Technology Didn’t Disrupt Your Industry: Q&A with Thales S. Teixeira, Part IV

This is the fourth and final installment of our conversation with Thales S. Teixeira, Lumry Family Associate Professor at Harvard Business School. Readers can find information on his book at  

To read Technology Didn’t Disrupt Your Industry: Q&A with Thales S. Teixeira, Part III, click here.
To read Technology Didn’t Disrupt Your Industry: Q&A with Thales S. Teixeira, Part II, click here.
To read Technology Didn’t Disrupt Your Industry: Q&A with Thales S. Teixeira, Part I, click here.

To listen to [Podcast] Technology Didn’t Disrupt Your Industry: Q&A with Thales S. Teixeira, Part IV, click here.
To listen to [Podcast] Technology Didn’t Disrupt Your Industry: Q&A with Thales S. Teixeira, Part III, click here.

To listen to [Podcast] Technology Didn’t Disrupt Your Industry: Q&A with Thales S. Teixeira, Part II, click here.
To listen to [Podcast] Technology Didn’t Disrupt Your Industry: Q&A with Thales S. Teixeira, Part I, click here.

How do brands go about implementing changes or processes if they’re not equipped to do that? That’s the first step, correct?
That’s a great question. If we think about it, obviously, nobody disputes that we’re in a period of great change in customers, business models, and technology. It’s not always the case. It’s not that great change happens all the time, every two years, but we’re definitely in a big period now. If you look at it and think about it from your own point of view, when big changes happen in your life, it’s very important to have a support group. It’s very important to have people who have your best interest in mind. People who have gone through the change and who can tell you, “This is what happened to me. These are the pitfalls. This is what you should avoid.” That’s very helpful. In that regard, you shouldn’t do it alone. Just like when you sell a house, you shouldn’t most likely do it alone, if you don’t have any information about it. You should have the advice and expertise of those who have done it.
And so, at this point in time, being able to look inside your company for those people who didn’t change agents as well as outsiders who can help you at the very least, not tell you what to do, because I don’t think they should. But [who can] at least say, “I’ve observed these other companies go through these changes, and these are the pitfalls that are most common, so if you can avoid those common pitfalls, you already have a much higher chance of success.” This is a very important aspect of combining insiders—nobody will know more about your business, your market than you. Outsiders are those who look across markets, because what we’ll see is that the pattern is virtually the same.
The same problem that Ford is facing, Sheridan, and Hilton are facing, and The New York Times is facing, and retailers are facing. The challenge is that executives are too focused on their industry. They have to kind of walk out of their industry and look at what’s happening, because the pattern of disruption is cutting across industries, because the element in common is actually the consumer.
If you like neuroscience and neuromarketing, you know something very valuable, which is the consumer only has one brain. The consumer does not have a TV-buying brain, a car-buying brain, a hotel-staying brain, a news-buying brain. It’s all the same brain, and they use the same message and processes, so we need to understand across industries to understand the fundamentals of the customers changing behavior.
But one of the things that we see is you need community for brands. How do you do that management-wise? By walking around? Because more and more brands are potentially more restricted, right? They’re not allowing entities to talk about what they’re doing. Everything is more top secret.
Sure. If there is one thing that I’ve seen that is almost like a rule of corporate world, is that whenever the company, no matter if it’s an organization, a two-people organization, a fifty-people organization, 500 or 5,000, if there is no process, if there is no message, what ends up winning is politics.
My role as an academic is to come to the companies and say, “This is the message. This is not the answer. This is the process that you should go through and everybody should go through together in order to figure out what’s important.” What are the important ingredients? What are the steps and in which order should you take? And this is how to go about it, and everybody should go use the same process and methods, and they’ll go figure out the answer. Without that, any decision or discussion ends up [carried by] whoever can shout the loudest and who has the most political power.
Method will trump politics, and that is the approach that I advocate to you, using a methodological approach, bringing science into an organization’s decision-making, and this is the point in time that definitely much more is needed, because there is so much uncertainty. 
Is that a process you advocate or is that a process they define internally? How do they do that? How do they develop that process?
