{"id":28586,"date":"2021-02-02T10:30:57","date_gmt":"2021-02-02T10:30:57","guid":{"rendered":"https:\/\/www.ceo-na.com\/?p=28586"},"modified":"2021-02-02T16:31:54","modified_gmt":"2021-02-02T16:31:54","slug":"which-firms-are-allowed-to-be-disruptors","status":"publish","type":"post","link":"http:\/\/servidor-mxigen1.com\/ceona-antiguo\/business\/industry\/which-firms-are-allowed-to-be-disruptors\/","title":{"rendered":"Which firms are allowed to be disruptors?"},"content":{"rendered":"

Outsiders often\u00a0<\/span>struggle<\/span>\u00a0to effect change.<\/span><\/p>\n

<\/p>\n

Digital article by<\/strong>\u00a0Freek Vermeulen and Amandine Ody-Brasier<\/span><\/em><\/p>\n

Conventional wisdom holds that newcomers and outsiders are better than incumbents at disrupting mature industries, because they\u2019re less hindered by conventions, vested interests, and other sources of inertia. A great deal of empirical evidence, however, suggests that in reality outsiders often\u00a0<\/span>struggle<\/span><\/i>\u00a0to effect change. We\u2019re interested in understanding why they struggle.<\/span><\/p>\n

The market for Champagne grapes<\/b><\/h1>\n

To investigate this question,\u00a0<\/span>we studied<\/span><\/a>\u00a0the Champagne industry in France. We conducted a total of 78 interviews with senior executives and industry experts and complemented that qualitative work with extensive quantitative data on all Champagne houses in the industry over a 10-year period.<\/span><\/p>\n

The Champagne industry is interesting because it is very mature and has been operating according to well-known established patterns for a very long time. Yet, underneath the surface, structural change has been brewing, with various houses rethinking how things could be done differently. One of our interviewees compared the industry to the proverbial duck swimming in the lake: on the surface everything seems calm and steady, but underneath the water there is vigorous paddling.<\/span><\/p>\n

Here\u2019s how it operates: vineyard owners are responsible for growing the grapes, which are then sold to the Champagne houses, who turn them into the famous sparkling wine and take care of the branding, marketing, and distribution to retailers, who sell the wine to consumers.<\/span><\/p>\n

In recent years, several houses have been trying to change this status quo; for example, some of them have been trying to vertically integrate by acquiring vineyards of their own; others have ceased doing the branding, marketing, and distribution by entering into arrangements with retailers who take care of these activities; yet others have set up subsidiaries in other wine regions, like California, using their expertise to create non-Champagne sparkling wines.<\/span><\/p>\n

Our research showed, though, that the vineyard owners \u2014 on whom the houses are still critically dependent because only wine made from local grapes can be branded Champagne \u2014 often react fiercely to these attempted changes, which they see as major violations of the industry\u2019s unwritten rules.<\/span><\/p>\n

Wine growers told us about how they would punish some of the violators for undertaking actions that they viewed as inconsistent with the industry\u2019s interests and status quo. For example, they might charge them higher prices for the grapes, deliver grapes of inferior quality, or cease working with them altogether. Some even told us stories of ostracizing and intimidating, including making threats of violence.<\/span><\/p>\n

Our quantitative analysis showed that whereas the cost of the raw materials that go into a bottle of Champagne may run about 10 euros, growers punished Champagne houses that violated the unwritten rules in the industry by pushing it up to as much as 13 euros, putting them at a significant competitive disadvantage compared with other Champagne houses.<\/span><\/p>\n

In our analysis, however, we encountered a surprising finding: The growers punished relative outsiders to the industry \u2014 new houses, houses located outside traditional Champagne villages, those who were not family businesses, or those who had been acquired by corporate groups (such as LVMH) \u2014 when they violated norms. However, they did not penalize the industry\u2019s traditional houses when they engaged in the same actions.<\/span><\/p>\n

Put differently, traditional industry insiders would be permitted to deviate from the industry\u2019s established practices, but relative outsiders were not; they were punished severely by their suppliers if they challenged the status quo. This is an intriguing finding because it suggests one possible reason that relative outsiders often find it so difficult to initiate change: A new entrant is usually dependent for critical resources on the industry\u2019s traditional suppliers, and these suppliers might not allow the firm to deviate from established practice.<\/span><\/p>\n

As a newcomer, a firm may not be hindered by the usual inertia that afflicts traditional incumbents, but our research suggests that it may still be subject to \u201ccontextual inertia\u201d \u2014 that is, factors external to the organization (such as its suppliers) that constrain its actions and compel it to abide by the industry\u2019s traditional practices.<\/span><\/p>\n

Insights for wannabe disruptors and incumbents<\/b><\/h1>\n

When industries mature, firms adopt habits and conventions that may not be cast in formal regulations, but that are nevertheless understood and followed by all parties. These conventions dictate what type of firms can operate in the industry, how payment for transactions takes place, how marketing is conducted, and even how people dress and talk.<\/span><\/p>\n

Challenging these conventions is often difficult, yet it may be necessary when new technologies, changing customer preferences, and other types of disruption make the traditional ways of operating relatively inefficient.<\/span><\/p>\n

Our research on the Champagne industry suggests that non-traditional players may find it difficult to act in non-traditional ways, because contextual inertia constrains them. Thus, outsiders should consider who they will likely be dependent on within the industry and how these players may prevent them from operating outside normal practice. Ignoring them may cause these wannabe disruptors to fail.<\/span><\/p>\n

The research also carries a message for established firms in an industry: they may be in an especially advantageous position to initiate structural change. Their key partners in the industry will often allow them to move outside the boundaries of their traditional roles, thus enabling them to move ahead of the rest. This constitutes an opportunity for established firms that is not granted to others.<\/span><\/p>\n

\n

About the author(s)<\/h1>\n

Freek Vermeulen <\/span>is a professor of strategy and entrepreneurship at London Business School and the author of\u00a0<\/span>Breaking Bad Habits: Defy Industry Norms and Reinvigorate Your Business.<\/span><\/i><\/a><\/p>\n

\u00a0<\/span>Amandine Ody-Brasier<\/span><\/a>\u00a0is an Assistant Professor of Organizational Behavior at the Yale School of Management<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

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