Disruptive Innovation

During a Crisis, Find Your “Inner Zone of Excellence”

By Robert Dilts

During a crisis, we have a choice. Either we find our "inner zone of excellence" and re-energize by connecting with the strength within. Or we regress into survival strategies that weaken our position further.

The inner zone of excellence is a key part of what is known as the “inner game” of business. The concept of the “inner game” was developed by Timothy Gallwey as a way of helping people to achieve excellence in various sports (e.g., tennis, golf, skiing, etc.), music and also business and management training. Fundamental to the inner game is our ability to stay in a high performance state when confronted with difficult circumstances.

Many challenges will present themselves in our business : fear of the unknown (i.e. what will happen tomorrow ?), dealing with loss (i.e. losing a member in the team) and a general sense of vulnerability (i.e. how can I succeed in spite of unfavorable circumstances ?). These can plunge us into unhelpful survival strategies: attack, escape or rigidity. This frequently results in temporary regression or inertia.

On the contrary, we can focus in our "inner zone of excellence" and feel :

o No fear of failure or anxiety about achieving our goals

o A  state of focused spaciousness in the mind and relaxed readiness in the body

o Performance coming without effort and without having to think about it

The problem is our relationship to money

That's what Peter Koenig told me in the “Money Seminar” that I recently attended. This is an astonishing course and I recommend it to everybody. Peter has an original vision of money related problems. According to him, money itself is not a problem: it is only a tool to facilitate transactions. Our relationship to money is at the source of difficulties such as the financial crisis. For instance, many people are afraid of lacking money to sustain their own security. This is an illusion. Whatever amount of wealth they own, they will always feel they do not have enough to feel safe. They will spend their life accumulating endlessly. In reality, we all have inside of us the means to feel safe, with or without money.

Here are excerpts of an interview of Peter Koenig :

“ Crisis equals change and opportunities for growth, it is said. What could be the benefits of this crisis?

Peter Koenig : Generally speaking the main benefit of this crisis is that it brings us away from the fictional, abstract, self-delusional world we have been pretending is the truth and natural and call "normal" -  a fiction mirrored by the financial system from inception in its design in 1692 - back to reality and closer to nature. A healthy remembering process.

Polia : Nobody controls a market disruption

Polia Consulting is a Consulting company specialised in Knowledge Management. It was able to make full use of the market disuption which lead to the creation of this new concept. Its founder played an important role in promoting it in France. However, despite this position, Polia Consulting was not able to control the evolution of the market disruption.

Knowledge Management is a new management method which creates a disruption in the consulting market. It allows companies to anticipate the future management of its employees’ skills. It valorises them and assures sustainable cooperation between the teams. This new concept was born during the late 1990s, and it quickly got the attention of many company executives. By 2001, it became the cutting-edge theory that everyone was talking about. Polia Consulting is a consulting company which was created that same year, based on this new concept. It quickly became a leader on the market, making outstanding profits and growing at an astonishing rate. When one listens to this tale, one is admirative of Polia Consulting’s acheivement. What timing! What success!

However, Jean-Yves Prax, founder of Polia Consulting, tells his story in a much more humble manner. He confirms that he participated in the coming of a market disruption but admits never having been able to control its development. As a matter of fact his undertaking has not always been so glorious. In 1993 he created his first company, CorEdge, a consulting firm based on ideas which were very close to Knowledge Management. The first brochure edited by Jean-Yves Prax already mentioned the importance of “Knowledge” for businesses. But the market for Knowledge management was not ready at the time as no potential client saw the point in giving importance to competence management. In the meantime, CorEdge started by working in the Enterprise Content Management sector, a technological breakthrough which was then very popular for companies. CorEdge had a hard time establishing itself in a market where competition was already feirce; it indeed became a minor company in this domain and its financial situation was uncertain.

Jean-Yves Prax, while being an entrepreneur, was involved in the dawn of Knowledge Management. He lectured conferences and wrote articles and books about concepts which later became the basis of Knowledge Management. At first, his ideas were vague but they soon became clear as he expressed them in more depth. Most importantly though, mentalities in companies changed. The concept of skill management soon appealed to company directors. It was a Japanese man called Ikujiro Nonaka who made the concept of Knowledge Management official in a book called “The Knowledge Creating Company”. Immediately breathtaken by his ideas, Jean-Yves Prax spread the new theory in France. His public was enthousiastic and he was soon a big part of a mediatic outbreak which came to its peak in 2001.

