Shifts in your industry will happen anyway. You need to embrace cannibalism of your products and services to thrive. The real question is; are you a player or a victim.
In every industry, there is an ongoing flow of technical developments and new versions of products and services replacing the older ones. Regularly more radical transformations take place, in which business models shift, and new entrants replace incumbents.
The question is not whether cannibalism is something to avoid or not. The shifts in your industry will happen anyway.
The real question is; are you a player or a victim and – as a result – will you capture the opportunities?
Today manufacturers are being overwhelmed by the many trends which put pressure on today’s performance and future success. New solutions, products and services are emerging. Some are still at a very early stage and others already have an important impact on the existing markets.
Many business leaders are concerned about (potentially) cannibalising their current products or services, which are the bread and butter of today. Some examples are:
- New life cycle services which could delay equipment sales.
- Pay-per-use offerings which could replace equipment sales.
- Radically new solutions using the latest technology which could replace the existing solutions, like digital camera’s replacing analogue cameras.
We also hear bold statements about “disrupt yourself or be disrupted” as an answer to thrive during disruptive changes.
So, the question is, should we indeed fear cannibalism and try to avoid it, or could it actually be a sound strategy to embrace cannibalising innovations to secure future success and thrive?
What is Corporate Cannibalism or Market Cannibalism
Corporate cannibalism or market cannibalism is the decrease in sales volume or market share of one offering as a result of launching a new offering by the same company. The new offering ends up “eating” demand for the older offering – entirely or partially.
3 types of cannibalism to embrace
In practice, we see different mechanisms of cannibalism. In this article, I will describe three forms of cannibalism you should embrace to secure your success of today and in the future and why you should embrace these.
1 – Version updates
This is an easy one, but still, it is cannibalism. Every industry has a certain pace and cadence of updating products, services and solutions with new features and functions. These new versions or models are designed to replace the older ones, preferably as quickly as possible. Examples are the yearly upgrades of trucks, mobile phones and laptops.
2 – Broader portfolios
Your market is not 100% homogeneous. You can divide your (potential) clients into several segments based on their particular challenges and needs. If your current offerings do not serve all segments very well, it often is an excellent strategy to launch multiple variations of your offerings to serve different segments. That way you will expand your addressable market.
Probably, there will be overlaps between the different offerings, which may lead to a decrease in the sales volume of the original existing offering – which is cannibalism. When done right, the additional revenue from the new variations will increase the overall and combined sales volume and revenue, not to mention a stronger brand and market position.
This was an easy one too.
3 – Transformation and disruption
All industries, markets, products and services follow an S-curved lifecycle which ends in declining market volumes and margins. Radically new types of solutions, which solve other kinds of problems, emerge and replace the old solutions.
Sometimes this is a gradual evolution of an industry; sometimes it is quite a disruptive transformation in which incumbents struggle to survive the newcomers.
- Streaming video services replacing VHS Video
- Mainframes being replaced by minicomputers, then by PC’s and now smartphones
- Software-as-a-service instead of buying licenses and DVD-disks
- Operational services to save on consumables and spare parts
- Renewable energy replacing Internal Combustion Engines
These shifts are coming from external forces and will happen, regardless of your strategy.
The real challenge of today
The third cannibalising mechanism – transformation and disruption – is what we find most challenging. This is for most of you a completely different and new ballgame than the first two mechanisms, because:
- Your business model will change.
Changing your value proposition, target market, brand, operating model, earning model, risk-profile, capabilities and competencies is a hefty adventure.
- Potentially, your position in the entire value chain of your industry will change.
- The relevant trends and the results are more difficult to predict, which triggers a much higher level of uncertainty.
The uncertainty triggers a defensive and risk-avoiding attitude with many business leaders. Typical signs for this are arguments like:
- Do not cannibalise our current products or services.
- That is not our core business.
- Nobody else is doing that.
- Our clients are not asking for it.
- Our clients will not pay for that.
- Those new entrants in the industry will never make it, they can be neglected.
There are substantial new opportunities to thrive and to have a meaningful impact on our global challenges like environment, energy, healthcare, nutrition etcetera.
In such disruptive times, companies that embrace the change and pursue the shift to new business models are the winners and those who are stuck in business-as-usual are the laggards who do not reap any benefits from the new opportunities.
To be one of the leaders in a changing industry, you need to:
- Embrace the changes.
- Do new things beyond-business-as-usual.
- At some point, stop doing the old things.
- Which also means replacing old products and services with new one – hence cannibalising your current offerings.
Some practical things you can do now, are:
- Focus on customer value of today and tomorrow.
- Encourage “attempts to cannibalise” from inside your organisation. Let them prove that the new solution is a better alternative and will help the business stay relevant in the future. Often these new solutions have their first successes in small niches of the market, maybe those which you hardly serve at the moment. Hence, they do not threat the current products and services.
- Only pivot and transition away from today’s cash cows if that business is declining and the new solutions and markets become dominant.
Strengthen the capabilities of your business to innovate and change at a higher pace continuously. Establish new management practices, innovation strategies and innovation methods which better fit today’s rapidly evolving industries and complexity.
Actually, we have been cannibalising existing offerings for ages, without calling it “cannibalism”. Cannibalism has been a common practice for everyone. Today, the necessity to replace “the old’ by “the new” is the same, whether it involves your products, services or business model.
The real challenge of today – more than ever – is how to deal with more uncertainty, unpredictability and higher pressure for more radical changes.
One of the symptoms related to this challenge is a defensive and sticky attitude to defend the status-quo of existing offerings and business models.
The name of today’s game is to Adapt and Thrive!