Strategies for Competing with a Tech-Driven Insurgent

Summary

HBR On Strategy: Strategies for Competing with a Tech-Driven Insurgent

Episode Release Date: December 4, 2024
Host: Harvard Business Review (HBR)
Guest: Professor Julian Birkinshaw, London Business School

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Introduction

In the episode titled "Strategies for Competing with a Tech-Driven Insurgent," hosted by Alison Beard of the HBR IdeaCast, Professor Julian Birkinshaw from London Business School challenges the prevailing narrative that traditional companies are inevitably succumbing to the rise of tech disruptors. Through a data-driven analysis and insightful discussions, Birkinshaw elucidates the strategies that incumbent giants like JP Morgan, Disney, and Procter & Gamble employ to not only survive but thrive amidst technological upheavals.

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Challenging the Disruption Narrative

Alison Beard opens the conversation by highlighting the common perception of relentless disruption led by tech giants:

"There’s been a big fuss made about disruption in recent years. Tech-enabled startups are taking over the world and old economy companies just can’t compete."
— Alison Beard [02:19]

Julian Birkinshaw counters this viewpoint by presenting empirical evidence:

"When you look under the hood at the number of companies which have genuinely come out of nothing to become members of that club [Fortune 500], it is a tiny number."
— Julian Birkinshaw [03:30]

Birkinshaw’s research indicates that out of the current Fortune 500, only 17 companies are newcomers in the past 25 years, including giants like Netflix, Google, Amazon, and Facebook. The remaining 483 are well-established firms that have maintained or grown their positions despite the rise of tech disruptors.

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Incumbents' Strategies to Combat Disruption

Birkinshaw outlines four key strategies that incumbent companies adopt to navigate and counteract the threats posed by tech insurgents:

1. Fighting Fire with Fire

A direct and proactive approach where incumbents engage competitors on the same terms.

"If you are Walmart, let's say your only strategy, they would argue, is to fight fire with fire, to take Amazon on at its own game."
— Julian Birkinshaw [09:27]

Example: The New York Times successfully transitioned to a digital subscription model, amassing approximately 8 million online subscribers, thereby surpassing its legacy in the print domain.

2. Doubling Down

Leveraging existing strengths to reinforce market position without directly challenging the insurgent's domain.

"Doubling down says we are a successful company in our own right. We have assets that this new company cannot possibly match."
— Julian Birkinshaw [10:26]

Example: Disney chose not to immediately enter the streaming market when Netflix emerged. Instead, it invested heavily in acquiring high-quality content creators like Marvel, Pixar, and Lucasfilm, building a robust content library that became a cornerstone for Disney+’s success.

3. Retrenchment

A defensive strategy focused on consolidating and protecting existing market share rather than expanding into new territories.

"Retrenchment means sort of pulling back a little bit, consolidating our existing position, possibly through merger, acquisition, lobbying, through regulation..."
— Julian Birkinshaw [13:12]

Example: JP Morgan and other major banks have engaged in mergers and acquisitions of regional banks to strengthen their market presence and counter fintech challengers. Additionally, they collaborate with regulators to navigate and mitigate emerging threats like blockchain technology.

4. Moving Away (Migrating Away)

A strategic pivot where companies transition resources from declining areas to new opportunities, often as a last-ditch effort to survive.

"Moving away is a strategy which says as long as I'm smart and proactive about it, I can find a way of almost rebalancing my portfolio..."
— Julian Birkinshaw [16:00]

Example: While Birkinshaw did not cite a specific company here, the general concept applies to firms like Kodak, which struggled to adapt to the digital revolution, ultimately failing to reposition itself successfully.

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Case Studies and Practical Examples

Professor Birkinshaw delves into specific examples to illustrate how these strategies manifest in real-world scenarios:

• Disney vs. Netflix: Instead of directly competing with Netflix’s streaming model early on, Disney focused on content acquisition, which later provided a competitive advantage once it launched Disney+.

• JP Morgan vs. Fintech: By merging with regional banks and engaging with regulatory bodies, JP Morgan has fortified its position against fintech startups without overhauling its core banking operations.

