How one man took on Amazon

How you respond to disruption could make or break your business

Late one September evening one of Philip Rooke’s colleagues texted him at home with news that could have crippled his business.

Internet retail giant Amazon had announced it was launching a website called Merch,that would directly compete with Rooke’s online t-shirt and merchandise store, Spreadshirt.

CEO since 2009, Rooke had helped Spreadshirt expand into 19 countries from its base in Leipzig, Germany. But it was small compared to behemoth, Amazon, the largest online retailer in the US, with nearly $89b in sales. 

Rooke could have panicked, but instead, the next morning, he got up and put on his favourite t-shirt emblazoned with the slogan, “Keep calm and sell t-shirts” — and he did exactly that.

“We had people (staff) thinking we were doomed. They were updating their CV,” Rooke recalled. “I walked the floor saying, ‘Hey, isn’t this cool?’”

Competition, Rooke said, makes everyone stronger. So, even if Rooke was, deep down, worried about the new challenge, he also knew that competition often breeds innovation. Throughout that day, he urged his staff to look at the announcement as good news.

“Every single time we’ve had a competitor come in, we’ve learned from it,” Rooke told his staff. “If we watch what they’re doing, we’ll get better.”

If a direct challenge from the internet or elsewhere hasn’t hit your business yet, then it soon will, and how you react could mean the difference between success and failure.

“Disruption is the reality for many organisations right now,” said Melissa Sonberg, executive in residence of Desautels Faculty of Management at McGill University in Montreal, Canada. “It’s like the plague: disruption doesn’t play favourites, a lot of people try to run from it, but you can’t hide.”

Changes to the media landscape — disrupted and irrevocably altered by the digital revolution —is a template for what many other industries should expect, Sonberg said. The stalwarts of your industry might fall, while nimble upstarts, driven by new technology, will thrive think the collapse of the print newspaper business versus the rise of online upstarts such as Quartz and BuzzFeed. And, the balance of the power and information will tilt away from the boardroom to individual customers, who can influence major corporations with something as simple as a Twitter hashtag. 

For managers, this means planning for a major disruption to strike at any time, Sonberg said. Constantly search for signs that something is coming, build a reserve and keep budgets flexible in case there’s a need for funds for a new fight.

When a major challenge does hit, often the first reaction for many managers is to ignore it. Then they realise they need to get in front of it, Sonberg said, followed by a painful exploration of “how bad it will hurt.”

Like Rooke’s reaction to the Amazon news, Sonberg said a good response to disruption is for the boss to communicate early and often about the challenge, be proactive and make it clear there’s a plan, she advised.

Over time you will learn “how to ride out waves, and there will be a point where a good manager loves disruption, because it’s when innovation happens,” Sonberg added.

Good managers will also learn to survive disruption by becoming innovative, said Michael Fertik, an entrepreneur and CEO of California-based reputation.com, which helps businesses manage their online persona. Forget about acting like a start-up, if you’re not, and figure out how to tap into the talent already on staff, he said.

“Becoming the disruptor isn’t about sending your management team into a soulful retreat,” Fertik said from Tel Aviv, Israel. “It’s about finding what you can learn from the person sitting right next to you.”

To become the disruptor, scrap the strict yearly budget, Fertik said, in favour of a less structured system that allows quick shifts to adjust to challenge. If that’s not possible in your company, then find a way to earmark money to experiment, even if it’s a small pool of funds. Identify the people on your staff inclined to think innovatively, put them together as a team, and encourage them to become a “skunkworks,” a small group working to radically rethink the way the company operates.

“You only need a small number of creative people to move the needle,” Fertik said. “Once you find the people inclined to innovate, you can cultivate it. That’s how you put a man on the moon.”

Dave Ferrari has figured out how to not only innovate in the face of disruption but also how to turn the tables. His family owns One Workplace, an office supply company that hit $242 million in sales in 2001. A large chunk of that revenue came from dot-com companies located near One Workplace’s office in Santa Clara, California, in the US.

By 2002, many of those soon-to-be-doomed internet companies had stopped paying the rent on their office furniture, or had closed their businesses outright. By 2003, One Workplace’s sales had dropped to $78 million. Redundancies, pay cuts, and furloughs (where US employees are given temporary leave to help their company save money and keep their jobs open), followed. Ferrari wondered if the company his father had joined in the 1940s as a bicycle deliveryman, and then later purchased, would have to close.

Instead, Ferrari urged his remaining staff to look for new revenue sources. “We need to find a way to ride out these waves.”

So they took a smarter approach and looked hard for industries better  able to weather downturns. They expanded into furniture for doctor’s offices and hospitals, which are projected to multiply as the huge population of Baby Boomers retire and grow old. They also started selling furniture to schools. In the US schools are given construction bond money for furniture, which is ring-fenced. Last year, One Workplace hit $315 million in sales, a 30% increase on business before the recession hit.

“We were facing a disruption that could have forced us out of business,” Ferrari said. “But we didn’t look at it as the end. We prioritised our people, instead of our bottom line, and we figured a way out.”

And, Ferrari said he is already anticipating and heading –off the next disruption. One Workplace has had to change the kind of furniture it offers to adapt to growing demand for open office spaces. Two years ago, Ferrari had his office redone with the open floorplan too.

That kind of reaction is exactly what managers need to not only survive a disruption but thrive on it.