Harness the Power of Paranoia to Disrupt Your Business

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In short, they call upon their sense of paranoia.

Great leaders have this skill. They have one eye peeled for competitive threats and the other alert for dangers. If you ask what keeps them awake at night, they'll have a laundry list. Why don't they rest easy and smell the roses?

Perhaps they remember Kodak. What a great brand. Gone. It's simplistic to think Kodak was destroyed by technology, swept away by the switch to digital photography. The truth is more complex.

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Kodak was a digital pioneer and introduced some of the first point-and-shoot cameras. I'm sure company leaders understood the potential of digital photography. Given encouragement, engineers at Kodak might have pioneered innovations such as smartphones and developed apps to rival Snapchat and Instagram. Unfortunately, Kodak was paralyzed by its success.

To fully embrace the digital photography market would have meant abandoning its core film business. Not so easy. For Kodak, the enemy was Fuji film. Yet Fuji wasn't the real problem; it was just a fellow dinosaur in a world about to be transformed by technology.

Writing recently in Fortune, author Geoff Colvin called preemptively changing direction in anticipation of potential market changes “self-disruption.” In short, CEOs can't be afraid to walk away from their most profitable line if another approach may lead to improved long-term outcomes. Leaders also have to anticipate resistance. Many will put their division — and their careers — before the company's objectives.

Consider the courses taken by two companies in the business of renting and selling DVDs of feature films. Blockbuster consisted of brick and mortar outlets that rented videotapes and DVDs. With only mom and pop stores as competition, Blockbuster rapidly became the leader in movie rentals. However, instead of optimizing the delivery of video content, they focused on expanding their store base.

Netflix blew Blockbuster out of the water by mailing DVDs direct to consumers and facilitating their easy return. This much is ho-hum: one company outmaneuvers another.

But then Netflix CEO Reed Hastings had an insight. Just as the U.S. Post Office was getting hammered by email, sending out hard copies of digital content was equally vulnerable. Hastings realized if he didn't offer online delivery, someone else would. So in 2011, Netflix self-disrupted and adopted internet streaming. As Colvin puts it, Netflix stock took a nose dive and Wall Street wanted Hastings' head. Who walks away from a billion-dollar DVD-by-mail market? You'd have to be nuts.

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No one's calling Hastings crazy now, as Netflix continues to thrive and evolve — even producing its own content. Who needs movies anymore?

When change is the norm, playing it safe isn't smart; it's foolish. No business is immune. I'm a consultant. You'd think this line of work would be fairly insulated from technological upheavals. Everything is face to face or device to device, right? But each year requires change on some level. Harnessing the power of paranoia, I strive to keep one eye on my competition and the other eye alert for new opportunities.

And I trust you do, too.



Sander Flaum is a principal at Flaum Navigators. 

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