• ING Bank (Europe): Recognized for reengineering its internal processes using agile methods, enabling it to adapt swiftly to market changes.

• Haier (China): Exemplifies a successful reinvention of operational strategies to maintain competitiveness in the white goods industry.

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Sector-Specific Insights and Future Outlook

Birkinshaw discusses how different sectors face unique challenges and timelines concerning disruption:

"Disruption of industries happens on both the demand side and the supply side."
— Julian Birkinshaw [28:36]

• Demand-Side Disruption: Rapid changes driven by consumer behavior and technology, such as streaming services altering media consumption.

• Supply-Side Disruption: Gradual transformations in production and operational methodologies, exemplified by the shift from traditional pharmaceuticals to biotechnology.

Birkinshaw emphasizes that while some sectors experience swift disruptions, others adapt over decades, allowing incumbents sufficient time to strategize and implement necessary changes.

Furthermore, he addresses the role of regulation in maintaining competitive balance, especially concerning dominant tech giants like Google, Facebook, Amazon, and Microsoft. He suggests that thoughtful regulatory frameworks are essential to prevent monopolistic dominance without stifling innovation.

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The Role of Startups and Smaller Companies

Addressing concerns about the sustainability of startups amid strong incumbents, Birkinshaw provides a balanced perspective:

"There is absolutely, and let me avoid anybody so say criticizing me on false grounds, both narratives are true."
— Julian Birkinshaw [21:46]

While acknowledging that some startups will rise to prominence, he cautions that reaching unicorn status does not guarantee lasting success. The majority of new entrants may not endure, aligning with the natural economic order where only a fraction of startups evolve into enduring powerhouses.

Moreover, Birkinshaw notes that mid-sized companies often face more immediate pressures from disruption, typically resulting in mergers or acquisitions rather than outright failures.

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Economic Implications and Workforce Considerations

Birkinshaw touches upon the broader economic and societal impacts of corporate strategies against disruption:

"There is this nagging worry in terms of welfare and job creation that somehow the amount of inertia that I see in the system is unhealthy."
— Julian Birkinshaw [24:38]

While some express concerns that large, resilient incumbents may stifle innovation and job creation, Birkinshaw remains optimistic. He believes that the dynamic marketplace fosters new ideas and corporate controls, ensuring that startups continue to emerge and incumbents remain agile.

However, he concedes that certain sectors, particularly those dominated by big tech, might require increased regulatory oversight to prevent unchecked dominance, ensuring a healthy competitive landscape.

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Conclusion

Professor Julian Birkinshaw’s insights present a nuanced view of the interaction between traditional incumbents and tech-driven insurgents. By dissecting the four key strategies—fighting fire with fire, doubling down, retrenchment, and moving away—Birkinshaw demonstrates that established companies possess the tools and flexibility to navigate the challenges posed by technological advancements effectively.

Moreover, his analysis underscores the importance of strategic choice and regulatory frameworks in shaping competitive dynamics, emphasizing that disruption is not an inevitability but a complex interplay of choices, circumstances, and proactive management.

For business leaders and strategists, this episode offers a roadmap to understanding and implementing effective strategies to ensure long-term success in an ever-evolving digital landscape.

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Notable Quotes

• "When you pick up the business press, it is full of these big companies."
  — Julian Birkinshaw [05:14]

• "Strategy is always about choice. The essence of strategy is making choices by default."
  — Julian Birkinshaw [18:49]

• "There is a vigorous marketplace for new ideas, there is a vigorous marketplace for corporate control and those allow the startups to come through."
  — Julian Birkinshaw [24:38]

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Final Thoughts

This episode of HBR On Strategy provides a comprehensive examination of the resilience and adaptability of incumbent firms in the face of technological disruption. By leveraging empirical data and real-world examples, Professor Birkinshaw offers valuable strategies and perspectives that challenge conventional wisdom, encouraging businesses to adopt a more informed and strategic approach to competition and innovation.

For those interested in mastering competitive strategy and understanding the dynamics between traditional and tech-driven companies, this episode serves as an essential resource.

