How the Constant Threat From Upstarts Can Inspire Big Companies to Disrupt Their Own Disrupters

The Fortune 500 can no longer rely on its first-to-market advantage

Fortune 500 companies are looking to respond to innovation in their industries. Getty Images
Headshot of Dave Knox

In December 2014, Amazon launched Prime Now, its same-day shipping option. Just a short three years later, the service is in 40 different markets and has set the standard for shopping convenience and instant gratification in ecommerce.

What many forget—or didn’t even realize in the first place—is that Amazon was not the innovator when it came to same-day shipping. That honor goes to a host of startups launched around 2012 that includes Deliv, Zipments and Postmates that raised tens of millions of dollars in venture capital around the idea. In fact, Deliv received a strategic investment from three of the largest mall operators in the world (Simon Property Group, Westfield and GGP) in 2014 and followed that up with another strategic investment from the shipping behemoth UPS in early 2016.

While these companies were the innovators in the space, Amazon has ultimately been able to disrupt the disrupters. They did so with an approach that can be a lesson for any Fortune 500 that is looking to respond to innovations in their industry.

Illustration: Alex Fine

For starters, Amazon made the decision to walk the talk around innovating with the speed of a startup. Prime Now was given its green light in August 2014 with the seemingly impossible goal of launching before that year’s holiday season just four months away. If that was not difficult enough, it also decided to launch Prime Now on one of the biggest stages in the world: New York City.

Second, Amazon did not approach this as an experiment or a test and learn. As Jeff Bezos later wrote in the Amazon 2016 shareholder letter, “To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment.” The Prime Now team took this approach to heart and built a platform that was beyond a simple MVP (minimum viable product). They built a customer-facing app, secured a location for an urban warehouse, determined which 25,000 items to sell, got those items stocked, recruited and on-boarded new staff, and tested, iterated and designed new software for internal use—both a warehouse-management system and a driver-facing app.

And they did all of this in just 111 days. On Dec. 18, the first order on Prime Now was placed at 8:51 a.m. for the Microsoft Xbox game appropriately named Rush. By 9 a.m., the order was packed, but since the delivery window was between 10 a.m. and 11 a.m., Amazon held off and delivered it at 10:01 a.m.

Oftentimes, you hear big companies say that innovation is difficult in their halls because it takes a long time to turn a big ship. Amazon disproves that theory. In 2014, its market cap was $150 billion, and just one year later the market cap had doubled, making it the sixth-largest company in the world.

Amazon is not alone as a large company applying the principles of disrupt the disrupter. Nestlé recently launched Sweetbake as a new direct-to-consumer model around baking. And, in a similar vein, Kroger introduced Prep+Pared, its answer to the rise of meal kit companies such as Blue Apron but with quick pickup in-store. Kroger’s program debuted with five different chef-crafted recipes that include ingredients to make dinner for two such as chimichurri steak and spicy lemongrass pork.

In its response to new competition, Kroger took the best of the innovators (convenience, pre-cut ingredients) while overcoming flaws that existed in the meal kit space. For instance, while Blue Apron’s stock has been crushed because of concerns about high consumer acquisition costs, Kroger is able to precisely target existing shoppers with a high propensity to purchase by leveraging their loyalty card shopper data. Kroger was also able to overcome consumer concerns around the freshness of meat or other ingredients in meal kit systems that have to rely on UPS or FedEx to get the box to your doorstep.

In today’s environment of high-stakes business, the Fortune 500 is under constant onslaught by new competitive threats. But with the right mindset and focus, these same competitors can also serve as inspiration, giving big companies the opportunity to disrupt the disrupter.

This story first appeared in the Dec. 4, 2017, issue of Adweek magazine. Click here to subscribe.

@daveknox As a brand marketer, venture investor and startup advisor, Dave Knox bridges the worlds of the Fortune 500 and entrepreneurship. He is the author of Predicting the Turn: The High Stakes Game of Business Between Startups and Blue Chips.