Summary

In every industry, there is an ongoing flow of technical developments and new versions of products and services replacing the older versions. Sometimes a more radical transformation takes place, in which also business models shift, and new entrants are replacing incumbents into the industry. The choice is not whether this cannibalism will happen or not. The choice is how you play it and - as a result – how much of the benefits you will capture. 

The problem

Today many manufacturers are being overwhelmed by many trends which put pressure on today’s performance and the future success. Many new solutions, products and service are emerging, some at a very early stage and some already having an impact on the existing markets.

Many business leaders are concerned about (potentially) cannibalising their current products or services, which are the bread and butter of today. Some examples are:

• 1. New life cycle services which could delay equipment sales
• 2. Pay-per-use offerings which could replace equipment sales
• 3. Radically new solutions using the latest technology which could replace the existing solutions, like digital camera’s replacing analogue cameras

On the other hand, we often hear bold statements about “disrupt yourself or be disrupted".

So, the question is, should we indeed fear cannibalism and try to avoid it, or could it be a good thing to peruse and embrace? 

What is Corporate Cannibalism or Market Cannibalism?

The three reasons to embrace cannibalism:

Version updates 

This is an easy one, but still, it is cannibalism. 
Every industry has a certain pace and cadence of updating products, services and solutions with new features and functions. These new versions or models are designed to replace the older ones, preferably as quickly as possible.  
Examples are the yearly upgrades of trucks, mobile phones, laptops every year. 
 

Broader Portfolios 

Your market is not 100% homogeneous. You can divide your (potential) clients into several segments based on their particular challenges and needs. If current offerings do not serve all segments very well, it often is an excellent strategy to launch multiple variations of the offerings to serve different segments and that way better expand the addressable market.  Probably, there will be overlaps between the different offerings, which may lead to a decrease in the sales volume the original existing offering – which is cannibalism. When done right, the additional revenue from the new variations will increase the overall – combined sales volume and revenue, not to mention a stronger brand and market position. 

This was an easy one too

Transformation and Disruption

Every industry, market, product and service in time follows an S-curved lifecycle which ends in declining market volumes and margins. Radically new types of solutions which solve other kinds of problems emerge and gradually replace the old solutions.  
Sometimes this is a gradual evolution of an industry; sometimes it is quite a disruptive transformation in which incumbents struggle to survive the newcomers. 

Examples are: 

• 1. Streaming video replacing VHS Video (Netflix) 
• 2. Mainframes being replaced by minicomputers, then by PC's and now smartphones 
  3. Software-as-a-service instead of buying licenses and DVD-disks 

• 4. Operational services to save on consumables and spare parts 
• 5. Renewable energy replacing Internal Combustion Engines 
   

These shifts are coming from external forces and will happen regardless of your strategy. The main choices we have are 

• 1. Do we follow an offensive or defensive strategy? 
• 2. Do we want to be 1st mover, the early adopter (imitation innovation which can be quite successful, like for example, Apple did with the iPhone, iPod and iPad) to pursue the new opportunities? 

• 3. Do we play the game in this industry or instead shift industries? 
  
  

Recommendation 

I believe it is a great time to be in manufacturing. There are substantial new opportunities for our future success and to have a meaningful impact on our global challenges like environment, energy, healthcare, nutrition etcetera. 

That does mean we need to embrace the changes and momentum to drive performance, change and innovation beyond business-as-usual – without jeopardising the business. 

How?

2. Encourage “attempts to cannibalise” from inside your organisation. Let them prove that the new solution is a better alternative and will help the business stay relevant in the future. Often these new solutions start in particular niches of the market, maybe even which you hardly serve at the moment.

Conclusion 

Actually, cannibalism is quite normal in our business for ages.  

However, today, we are facing exciting and challenging shifts which make the upcoming innovations and changes more complex and harder to predict. That does not change much whether cannibalism is good or bad. It does change the way we need to manage our business and teams, as well as how we innovate and change. 

The name of the game is to Adapt and Thrive! 

Do you want to assess the capability of your organisation to drive continuous innovation and change beyond business-as-usual, maybe our scorecard can be useful. You can download the Scorecard Navigating Disruption here.