Transcript

[Alison Beard]

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[Muriel Wilkins]

Youm know there's another HBR podcast you might like Coaching Real Leaders takes you inside real life leadership coaching sessions. Host Muriel Wilkins has advised CEOs for nearly 20 years. Listen in as she helps guests work through their hardest career challenges. Find new episodes of Coaching Real Leaders wherever you get your podcasts.

[Hannah Bates]

Welcome to HBR on strategy, case studies and conversations with the world's top business and management experts, hand selected to help you unlock new ways ways of doing.

[Alison Beard]

Business.

[Hannah Bates]

Looking at business news over the past decade, including a few HBR articles, you might assume that just about every traditional company has fallen or will soon fall to competitors from the tech industry. But London Business School professor Julian Birkinshaw says that story of disruption and destruction is overblown. His research into Fortune 500 and Global 500 organizations shows that despite the rise of a few tech giants like Amazon in Google, many industries haven't been radically remade. In this episode, Birkinshaw outlines the strategies that many incumbents like JP Morgan, Disney and Procter and Gamble are using to survive and thrive. He breaks down the benefits and drawbacks of four key strategies that incumbents typically use to compete with insurgents, and he explains how you can decide which strategy best fits your organization. If you're interested in competitive strategy, this episode is for you. It originally aired on HBR IdeaCast in February 2022. Here it is.

[Alison Beard]

Welcome to the HBR IdeaCast from Harvard Business Review. I'm Alison Be there's been a big fuss made about disruption in recent years. Tech enabled startups are taking over the world and old economy companies just can't compete. Look at what Netflix did to Blockbuster, what Amazon did to department stores. Our guest today says that narrative ignores one thing. Over the past three decades, many industries haven't been disrupted at all. In fact, his research into the Fortune 500 and Global 500 shows that lots of large and long standing businesses are not just surviving, but thriving in today's digital world.

[Julian Birkinshaw]

How are they managing it?

[Alison Beard]

Julian Birkinshaw is a professor at London Business School. He's the author of the HBR article How Incumbents Survive and Thrive. Julian, welcome to the show.

[Julian Birkinshaw]

Thank you very much Alison. Nice to be here.

[Alison Beard]

First, could you just explain why this.

[Julian Birkinshaw]

Narrative around disruption is so wrong? What did you find in your analysis to show that incumbents are actually going really strong?

So I'd always had this nagging worry that the narrative of disruption, where the big established companies were dinosaurs, was overplayed. So I went back to the data. I simply took the Fortune 500 list, which, as you all know, is the top 500 companies in the US by sales. And I asked myself, how many of the companies on that list today did not exist 25 years ago? So 25 years ago is 1995. And that date is chosen not just because it's a convenient quarter century, but because 95 was the year when the Internet really became a kind of a commercial endeavor, when you could actually start buying and selling things. And so the thinking was that's a long enough period for these digital upstarts and tech companies to really kind of tear through traditional industry. The answer to the question, how many of those companies in the Fortune 500 today didn't exist 25 years ago is 171 7. There are only 17 of them, and that is the Netflix and the Googles and the Amazons and the Facebooks and a bunch of others. The other 483 companies, companies are all long established companies now. Some of them have been renamed. Some of them are companies which existed before, but not in the Fortune 500, and have gradually grown into the Fortune 500. So I'm not saying there's no turnover in the Fortune 500. I'm saying when you look under the hood at the number of companies which have genuinely come out of nothing to become members of that club, it is a tiny number.

And so is it just that the stories about the Amazons and the Facebooks and the Googles have become so dominant in business coverage that we ignore everything else that's happening? You know, why are we obsessed with this idea of corporate disruption and destruction?

I mean, there's two or three things going on, right? One is absolutely, when you pick up the business press, it is full of these big companies. There's a couple of other points going on as well, which is that they are not just big, they are also reaching across a number of different industries. So there's this sort of hypothesis that Amazon, for example, or Google are not content just to stay in their chosen sector. They want to kind of move in and disrupt a bunch of other sectors. So it's very easy to see how an argument can kind of be propagated that says no industry is immune. And of course, I can't completely disprove that that's going to happen. I'm just saying let us take a little bit of a sense of history here. Let's remind ourselves of the Conversations we had, for example, in the late 90s when many people were predicting the imminent demise of banking and goodness knows what other industries, and it did not happen then. So let's be cautious before we predict that it's going to happen this time.

