By Geoff Colvin and Ryan Derousseau
July 21, 2016

Taking a break from RNC coverage today – back on it tomorrow. But today a confluence of news events begs us to look at disruption, the No. 1 worry of most business leaders, and how it’s happening in businesses where you might not expect it and in ways you wouldn’t imagine. No one is immune – everyone nods when you say that, yet big, famous, smart companies still get blindsided.

Today’s example is Procter & Gamble and the beating its Gillette business has suffered at the hands of Dollar Shave Club, Harry’s, and other new competitors. I confess: Even I thought it was impossible. I’m among the many people who believed that personal care products like those sold by P&G, Unilever, and Colgate-Palmolive were one of the world’s most disruption-proof businesses. That’s because their power is beyond rationality; it’s in brands and brand loyalty, built up over decades with billions of dollars in marketing. A competitor could make a toothpaste identical to Crest, but it couldn’t be called Crest, so millions of faithful consumers wouldn’t switch. Relationships between brand and buyer are especially deep and powerful with products that touch the body – toothpaste, soap, deodorant, razors, for example. No startup could digitally disrupt those relationships.

At least that was conventional wisdom. It’s wrong. In just the five years since Dollar Shave Club launched, P&G’s North American market share in razors and blades has tumbled from 71% to 59% in a business where competitors wage nuclear war over single points of share. Dollar Shave Club is the main reason. “It was probably on the radar, but we weren’t necessarily having the right conversation around what might disrupt us,” an unidentified source told the WSJ. P&G is responding belatedly with its Gillette Shave Club and is testing the same concept with other products. An example is the Tide Wash Club, an online subscription service it launched in Atlanta.

Which brings us to another news event: Yesterday Unilever bought Dollar Shave Club for $1 billion. So now the worst thing that ever happened to Gillette will be bulked up on the resources of a giant global competitor. Why would Unilever pay five times this year’s projected revenue for an unprofitable business? Because it’s getting more than entry into the North American market of a sector in which it’s only a minor player. It’s also getting something P&G barely has: extensive data on individual customers. With its direct sales model, Dollar Shave Club knows a great deal about its 3.2 million members, and Unilever with its mammoth product portfolio can do a lot with that data.

None of this was supposed to be possible. No company that five years ago consisted of two guys could disrupt a 115-year-old brand like Gillette that’s backed by a global champion brand builder like P&G, right? Nope. The lesson for incumbents is to stop asking “Can it happen to us?” and to start asking “How will it happen to us?”

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