I’ve researched in the past eight years a process for responding to digital disruption. In my upcoming book, Unlocking the Customer Value Chain, I lay out a problem. I lay out how disruption occurs. If you’re being attacked by a tank, you need to understand how the tank works before you respond to the tank. The first few chapters of my book explain how disruption goes about, and then the last few chapters talk about what is the process to go about finding an avenue to respond to digital disruption. There are many processes out there. I have a customer-driven innovation process for responding to digital disruption in my book. I can’t help but advocate for it in lieu of lack of processes. And that’s the bigger problem that I see in organizations. 
Is that a framework that allows them to address that problem, or one that can help simplify it?
It’s a framework that puts everybody on the same page of what needs to be done. It’s prioritized a few tools. There’s a framework and approach, and there’s many, many tools that are part of this framework. One tool is how to understand what customers value.
There’s another tool that helps fixing broken business models. “Leakage” is what I call the activity of creating value for a customer, but not being able to capture it. For example, if you have a store, and you educate customers on what to buy, and then they buy online at a competitor, you’ve just created value, but the value leaked. You weren’t able to fully capture it. I have a tool that’s called the leakage detector. It goes into businesses and finds opportunities just to plug in the leakage, just to really make money out of the value that you’re already creating.
Because what happens is, natural tendencies of executives and managers is, when they’re being disrupted, and they start losing customers or market share, they say, “Let’s create new products.” That is not the first approach. It’s just like there’s a faucet that’s leaking in your house. You’re not going to go and buy a new one automatically. You’re going to first say, okay, let me fix this one. You plug in the leak. So that is another tool. There are many tools that I have in my framework to identify, evaluate, and make decisions on top of specific elements that we call broadly the digital transformation of businesses.
How do you measure what’s working and what’s not working? And then, how do you get that back to the brand?
The measurement is related to the bigger problem. There are many sub-problems in what’s going on. But the bigger problem is that digital disruption happens when you have established business that loses a significant amount of market share in a short period of time. We are not talking about one or two or three percentage points. We’re not talking about a decade and a half. What we’re observing today is startups that are taking away 10, 20, 30 percent of market share from large businesses in a matter of three, four, five, six years.
Dollar Shave Club got 45, 50 percent of market share of online razors. A company that had no experience in shaving before, from the incumbent, Gillette. That is digital disruption. So, getting closer to a solution is first being able to not lose so much market share in a short period of time, and then regaining some of that market share back.
But there’s a lot of different metrics. They become very specific to the nature of the business, but the first one is to stop losing a significant amount of market share in a short period of time. Stop the digital disruption that’s happening with large businesses. 
If you could give one piece of advice to brands to help them look at disruption, to help them innovate, to help them be customer-centric, what would that be?
Go back to basics. Forget about technology. Technology is not the problem. It’s not going to be the solution. Chances are, you’re not a technology person. You’re a business person. You either have formal business training or experience in business, so get back to basics. Digital disruption is fundamentally a business problem, and you have to use your business knowledge to solve this problem. So, do not freak out. Do not go crazy. Do not try to solve the problem by buying technology, by listening to all the tech illuminati of our ages. You don’t need to be going to Silicon Valley for the solutions. Always be attentive. The problem that you’re facing now is a business problem. Go back to business and solve it with business solutions. And focus on the customer. 
Was there anything you expected to find in your research that wasn’t there? Or vice-versa?
Well, I originally thought the biggest surprise was that technologies were disrupting markets, because that’s what I read all the time. In the media, I thought it was the big technologies. Some call it disruptive innovation. Some call it transformational technologies, whatever.
I thought those were the drivers of the big changes, and so what surprised me was, when I looked at data and looked case by case, I saw was rarely the case. It happens, yes, in a few cases. And we’re just bogged down in the industry by a few very prominent cases of technologies by the tech companies. But in the vast majority of instances, that is not the case. That was pretty shocking to me. 
Unlocking the Customer Value Chain will be available February 19, 2019 through Penguin Random House Press.

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