And which companies are some prime examples here? You know, what are the old school companies that are doing just fine even in the face of competition from the likes of Amazon, Google, Facebook, Netflix, etc.

So in some ways it's a very boring list I'm going to give you. I mean, there's a few categories of established companies that are doing well. Some of them are literally just everybody's favorite stories. And I can mention JP Morgan, I can mention Procter and Gamble, I could mention the New York Times and so forth. I mean, these are big established companies who haven't just survived because they're big, but they've actually done some really cool things in order to continue to adapt. And then of course you do have other companies which were perhaps were not quite so well known before, who have become famous for kind of dramatically in reinventing how they work. I live in Europe. ING bank in the Netherlands, for example, has become very famous for its phenomenal kind of rethinking of its internal processes using agile methods. If you live in China or if you spend time in China, you know the stories of Haier, the white goods company, which has completely rethought how it is an incumbent is going to operate and it's done very well as a result. But you see this in some ways it kind of misses the point to say here are the one or two exemplars. Because in fact, behind the scenes, most of these large established companies are feverishly re engineering, delayering, simplifying, trying to get closer to their customers. There's a lot happening which doesn't make the headlines, which is actually a huge part of the story of almost like internal creative destruction.

So it's not that they have a stranglehold on competition in their sector or there are regulations that are working in their favor. It very much is that they are changing their strategy to face this digital threat.

That's right. It is actually true that these companies are doing a number of different things at the same time. And sometimes they are absolutely falling back on regulation as a sort of a defense mechanism, and sometimes they are absolutely building on some of their existing strengths. But they're also trying to take on the upstarts and the big tech companies at their own game.

So let's talk about those different strategies for combating all the threats that are coming at you. You talk in the article about four. So maybe we should go through them one by one and talk about the pros and cons of each.

I mean, for me, the starting point is my colleague Gary Hamill. He coined this phrase back in the first.com era. He said, out there there's a company who's forging a bullet with your name on and your only option is to shoot first. In other words, if you are Walmart, let's say your only strategy, they would argue, is to fight fire with fire, to take Amazon on at its own game. And so of course we do see companies that have done this. And a great example nowadays is indeed the New York Times, which has somehow succeeded in getting to, I think roughly 8 million online subscribers. It has now become more successful as a digital company than it was in the old paper based world. Now, it's taken them a long time to get there, let's be clear. But there are many, many other strategies out there which don't involve that direct fighting back strategy.

And so what are some other things we might do?

I've arranged this in the way I presented in the article as a sort of a two by two matrix. So the other, shall we say, proactive strategy, if fighting back is clearly a proactive strategy, it's fighting fire with fire. The other very proactive strategy where you are deliberately trying to push the insurgent into a corner, but you're doing it on the basis of your existing strengths rather than playing the game of the insurgent. And I simply call that doubling down. And doubling down says we are a successful company in our own right. We have assets that this new company cannot possibly match. And if we continue to really invest in those things, we will actually be able to not just sort of survive, but actually to some degree, actually reinforce our position. So Disney is the great example of that. We all know the, the Netflix story now, and this is told so often, but there is actually a side to that story which not everybody knows, which is around 2005, 2006. This is of course when Netflix was really starting to ramp up its streaming service. It became really possible for us to watch movies on demand. Disney could have said we're going to get into streaming at that point. But of course it was a very uncertain market. They didn't have the capabilities in stream me. But what Disney did, and what Disney does to this day is they doubled down, they reinvested essentially in content. And most people will know that they bought, they bought Marvel, they bought Pixar, they bought Lucas films, all of which were essentially ways of, you know, building out their stable of high quality content production and of course a huge library of materials that every streaming service desires. So, I mean, it's a long story, but essentially for the first decade of Netflix existence, Disney really didn't bother to actually take Netflix on at its own gain.