It was then that business truly started to pick up for Jean-Yves Prax. He left Coredge into the hands of new owners and founded Polia Consulting which was dedicated to Knowledge Management. The new company soon prospered thanks to Jean-Yves’ reputation. Despite its recent creation, it gained a major Knowledge Management contract from a large French corporation. Business then started flowing and Polia Consulting was soon enjoying sustained growth.

When asked about how he was able to be so succesful, Jean-Yves Prax stays very modest. He humbly replies : “I happened to find myself in the right place when the tidal wave of Knowledge Management broke out”. He undeniably played a role in spreading the concept in France. He was however incapable of influencing the timing of the disruption. Would he have been able to do it, he could have forced the market to adopt the concepts of Knowledge Management earlier on. He would have then won time in the success of his entreprise.

Market disruptions have a steady development. They only take shape when two conditions are met. First of all, future clients must have latent needs for which they have not yet found an answer. In this case, companies feel frustrated with poor skill management, and other management techniques are unable to solve the problem. Secondly, a solution appears and is adopted by the clients, like the ‘Knowledge Management’ theory created by Nonaka and passed on by others. However, time is needed for clients to understand the potential of the solution, which causes the market to mature slowly.

Nobody can control the development of a market disruption. Even if the founders of the concept can legitimately claim themselves as being it’s father, they depend on the market’s evolution, which they do not control. Unless people see the point in their thoughts, their reflexions stay theoretical and approximative : indeed, the responses of their future clients are what enable them to enrich and perfect their theory. Jean Yves Prax explains: “It was the latent demand of the market which made the development of the ideas possible. When I reread the first books that I have written, I find they are flawed. It was only when companies were ready to receive the message of ‘Knowledge Management’ that it was born and was able to spread.”

PriceMinister : how to create a unique value

How do you stand out in the crowd when all competitors do the same thing?  How do you provide a unique benefit that no other can offer? This seems an illusionary quest. And yet, Priceminister reveals that it is possible. This company has taken advantage of the e-commerce market disruption. It has created an innovative benefit for its clients, putting itself above standards. Judging by its results, it has played better in the market disruption than a lot of other protagonists. What is their secret in reaching this objective ? The answer is observing clients' frustrations.

Priceminister is an online buying and selling site for new and second hand products. The corporation was created in the year 2000, a very inauspicious time, being in the middle of the internet bubble collapse. Nevertheless in 2006 the business is doing very well. It handles 20,000 transactions in France per day, with a 100% growth in 2004 and 2005. At this pace, the business should outmatch E-Bay soon. Priceminister is one of the few able to create a new business in electronic commerce and earn loyalty from customers, while many others have not survived the new economy's dream.

The key to success resides in a major innovation in value proposition towards the client. Priceminister has created two unique benefits that are unequalled today by its competitors. The first benefit is the trust instilled between individuals during transactions of second-hand equipment. The second benefit is the precise description of cultural products (books, CDs, films/movies) of which variety is almost infinite. Each product on sale is described as precisely as if new. How did the founders of PriceMinister come up with these ideas?

The inspiration came by observing the frustration clients felt with other solutions. Let’s take the example of a web surfer who wishes to buy a product on line, without going through the misfortunes of auctioning. He can buy a new product using a traditional online buying/commercial site, such as FNAC.com or Rue-du-Commerce. The products are perfectly classified with well defined characteristics. The site guarantees the buyer’s satisfaction: if the client is not satisfied, he can send the product back and is refunded. However, the site does not have fulfil all expectations. Perhaps the buyer wants to groove on the sound of Charles Aznavour’s first songs, whose album is not in stock at the store. FNAC.com's catalogue will not include the desired product.

Or perhaps he wants to acquire a second-hand DVD player in order to enliven his rainy afternoons in his country house. To him, FNAC.com's prices seem too expensive. Our internet user can then try online classified ads. This allows a contact between a great number of sellers and buyers: the choice is large with appealing good deals.

But the buyer embarks on a journey riddled with traps. The ad describing the product is incomplete, maybe even erroneous: he isn’t sure he’s ordering the right product. He makes contact with a seller he does not know: and what if the stranger isn’t honest? If he is not satisfied with the product he receives, he has little resort . It is a risked transaction and he can pray god that it will not go amiss.

