areas, and test them by talking to others, doing research, and getting diverse input to help you to see them differently. Test yourself. If you aren’t feeling a little uncomfortable, if you don’t see anything on your list that makes you think, “That’s just not possible to change,” you may not be pushing far enough.
Going along with the courage to challenge assumptions, defining your edge of disruption requires you to take an optimistic stance about the future of your industry and your place in it. People sometimes shy away from sounding overly optimistic, because they worry about sounding naïve. But without optimism that your industry and your business can thrive, there’s almost no point in doing the work of heading to the edge of disruption.
Pessimism is the foundation of price wars. Because you can’t see any other way to do business and charge a premium for your services, you focus on driving down cost and winning on price. Time and again we’ve encountered people who feel deeply pessimistic about the future of their industry or their place in the market. This is a crushing situation to be in, because it diverts all of your energy into protecting where you are and prevents the best people from spending time thinking about what “could be.”
We believe there are not really pessimistic and optimistic people; rather, there are pessimistic and optimistic questions. Finding your edge of disruption, and then thriving from what you learn there, is about asking more optimistic questions. Optimistic questions are growth questions for the future. Questions like “How can we use this to our advantage?” “What opportunities are hidden in this disruption?” and “How could we get ahead of this change and profit from an early-mover advantage?” Pessimistic questions are the survival questions about today’s models. Questions like “How do we stop customers from moving to this new, more user-friendly technology-based experience?” or “How can we use our market strength to kill the spread of this new innovation?” We understand the need to be practical; sometimes you have to meet and outdo your competition where your buyers are today, not where they will be in a few years. But if you are optimistic about the possibility that the future can be even better than today, you will keep pushing out of the box you are in, even if it is a box that is currently serving you reasonably well.
Homeplus asked an optimistic question that focused on the future possibilities: “How do we help shoppers to buy our products differently?” A pessimistic question that kept them concentrating on the status quo would have been: “How can we keep shoppers coming into our stores and buying more from us in the model we know best?” Developing Piggly Wiggly’s new format was an optimistic position to take as well. It asked “what if” questions about shopping—“What if the cost of service could be lowered?” “What if customer satisfaction could be improved?” “What if these things happened through a different experience altogether?”—rather than asking, “How do I attract more customers to the same experience that my competition offers?” The answer to that inevitably would have led to a “lower prices” conclusion, leaving Saunders to slug out a commodity pricing strategy along with all the other grocers.
The GHX founding companies did the same. Instead of asking a more scarcity-driven question like “How do we protect our data and ourselves in the process?” the founding companies asked, “How can we avoid duplication and create a data exchange that doesn’t just reduce the cost to serve but also allows the industry to deliver even more value?” That same optimism is alive and well at GHX today as it forges ahead to solve the industry challenges present in implantables and pharmaceuticals, and as it works to create value in other markets, like those in European countries. There is a belief at GHX that they can make a difference, and that makes all the difference in how they define their edges of disruption.
Over and over, we saw optimism, coupled with the willingness to challenge assumptions, as crucial characteristics for success.
During our research, embedded in the case studies, and in our work, we’ve consistently found that optimism was a foundational element of success for people who decided to re-create their businesses. By adopting a more optimistic stance, leaders asked better questions—questions that pushed them to identify the opportunities, not just the threats, at the edge of disruption. Over and over, we saw optimism, coupled with the willingness to challenge assumptions, as crucial characteristics for success.
The power of optimistic thinking holds true for companies of all shapes and sizes, and in all industries. Let’s shift gears and look at an example of a company that is smaller in size, but not in impact: a mid-sized plumbing distribution company from the southwestern United States.
Standard Plumbing Supply is no multibillion-dollar giant like Homeplus. It is a family-run, increasingly vertically integrated plumbing supply business based in Utah, and it faced a competitor that strikes fear in the hearts of many established market leaders: Amazon. That’s right, Amazon wasn’t just unsettling consumer-facing retail giants like Barnes & Noble and Best Buy, but also business-to-business players such as electrical and plumbing distributors. Lowe’s and Home Depot were tough enough competition, but now this plumbing distributor was squaring off against this disruptive online wizard and its world-class user experience.
In 2014, with Amazon encroaching, a group of plumbing suppliers invited Karrikins Group (then ChangeLabs) to address its annual convention and offer guidance on how to respond. In conducting a preconference briefing, Karrikins Group brought multiple business owners into the same room to explore their perceived challenges and opportunities. Richard Reese, CEO of Standard Plumbing, dialed in, and for much of the discussion, was content to listen. When the question “What opportunity does Amazon actually present to the distributor and its current role in the value chain?” was posed, the other plumbing suppliers responded with versions, some unprintable, of “Amazon is the devil.”
Richard’s response was very different. He noted that while Amazon was indeed a disruptive force, in that disruption lay tremendous opportunity to grow their businesses, both in store and online. We were shocked to hear this. It may have been the first time we heard someone speak so positively about a competitor and the change they were bringing, let alone one as aggressive as Amazon. If we had known the history of this family business, we might not have been so surprised.
Disruption was not new for Standard Plumbing. In fact, the company was founded as a disruptive force. In 1952, following a graduate degree from the New York University School of Retailing and a stint at Macy’s, Dale Reese returned to his home state of Utah and did for plumbing supply what Piggly Wiggly had done for grocery retail—he made it self-service. Many years later, Standard Plumbing, now under the leadership of one of Reese’s sons, Richard, faced a choice: ignore the emerging forces of online commerce that were starting to bubble up on the fringe of the industry, or lean into them, move to their edge of disruption, and embrace this mostly uncertain online channel opportunity.
The company chose to move toward the edge, with confidence and optimism, and set up an online department. Although a pallet in the back of the warehouse is hardly a “department,” it was a symbolic move that the future was coming, and Standard Plumbing would be a part of it. Where did Standard Plumbing choose to sell most of its supplies? That’s right: Amazon!
Like most entrepreneurial businesses leaning into the online world in those days, Standard Plumbing did not realize that by doing so it was essentially making transaction and product information (called a “stock keeping unit” or SKU) across almost every product category on earth available to Amazon. Amazon would track SKUs and categories, and when one reached a sizeable enough volume, Amazon would begin competing with those suppliers who had been listing on its site. The B2B industrial product space is twice the size of the entire retail market in the United States,6 so it’s no wonder Amazon decided to target a pretty large share of it.
Now one might