Yeah. And then all of the streaming services had to start creating their own content to compete with that amazing creative engine that Disney became.

Indeed. And indeed, I mean, the tussle continues today between the content creators on the one side and the streamers distributors on the other. And it's become a bit of an arms race, as we all know.

Yeah. So those are the proactive strategies, which would obviously seem to be the best course of action. But incumbents have survived by not being proactive.

Yeah. So of course everyone wants to tell a good, positive story. And perhaps we come back to this at the end in terms of how you tell your shareholders what's happening. But there are absolutely two completely legitimate defensive strategies that I have observed. The first is what I call retrench. This is an incumbent company recognizing that there is an insurgent, there's a new upstart who is eating into their existing market. Retrenchment says, I accept that that is happening and I realize that I don't really have the skills to compete with them directly, but it is a heterogeneous large market in which I operate. And retrenching means sort of pulling back a little bit, consolidating our existing position, possibly through merger, acquisition, lobbying, through regulation, a number of different tactics that help me to shore up or defend my existing place in the market. If you take for example, the well known story now of the demise of Kodak and Polaroid and so forth, when digital imaging took off, all the big manufacturers of traditional cameras, and I'm talking about Conica and Minolta and Canon and those guys, what did they do? I mean, they could see that their market was being attacked, they didn't give up, they just basically merged with one another in order to create economies of scale to try to sort of shore up a position. And then I think perhaps an even better example actually is the world of retail banking today. When we look at any retail bank, it could be JP Morgan, it could be Citibank, it could be Barclays or Lloyds in the uk. Their strategy in the face of fintech insurgents is of course to continue to be what they've always been, which is the very secure, trustworthy home for your primary bank account. We see some mergers happening, we see consolidation happening. We see them pushing back against, for example, blockchain technology by working with regulators to keep blockchain at bay. We see them doing a number of other things, for example, working to build capabilities in some of these new areas, but with a sort of an understanding that actually their biggest priority is to make sure that they maintain their existing market share amongst their existing customers. I mean, it's, you know, it's a multi, multifaceted strategy. But ultimately I see this as a retrenchment. So that's retrenchment. That is the third strategy. The fourth strategy is in some ways the least desirable. I call it moving away or migrating away. I mean, you can call it giving up if you like, but it is absolutely a pragmatic look as a difficult situation where I can see that my market, the business I used to be successful in, is kind of disappearing before my eyes. And, you know, you can think of poor old Kodak in the early 2000s where, you know, they had nothing left to offer as the world migrated to digital imaging. And of course they tried for many years and they'd failed. So what does one do if the market which you used to be see as your own is shrinking and is being taken over completely by digital players? Well, moving away is a strategy which says as long as I'm smart and proactive about it, and as long as I have a little bit of luck going with it, I can find a way of almost like sort of rebalancing my portfolio, taking resources out of the things which are being destroyed and moving them into areas where I have a shot. And so by getting on the front foot and moving almost like before everybody else realizes there's a problem, can in fact be a good strategy. It's very rare that that happens. I mean, I'll be honest, most of these migrate away or move away strategies are kind of a last ditch effort to survive.

[Alison Beard]

Asana is the number one AI work management platform. It's where work connects to goals so your entire organization can move forward faster. Asana is where AI is seamlessly intertwined with every project, team and goal. Try for free [e-mail] that's asana.com.

[Julian Birkinshaw]

Why.

[Muriel Wilkins]

Should you listen to the Worklab podcast from Microsoft? Because it's made for leaders. Leaders who know they must adapt to stay ahead. Those leaders also know that AI powered organizations will be better. Better at spotting opportunities, better at creating new products and business models, and better at maximizing value. Worklab is the Place to find real world lessons and actionable insights to prepare you for the next phase of AI at work. That's Worklab, Work Lab, no spaces available. Wherever you get your podcasts.

[Alison Beard]

How do.

[Julian Birkinshaw]

They choose which path to take?

