Operations

How To Handle Industry Disruption

Posted on May 18, 2016 by Lexi Tucker - Also by this author

Peter Sheahan captured the attention of attendees with his dynamic presentation.
Peter Sheahan captured the attention of attendees with his dynamic presentation.
LAS VEGAS, Nev. — Entrepreneur and CEO of ChangeLabs Peter Sheahan, the opening keynote speaker, presented a powerful idea on the concept of change and what it’s doing to the ground transportation industry. But instead of spending time just talking about how the industry has been altered by technology, TNCs, and other disrupting forces, he wanted the audience to consider something else: What are operators going to do about the industry changing?

Sheahan offered three choices: You can lie in the corner and suck your thumb, and hope it all just goes away. Or you can take the passive aggressive path, in which you nod at all the right times, but then do nothing about the situation. Third, you can accept the world is changing and the need to do something about it.

“I don’t think we should spend any more time in this industry talking about ‘the change,’” Sheahan said. “We know it’s there, we’re feeling it, and we see the new technology and competitive threats. I think we need to change the conversation from what is changing, to what do you about what is changing.”

“You can’t take yesterday’s assumptions into tomorrow’s world,” Sheahan explains.
“You can’t take yesterday’s assumptions into tomorrow’s world,” Sheahan explains.

The Right Response

Sheahan asked: Is it possible to respond to change and do more damage than good through your response? The answer is a resounding “yes.” By overreacting, you destroy value instead of creating it. The ground transportation industry is not the only one being disrupted, and therefore has the ability to study the approaches that helped other successful companies stay afloat.

Sheahan drew a humorous diagram to help explain the situation. Companies start off in “happy land” — that is, a period in which they do well and get too comfortable. This is disrupted when new money makes it into the industry, and new technology allows people better access to the service they desire.

“The mechanisms by which you compete then scatter. Customers who used to be all about relationship are now asking what you’ve done for them lately, and the dynamics start to change,” he explained. To compete, a company can take three different approaches to doing business.

There’s the “niche” approach, which is more narrow and focused in terms of design and user experience; “Volume,” a price based model; or “integrated services,” in which you realize margins are getting squeezed, but if you can sell more product to the same customer, your gross margin will ultimately be the same. So which path is the right one?

5 Strategies For Turning Challenge Into Opportunity
  1. Move towards the disruption
  2. Create more value
  3. Question assumptions
  4. Take intelligent risks
  5. Collaborate

The Road Not Taken

Here’s the trick answer: “The one mistake companies make in the face of disruption is not that they choose the wrong model, but that they don’t make any choice at all,” Sheahan said. You have to make a decision, or you will end up stuck in the middle where you are neither the cheapest nor the most extraordinary provider, nor will you have the ability to sell additional services to make up for where you are losing on either side.

 If you stay in “happy land” too long, he said, it quickly evolves into the land of the boiling frog. To simplify the metaphor, if you put a frog into a pot of water already boiling, it will immediately hop out. However, if you put it into that same pot when the water is cool and then slowly bring up the temperature, it won’t notice until it’s too late. The moral of the story is disruption doesn’t hurt quickly enough to force people to change early enough.

As operators in the ground transportation industry, you are competing more on value than on price. Excellent service and experience are what your customers expect. Sheahan suggests you ask yourself: “Where are the opportunities, and how do you have to act in order to make sure you are creating more value rather than having to win solely on price?”

Questions To Ponder
  1. What opportunities does disruption present you?
  2. Where is the greatest complexity now?
  3. What are the most “emotion-generating/engaging” service attributes you can offer that a TNC could never satisfy?

Change Your Game Plan

Sheahan provided multiple examples of how other companies have moved toward their disruptors and learned from their competitors. One of these was Angela Ahrendts, former CEO of Burberry. When she was asked, “Who’s your number one competitor?” she didn’t say Coach, Gucci, or Louis Vuitton, but Burberry’s own online store. Why? Because customers could purchase products for 25% less online than in the physical store.

 Ahrendts said “the experience of buying from [Burberry] needs to be worth at least 25% of the underlying value of the product.” After implementing new technology in the store, such as tablets and digital screens that suggested other items based on the customer’s personal tastes, Ahrendts was able to augment the experience of buying in-store to help streamline customer service.

It’s all about creating the perception of value. Whether consumers know it or not, value is constructed based on their belief systems. Sheahan illustrated this point with the example of a group of sommeliers who were part of a wine tasting experiment. They stood in an MRI machine while sipping their beverage, and it turned out the higher the perceived price of the product, the more the pleasure center of the brain lit up. Price became a driver of perceived value in the mind of the consumer.

After they got rid of the price and tested based on the region the wine came from, it had the same effect. Finally, when the people running the experiment had them blind taste and then order the bottles from best to worst, the sommeliers set them up in the exact opposite order they had ranked them when they were aware of the price and region.

Value, therefore, is not solely based on personal opinion, but is biochemical as well. As a provider of a service, you have to seek out what really matters to your client. Anyone can open a car door or carry on a pleasant conversation with a passenger. In today’s world, the things people care about are duty of care, safety, and transparency. Question TNC users and figure out how you can beat them at their own game. Instead of complaining about them, work together with your fellow operators and ensure your passengers are getting what they need from you.

Speaker Bio

Sheahan has worked with leaders from companies such as Apple, Microsoft, Hyundai, IBM, Pfizer, Wells Fargo, and Cardinal Health. He is the author of seven books, including Fl!p, Generation Y, Making it Happen, and the soon to be released, Matter.

He has given 2,500 presentations to more than 500,000 people in 20 different countries, and he has been named one of the 25 Most Influential Speakers in the World by the National Speakers Association, and is the youngest person ever to be inducted into their industry Hall of Fame. He can be reached through his website, www.karrikinsgroup.com.

Source: Karrikins Group

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