Priceminister has defined its value proposition by addressing clients' frustrations. Why not offer the best of two worlds: FNAC.com's high quality service and/combined with the diverse low prices of auctioning?  Its CEO, Pierre Kosciusko-Morizet explains: "We have designed our service to equal the performance of online e-commerce sites. For each of our transactions we act as a trusted third party between the buyer and seller. We guarantee that the seller will be paid.

If the buyer is not satisfied, he can send us the product and is refunded. We put at the seller's disposition a gigantic data base with products' characteristics. When they put an item on sale, all they need to do is enter its bar code and its pre-registered technical information is activated. This allows the buyer to be completely reassured on the product he orders."

By designing such a service, PriceMinister has created a new market: the company targets a new segment made of unsatisfied clients of e-commerce sites and disappointed users of online classified ads. It’s the emergence of a new market that explains the company's regular growth.

Newspapers : learning a new paradigm

The Internet disruption has transformed the paradigm that rules the newspaper business. Newspapers have to find new value for their readers. They have to reinvent the pricing model. They have to learn again the basics of their business. But how do you do this while keeping on running your day to day operations ? The IHT (International Herald Tribune) gives us a simple answer. First, they set a separate Internet team to experiment the new media. Later, when online news were more mature, they started integrating the Internet team and the Paper team to create a multi-channel team.

Online news has grown to become a major information media. The Internet revolution started in 1995 when the emergence of web sites created the possibility to publish news online. In 2006, everybody admits the hard facts : there are at least as many readers on the web as there are for printed newspapers. As many as 2.5 Million users visited the IHT Online Edition in the month of January 2006. On the other hand, overall newspaper circulation (the number of printed newspaper copies issued) is flat or decreasing.

Unfortunately, the financial picture of the Internet revolution is not that bright. Readers’ enthusiasm for online news does not show in revenues. Since the early days, the disruption raised a fundamental question : if news are published for free on the web, will the Web cannibalize the printed press ? Will it destroy the industry’s profits ? Advertisement, the main source of newspaper revenues, generates much less from online than from paper. However, according to TNS Media Intelligence, the French Internet advertisement market, although small in size, grew 74 % in 2005. Could it get big enough and and compensate the decrease of paper advertisement revenues? Nobody can tell.

In order to learn how to deal with the new paradigm, IHT (International Herald Tribune) initially created a separate Internet team. They were not alone: the New York Times created a separate subsidiary named New York Times Digital to run the Internet activity. IHT’s traditional core business was keeping employees focused on paper. At the same time, the IHT’s Internet team was free to experiment the new possibilities of the web. They re-designed parts of the site frequently, for a nicer look and a better user experience. They moved from a once-a-day-update to 24-hours breaking news publishing. They launched blogs around events such as Davos. They learned the new processes required by a publication on multiple media. For instance, if an article is published on paper and web, any correction to the text has to be reflected on both media. They continue to test and learn. In spring 2005, they have launched a new mobile service that makes news content available on smart phones. 9 months later, this service already enjoys 350 000 page views per month. 

Thanks to the freedom it was given, the Internet team did not have to worry about online cannibalizing paper. It could take a completely new approach to rethink its pricing model. Paper can be bought by the copy in a kiosk or by subscription. This model does not fit the web. Meredith Artley, director of IHT.com, says : “Readers can easily find so much news and information on the Web for free. Certain aspects of the site are incredibly unique, such as opinion pieces. That was part of the thinking behind creating TimeSelect, a fee-based service that gives readers access to popular columnists, multimedia content and archives”.   

Today, with the growing flow of online readers, newspapers have no other choice than getting a strong online presence. As Meredith Artley says: “The internal debate about cannibalization is now gone. Web readership being so big, everybody knows that if we do not have a presence over the web, a competitor will take our place.” Mentalities have changed. Journalists view an online experience as a plus on their resume. The web has become a central part of the newspaper business.

IHT is now organizing the integration of paper and Internet teams. Upper management has clearly set the direction : IHT is moving from a paper business to a multi-channel business. It is the future of the company and everybody in the organization has to understand it. The core business is set to produce news for both paper and web. Individuals from the Internet team are working closely with the print side of the business, and vice-versa. They make their expertise available to their colleagues to migrate smoothly to the new paradigm.

This is a good lesson on how to take a new direction in a market disruption. In the beginning, the effect and benefits of the market disruption are not clear. As a first step, it is best to create a separate “disruptive” team to learn and experiment the new possibilities made available by the disruption. The core business is kept on running the existing business in the traditional market. When things have matured and the market direction is clear, the second step consists in integrating the disruptive team and the core team to embrace the new paradigm.