Everyone wants to know that answer, right? What should I do? And of course, the truth is, it's complicated. The truth is that as an emerging technology takes hold and some upstart companies start using that technology to find their way into the sector, there's a huge amount of ambiguity and the right way forward is not clear. And we've seen that story played out time and time again. And right now, for example, we could absolutely say, how is blockchain technology shaking up financial services? What is the right strategy for a bank? And nobody has the right answer to that. You can also look at the automotive sector and you can look at electric vehicles and hybrid vehicles and fuel cell vehicles, and you can say, what is the right strategy for a major automotive company? I don't mean Tesla. Tesla strategy is very, very clear. But for all the incumbent automotive companies, what is their strategy for coping with that sea change away from internal combustion engine in the period of ferment, the period of ambiguity? The best advice I can offer is that actually you have scope to experiment with a number of options. I mean, doing all four things at the same time feels like overkill. You've got to have at least a point of view on the merits of each of those things, given your specific situation. But there's absolutely scope, for example, to create a unit whose job is to fight back directly whilst having another unit which is feverishly kind of reinventing itself or re engineering itself in order to consolidate its existing position. But at some point you have to put your, you know, your bet on the horse, the main horse that is going to sort of see you through here. Because strategy is always about choice. You know, the essence of strategy is making choices by default, you know, doing something which involves taking money away from certain things and doing other things. And of course, the trick is knowing when to switch from doing a little bit of everything to putting almost all of your energy and commitment and political capital around the transition to some sort of new world.

So this is sort of bad news for startups. You know, it seems like a bunch of early tech companies made it through and achieved sort of Fortune 500 Global 500 status, and now all the old established companies are sort of getting digital transformation or figuring out their reinvention. Is there still room for disruption from all these unicorns we're hearing about? Or Smaller companies.

Yeah, look, there is absolutely, and let me, to avoid anybody so say criticizing me on false grounds. I mean, both narratives are true. In other words, it is absolutely the case that disruption is happening and that some of these unicorns will actually ultimately become hugely successful companies in their own right. And alongside those sort of five or six big tech companies that everybody talks about, a few of them will make through, but the point is that most of them will not. That is just the natural order of things. That getting to unicorn status, a billion dollars of putative market value, it sounds like you're assured, but in fact you're absolutely not.

Yeah, I know you haven't studied this, but do you think that there's more disruption in sort of the small to medium sized business area?

So one of the criticisms, I present this all the time to executive groups and one of the criticisms I will hear is, look, of course you're focusing on the top tier of the market and that's always the most stable bit. And what you're missing, they will say is the lower tiers. And of course there is some truth to that and I don't have hard data. It is always going to be the case that in any stratified market, the bigger, most successful companies will always be the kind of the last to be really hit. I will put aside the world of retail because retail is such a low margin, fragile business that some of the normal rules don't apply to retail. But in every other sector it is absolutely the case that some of these mid sized companies are losing out. But again, let's think about what losing out means. Losing out generally does not mean bankruptcy. Losing out generally means being bought out by another company. You know, we, when you go back right to the start of our conversation and I said, look, you know, the changes in the Fortune 500 have been much less than people think. Well, there's actually been quite a lot of turnover in the lower riches of the Fortune 500. 500, because many of the old members of the Fortune 500 just simply got bought out by the bigger ones. You know, a company like JP Morgan or Citibank has over the last 20 years acquired 10, 20 regional banks each. And of course those regional banks used to be members of the Fortune 500.

What does this mean for the economy, for consumers, for employees? This idea that once large companies are large and have a lot of money and a lot of people to think about, you know, how to beat disruption, that they're going to keep dominating. And that is true for big tech. Now, you know, for those companies that have broken through, it's true for them as well.

