The unpredictability of retail disruption offers an unmatched playing field for CEOs to hone the practice of disruptive jiu-jitsu—learning from the competition, then deliberately disrupting one’s own business model to stay ahead.

Benjamin Finzi, managing director, Deloitte Consulting LLP, and co-lead of Deloitte’s Chief Executive Program

We’ve recently passed the season of Amazon Prime Days, a time-honored example of how a disruptive competitor throws down the gauntlet. Other online retailers should try to figure out not only how to not be disrupted, but how to take the energy of the moment, and disrupt themselves, to their own benefit.

When a competitor launches an attack, a CEO’s first instinct is usually to place sandbags around the business, pursuing a series of defensive moves to protect the company. But in the face of genuine disruption, this approach may be doomed to failure. No barrier is likely strong enough to withstand the impact of a truly disruptive business model—by definition, that is what makes it “disruptive.”

Starting with Amazon, retail has been in a constant state of disruption more intensely, and for longer, than probably any other industry.

And in an environment teeming with potential disruptions, sheer heft is typically no longer a reliable defense in and of itself. Indeed, size can be a liability: as our research has noted, it’s the bigger, less agile legacy companies that often prove weaker and more vulnerable.

Strange as that statement may have seemed in the good old days of legacy sovereignty, that’s the very lesson learned by many retailers who initially dismissed the strategy of Amazon’s founder, Jeff Bezos. A 1999 Wired profile titled “The Inner Bezos,” published when Amazon primarily sold books and Bezos was just 35, asked him what retail would look like in 2020. He predicted that people would order the majority of store-bought goods online, including food staples, paper products, and cleaning supplies. The only way brick-and-mortar retail would survive, he said, was by providing “entertainment” and “convenience.”

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Vincent Firth, managing director, Deloitte Consulting LLP, and co-lead of Deloitte’s Chief Executive Program

At the time, very few retailers gave his projections much weight, and understandably so. In 1999, e-commerce sales accounted for only 0.64 percent of the United States’ total retail sales, compared to more than 10 percent today.

Starting with Amazon, retail has been in a constant state of disruption more intensely, and for longer, than probably any other industry. Bezos aside, retail leaders have had to reinvent themselves, their business models, and their approach to consumers as virtually every bit of ground has shifted beneath them.

For the past four years, we’ve been studying CEOs of top legacy companies, including retailers, and have heard what they’ve had to say about leading in a time of disruption. One consistent takeaway from these talks was that taking the approach of going on the offensive, seizing new competitors’ forward momentum, then turning that momentum against them, introduced the possibility of beating disruptors at their own game. We dubbed this approach disruptive jiu-jitsu—and classified it as one of five key attributes of the “Undisruptable CEO.”

Finding patterns, deconstructing them… and turning them to one’s advantage

In his 5th Century BCE military treatise The Art of War, Sun Zi wrote: “It is said that he who knows his opponent and knows himself will not be imperiled in a hundred battles.” To practice disruptive jiu-jitsu successfully, CEOs should know their opponents. By actively seeking out emergent market concepts, particularly those with apparent destructive potential, leaders can reduce the element of surprise and prepare to meet the competitive threat with an equally impactful response, whether or not it is thoroughly novel.

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Mark Lipton, eminence and content strategy lead for Deloitte’s Chief Executive Program

CEOs should therefore commit their organizations to scanning the environment, identifying unusual or interesting patterns of new value creation that serve the customer, and being ruthlessly curious about the underlying sources of that new value.

Is there anything to be learned from these ideas? Can they be seized, internalized, and made better? Can potential disruptive scenarios be played out to their logical conclusion: “If X, then ultimately Y?” All of these questions can help CEOs recognize nascent disruptions and devise strategies for turning them to their own advantage.

Many traditional brick-and-mortar retailers are adapting to the new competitive reality Bezos predicted—and in large part, created—by making their own moves to deconstruct certain elements of e-commerce and integrate them into their own business models.

For example, Nordstrom introduced Nordstrom Local in the Los Angeles market in 2018. These are stores with a small footprint, no inventory, and only a few high-end garments and shoes on display. Instead these spaces house personal stylists who offer fashion tips, onsite tailoring, and wines and manicures for purchase. The goal is to provide a unique customer experience that entices customers to buy merchandise on Nordstrom.com, which then provides same-day delivery service.

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Bringing digital into physical stores

Such strategies aren’t unique to high-end retailers. Companies like Best Buy have been busily linking select e-commerce capabilities to the potential advantages conferred by their physical stores. Rather than fight “showrooming” customers who visit the store to examine a product in person before buying it from an online competitor, when Hubert Joly was Best Buy’s CEO (he recently became Executive Chairman) he decided to take advantage of it by instituting a price-matching policy.

Best Buy also offers branded floor space for companies such as Apple, Samsung, Amazon, and Google to showcase their products. With 13 such brands under his roof, he augmented Best Buy’s own business model and in fact found a way to attract more would-be “showroomers”—and offer them the instant gratification of an informed in-store purchase.

With brick-and-mortar and online retailers continually using disruptive jiu-jitsu against each other in an ongoing battle for supremacy, customers can likely expect to see a steady stream of interesting innovations in the unfolding retail customer experience.

Retail self-disruption is hard, but beats external disruption

Retail CEOs practicing disruptive jiu-jitsu will likely need the emotional fortitude to confront the impermanence of their own business model—and a beginner’s mindset to help them find the insights needed to self-disrupt, before being disrupted by someone else.

Though the process can be painful and full of risk, the alternatives can be worse. As a Forbes article on self-disruption speculated: “Imagine if the taxi industry had taken a moment to self-reflect on how it could improve its offering to consumers before Uber came in and made it nearly irrelevant.”

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Within the very same forces reshaping retail are the potential paths to market success—for those CEOs who can, with a bit of disruptive jiu-jitsu, turn those forces to their own advantage.

Deloitte Touche Tohmatsu Limited, commonly referred to as Deloitte, is a global accounting, consulting and professional services firm.

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