Self- disruption and/or self- cannibalization as potential source(s) of sustainable competitive advantage

October 10, 2022

Self- disruption and/or self- cannibalization as potential source(s) of sustainable competitive advantage

Should your well-established, entrenched, incumbent, experienced and profitable organization self-disrupt and/or cannibalize some of its own most profitable products/services as a pathway to ensure its long-run profitability and going concern status? Is this a rhetorical question?  Honestly, if you were the CEO of a relatively large global multinational corporation that was confronted with dwindling sales and shrinking margins resulting from rapid changes in consumer requirements/preferences, shorter product life cycles, regionalism and/or globalization and severe competitive pressures, and this self- disruption/cannibalization idea/thought was proposed to you for consideration,  how would you react? This is not a rhetorical question because this is a real-world/ practical situation that confronts many developed market multinational entities [DMMEs] especially DMMEs in North America and Europe. Depending on the organization’s sense of urgency and the nature of the response, i.e. proactive, reactive or passive you may self-disrupt and/or self-cannibalize and thus successfully thwart potential disruptors/agile competitors and retain/gain market share and margins or you could fall prey to disruption and thus lose market share along with eroding profitability. If I may quote Steve Jobs to reinforce a useful point here, “If you don’t cannibalize yourself, someone else will”(Jobs, n.d). Under the leadership of Steve Jobs Apple disrupted entire industries and had a track record of cannibalizing its own products all while avoiding being disrupted. This attribute along with its own innovative culture has been key sources of Apple’s competitive advantage and drivers of enterprise growth and profitability. But as a business/competitive strategy in the 21st century undergoes “radical” transformation Apple’s lone differentiation generic strategy may not save it from losing market share to global rivals employing integrative generic strategies unless Apple reembraces self-cannibalization which had been ignored/lost under current management. A global multinational enterprise that successfully rode/embraced Harvard’s Clayton Christensen’s disruptive innovation framework to thwart competitive threats to its core business is Dow-Corning. How? By self-disrupting its silicone products used in commercial applications across many industries ranging from aerospace to textiles and from construction to cosmetics. The commoditization of the silicon business in the late 1990s began when smaller agile local players and larger regional suppliers entered the market with competing lower cost products and captured market share and effectively eroded Dow Corning sales volume and higher margins which could be credited to a premium-priced differentiation strategy. Unlike incumbents in other industries whose management remain stiff-necked/complacent in the face of imminent disruption of their businesses Dow Corning’s management went on the offense and promptly disrupted their profitable core business which had captured 40% market share of global silicon industry sales. Two other relatively new high technology MNCs which frequently disrupt industries and/or are perennial/frequent cannibalizes of their own product(s)/service(s) are Amazon and Netflix. They are both industry leaders and have both recorded increased sales growth over the past several years albeit enterprise profitability could be improved on. Nonetheless, few people would doubt the longevity and going concern status of these two disruptors. The $X question you may be asking yourself is how can I tell if my industry is ripe for disruption, is my industry in the midst of disruption, and how should I respond and/or avoid disruption? Well, first do you acknowledge that your business is prone to disruption [actually in the 21st century many industries are prone to disruption], do you know where your industry is on the disruption S-curve, etc, etc? An organizational debate and/or soul searching which may point you in the right direction is to investigate if your business has or can acquire the resources and capabilities to successfully pull off self-disruption/self-cannibalization.