultimately led to PayPal’s success.

If you're in a broom closet, it's no great accomplishment to be the smartest person in the room. Network intelligence expands ‘the room’ you're in to stadium-sized dimensions

“This will help you solve problems faster…and help you see opportunities you would otherwise miss. One of the hidden stories behind PayPal’s success is the crucial role network intelligence played in discovering the formula for viral growth. Once the team realized that eBay was a major driver of PayPal usage, its members looked to other companies in the eBay ecosystem for inspiration.”

Outside Insight leverages insights from external data – customer data, competitive data and more – to help business leaders better understand the market they’re playing in, discover where there are gaps or opportunities, and make much more informed decisions to remain ahead of the competition.

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