Memo to the Ceo: The Barbarians are Closer than You Think

2015-08-06 11:24

A quick Google search of the phrase, “barbarians at the gate” returns 485 000 results in 0.34 seconds. My historian friends tell me that that the phrase found its place in history after the invasion of the Roman Empire by the Barbarians and the subsequent collapse of the Roman Empire.

In modern times, the phrase is used in different settings to denote different things, from something as bizarre as “an urgent need to go to the toilet” (see www.urbandictitionary.com) to something as serious as the threat posed by malware (see http://www.cnbc.com/id/100846806) and more popularly, to denote threats posed by or less endowed or sophisticated players (my own emphasis).

In financial markets the phrase gained currency during the battle for RJR Nabisco between private equity titans, when Ted Forstmann mentioned the phrase as a euphemistic reference to KKR’s bid (see (http://en.wikipedia.org/wiki/Barbarians_at_the_Gate_(film). It was popularized by Heylar and Bryan Burrough in the book titled; “Barbarians at the Gate” and the movie based on the book.

Whilst private equity firms did take the world by storm and in the process also instilled some level of fear in certain quarters, I however think that the real barbarians that CEO’s should take note of are disruptive innovators. They certainly fit the profile of a typical barbarian in two ways. Firstly, they are less sophisticated or less endowed than firms or industries that they take on. Secondly, as Clayton Christensen indicates, they start off at the bottom, generally, with a product that does not meet the specifications valued by “mainstream” customers. They use this to gain a foothold in the market and then finally attack you're your core customer segments.

This set of “barbarians” have disrupted industries, value chains and business models and continue to do so in present times, thanks to digital technologies such as cloud, mobile, social media, 3D printing, embedded analytics etc., In lots of cases these innovators are simple people who are just motivated by a compelling vision of how the world can be or by the need to solve problems that are close to their hearts. Thanks to digital technology, these barbarians have set in motion, a revolution that will not leave any industry sector untouched. These digital technologies are turning out to be what “crop rotation” and the “wheel-less” plough was to the agricultural revolution and what the “spinning wheel and steam engine” was to the industrial revolution.

If experiences in movie rentals, book retailing, newspapers, broadcasting, music retailing, payments etc., are anything to go by, then the barbarians are closer than you think. They are probably inside the gate already. Whilst revolutions generally live in their wake, casualties, but they are also present an opportunity to change the game and outcomes for customers, the firm, shareholders and employees. To realize these opportunities however, one requires appropriate insights, imagination and vision as well as investment in appropriate capabilities and technologies.

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