If you haven’t signed up for CB Insights’ (CBI) excellent newsletter, you really should. For those of us focused on the role VC-backed companies play in disrupting established industries, it’s essential reading. That’s why it was so disappointing to see them so drunk on Silicon Valley disruption Kool-Aid that they are starting to get stuff wrong.
The Silicon Valley Disruption Cult Kool-Aid
Last week, CBI wrote:
“If you’re part of the leadership team of a large incumbent corporation, it’s hard to understand how quickly things change, especially when things are going well…. Sometimes, the change comes as the result of technology. The easy, intellectually lazy argument when it comes to technology is to dismiss it.”
This is the mantra of Silicon Valley – a mantra that is more often right than wrong. But, it’s not ALWAYS right, and it’s dangerous to assume that every incumbent who dismisses or downplays a tech-based disruptor is simply being lazy.
The Four Seasons and Airbnb
In fact, the example CBI chose to support the statement above demonstrates the fallacy of painting with such a broad brush:
“Our guests don’t want the Airbnb feel and scent,” said Christopher Norton, EVP of global product and operations at the Four Seasons, speaking to Fast Company last year. He went on to explain that his customers expect a “level of service that is different, more sophisticated, detailed, and skillful.”
These aren’t the words of a delusional executive, but one that truly understands his customers and their expectations. The Four Seasons is a luxury brand that caters to a very specific customer where price is not an object and the expectations for service are far beyond anything AirBnb can deliver today or envisions delivering in the foreseeable future. As Sarah Lacy explained in her response to the CBI newsletter:
“So when Starwood blithely predicts it won’t be meaningfully affected by Airbnb, it sounds like their head is in the sand. When the Four Seasons does, well, I think they probably know their clientele pretty well.”
Porsche vs. Autonomous Vehicles
CBI made a similarly “lazy” claim a few weeks ago with a newsletter titled “Porsche Puts Head in the Sand.” They were referring to Porsche’s CEO saying that the company doesn’t plan to develop self-driving vehicles because, “One wants to drive a Porsche by oneself,” and CBI suggested this mirrored the thinking of BlockBuster’s CEO, etc.
Again CBI’s knee-jerk reaction ignores the reality of the Porsche brand and its customer base. They make cars for people who love the ‘sport’ of driving. As a company, they have always been late adopters of technologies designed to make driving ‘easier,’ because those innovations were contrary to the brand. In fact, they didn’t adopt a fully automatic transmission option until 1990! That’s more than 40 years after Oldsmobile pioneered it. It’s a niche, but the value of the Porsche brand is tied up in the experience of driving one, not riding in one.
While they will undoubtedly add autonomous features over time, they will continue to be a late adopter by choice and by strategy. Their relationships with VW and Audi will play a role, and a future Porsche might look a lot like the Audi RSQ concept from the movie iRobot with a fully manual mode for those moments when you want to drive for sport…or avoid hundreds of homicidal robots.
The lesson here is that both sides of the disruption equation can lapse into intellectual laziness. When most established companies simply dismiss disruptive new technologies and business models, they risk whistling past the graveyard. At the same time, those of us who’ve bought into the disruption mantra, can too easily dismiss incumbents with alternative strategies – strategies that may be successful and could be adapted and integrated into a disruptor’s business plan. In the end, the right strategy for incumbents like Four Seasons and Porsche might be to double down on what has always made them special rather than simply following the trends, technological or otherwise.