Defending the Fort — Lessons for incumbent businesses on surviving the threat of new entrants
By: Damola Oladosu
Tags: Bacteria, Business Strategy, CRISPR, Disruption, Competiton

Defending the Fort — Lessons for incumbent businesses on surviving the threat of new entrants Damola Oladosu Apr 1·5 min read

Image by Kjpargeter at freepik.com

Introduction

The year is 2100. Scientists have perfected the science of editing genes. Babies are born without diseases. Parents can select specific genes/traits they want in their children. “Designer babies’’ are the norm. Adults with genetic diseases like sickle cell can edit their genes and live fuller, longer lives. The world is disease free.

While this sounds like a dystopian future, the gene editing technology to achieve this — the CRISPR-Cas9 system, already exists. You might also remember that Jennifer Doudna and Emmanuelle Charpentier won the Nobel Prize for the development of this technology in 2020. CRISPR, which stands for Clustered Regularly Interspersed Short Palindromic Repeats, is a powerful system that can be used to edit (insert and delete) gene sequences. Think of this as a find and replace function in Microsoft Word.

So, what is CRISPR anyway? It turns out that CRISPR is an elegant system, originally designed as part of bacteria’s immune system (think of these as warrior cells and proteins), in order to defend and protect themselves from viruses. Even bacteria aren’t safe from viruses. Crazy, right?

While reflecting on the dynamics of the bacteria — virus relationship after watching a Netflix documentary (Human Nature, you should check it out), it occurred to me that their relationship within a cell reminded me of the business environment. I realized that the dynamics were similar to incumbent — new entrant behavior, where the cell is the business landscape, the bacteria is the incumbent business, and the virus is the new entrant looking to displace the incumbent in the cell.

In this article, I would be describing how CRISPR-Cas9 works to protect bacteria (incumbents) from viruses (new entrants), and highlighting lessons that incumbent businesses can learn from bacteria to defend their businesses.

The CRISPR-CAS9 Mechanism

As previously stated, the CRISPR-Cas9 system is used by the bacterial immune system in order to gain resistance against viruses. This happens in three main steps: Adaptation, Expression and Interference. I will be explaining each step of the CRISPR-Cas9 system and drawing parallel lessons that incumbent businesses can learn from bacteria. If you don’t have a biology background, don’t fret, I’ll try to minimize the technical terms and explain those I use.

Step 1: Adaptation

What do bacteria do? CRISPR moves around the cell, acting as spies/watchmen trying to identify any intruders/foreign materials. When a virus enters the cell (hoping to take over), CRISPR detects and saves the viral DNA (Deoxyribonuclease Acid, contains all the necessary information for viral life function) creating a “CRISPR-viral DNA complex”, a folder for storing information and learning more about about the virus.

What can businesses learn from this? First, it is important to actively monitor your landscape in order to identify disruptive trends and technologies early. Remember that disruption does not always come from direct competitors i.e. businesses that operate within your sector. Disruption tends to come from indirect competitors. For example, Wal-Mart’s Ribbit Money will provide financial solutions to its customers, allowing it to compete with traditional players like banks in the financial services sector.

Second, the new entrants in your market are an important source of information about the market/customer needs. Quite often, when there’s a new threat, incumbent businesses rush to replicate the product/strategy, blindly. If you are going to copy, you must copy well. Rather than playing blind catch up to new entrants, it is essential to unpack the additional information they are giving you about your market and customer needs. Once understood, you can use your internal capabilities to compete successfully (more on this later). For example, Microsoft learned from Slack that there was a market need for productivity and collaboration tools. In response, it created and bundled Microsoft Teams with its existing suite of products, allowing it to successfully out-compete Slack.

Step 2: Expression

What do bacteria do? After creating the CRISPR-viral DNA complex, the bacteria produces more copies of all the information it has gathered on the virus. This is done by creating crRNA complexes, CRISPR molecules that are attached to the virus’s genetic material. Next, the crRNA attaches to Cas9 — think of these as a pair of molecular scissors that can cut genetic material. These molecular scissors (Cas9-CrRNA complexes) float around in the cell, waiting for the next virus attack.

What can businesses learn from this? After learning about the virus, bacteria basically wait around for the next round of attack. Again, don’t be in a rush to react blindly. Waiting is an underrated strategy. While waiting, take the time to understand your own strengths and build internal capabilities. Think critically about what trade-offs you need to make as a business in order to respond to a new entrant. Back to the Microsoft example, by bundling Teams with existing products and offering it to existing customers for free, Microsoft leveraged an internal strength that Slack lacked: distribution and scale.

Additionally, the new entrants could potentially make a mistake, providing you with second-mover advantage that you can leverage. For example, Apple is always a second mover — with the iPod, iPhone, smartwatch etc. However, by constantly leveraging lessons from first movers, combined with its own internal strengths (simple design), it has become one of the world’s most successful companies.

Step 3: Interference

What do bacteria do? When the virus attacks again, the Cas-crRNA complexes that have been floating around the cell move into action and quickly recognize the virus. The Cas protein (molecular scissors) cuts and effectively destroys the virus, allowing the bacteria to be resistant to the virus.

What can businesses learn from this? When you do decide to act, timing is everything. It’s not always about first-to-market. Building the capabilities to proactively monitor your landscape, as highlighted in step 1 above, gives you a major advantage: the ability to respond before the new entrant has fully emerged, which allows you to act at the right time. For example, Facebook uses an internal tool to actively monitor its rivals, and potential threats, including new entrants. At the peak of Snapchat’s popularity, Facebook launched Instagram Stories, which eroded Snapchat’s customers and slowed its growth by 82% in 2017.

Conclusion — Competition As A Discovery Procedure

Underlying the CRISPR-Cas9 strategy in bacteria is an adaptive immune system. Overall, it is important to build business strategies with adaptive elements. Don’t be afraid to copy well. New entrants can help you discover new things about your market/customers’ needs. To do this successfully:

Actively monitor disruption

Pay attention to the customers’ needs

Understand your internal capabilities

Remember that being first-to-market does not guarantee long term sustainability

When you do respond, pay attention to the timing

Good luck out there!

P.S. Ifeanyi Nnaji — thank you so much!