That's right. I mean, there is this nagging worry in terms of sort of welfare and job creation that somehow the amount of inertia that I see in the system is unhealthy. And I kind of see those arguments. But I'm much more optimistic actually that the process of creative destruction of having, and this is the US and the UK particularly. I mean, other parts of the world have tighter labor markets, probably more restrictive rules about startups. But in the parts of the world I know best, there is a vigorous marketplace for new ideas, there is a vigorous marketplace for corporate control and those allow the startups to come through. And it also keeps the incumbents honest. Now I think that's absolutely the case for these big incumbents. I see them working very hard all the time to re engineer and delayer and try to stay relevant and they're doing a better job than most people give them credit for. I do completely concede the point that unfortunately there are some sectors of the economy where the big tech companies have become so dominant, using some of these new sort of increasing returns to scale that are sort of central to the digital economy, that actually they are now almost unassailable in competitive terms. I do actually think that there is a huge role for regulation actually in setting the terms of engagement a little bit more narrowly because we are now looking to five or ten years of absolute dominance amongst certain parts of the economy by Google, Facebook, Amazon, Microsoft. Strangely, I think Apple is less of a threat in terms of absolute dominance. But that's a personal view and not Tesla either, by the way. I mean, it's a separate conversation. But I don't see any scenario where Tesla dominates its sector in the way that Google, Facebook, Amazon and Microsoft will dominate their sectors.

So you're not worried about the old economy companies that have managed to survive and thrive. They've done it in a way that's healthy for the economy. But we're worried about those disruptors that broke through and are now the big players. We're worried about them.

The big tech are now the six most valuable companies on the planet. Yeah, because almost by definition the old economy companies are companies that live in a world of what we often call diminishing returns to scale, which, you know, were susceptible to all the old regulatory systems which were invented in the classic industrial era. And we understood the rules of the game there around what a dominant position was, you know, what the necessary sort of regulatory rules were to stop any company becoming too dominant or to dump their prices too much and so forth. So I'm pretty sanguine about all of that. I mean, you know, it is true that say, healthcare and financial services are industries where we see some possibilities of established companies gaining unassailable advantages, for example, through returns to scale, through information, but I don't see any evidence of that just yet.

As you're advising companies, is there one set of executives in one sector industry that you would say, hey, it's really time to watch out. Which sector are you most worried about and do you think needs to start considering these four strategies quickly?

It's a good question. So the way I now think about it is that disruption of industries happens on both, shall we say, the demand side and the supply side. So a demand side disruption is technology enables the user experience to change dramatically. And that is of course, streaming of movies, that is, for example, consumption of news, that is taking pictures and sharing them with friends. Right. Those are the sectors where the threats are the most visible because the changes happen quickest. And those are the sectors where incumbent company executives have to be most attuned and most proactive. But you've also got disruptive changes on the, shall we say, supply side. And by that I mean things like the traditional big pharmaceutical companies being disrupted by biotechnology, which obviously is a very different way of creating drugs, but has no implications for how drugs are actually marketed and sold globally. And it's also interestingly, the automotive sector where ultimately a car is actually still going to be a hunk of metal with four wheels, whether there's a battery powered engine inside it or whether it's an engine powered by an internal combustion. And so actually these so called supply side disruptions are typically much slower moving. The incumbent companies typically have so much power in the retail side of things and in the brand and the reputation that they no one should ever rest on their laws, but that they actually have time to adapt quite successfully. So when I talk to people in the automotive industry or utilities or pharmaceuticals, I absolutely talk about many of these things. But I'm conscious that they've actually got time on their side because you take any of those industries I've just talked about, and to the extent that we've seen disruption, it has played out over decades, not over years.

[Alison Beard]

Terrific.

[Julian Birkinshaw]

Well, Julian, thank you so much for.

[Alison Beard]

Talking with me today.

[Julian Birkinshaw]

You're most welcome. It's been a pleasure.

[Hannah Bates]

That was London Business School Professor Julian Birkinshaw in conversation with Alison Beard on HBR IdeaCast. We'll be back next Wednesday with another handpicked conversation about business strategy from Harvard Business Review. If you found this episode helpful, share it with your friends and colleagues and follow our show on Apple Podcasts, Spotify, or wherever you get your podcasts. While you're there, be sure to leave us a review. And when you're ready for more podcasts, articles, case studies, books and videos with the world's top business and management experts, find it [e-mail] this episode was produced by Mary Do, Anne Sani and me, Hannah Bates. Ian Fox is our editor, and special thanks to Maureen Hoke, Nicole Smith, Erica Truexler, Ramsey Cabaz, Anne Bartholomew, and you, our listener. See you next week.