A prime example is Recruit Holdings, one of the largest publishers of print magazines for the staffing, housing, automobile, travel, bridal, dining and beauty industries in Japan. The Tokyo-headquartered company managed to leverage its incumbent advantages by following these three principles, disrupting itself no less than four times in the space of 25 years to become a digital powerhouse for advertising, media, and recruitment in Japan and the world’s fourth largest staffing firm by revenue in 2020.
So how did it do this? Recruit’s mantra for serial disruption was to anticipate and respond by leveraging incumbent advantages.
With the advent of the internet, Recruit’s core business was in danger of becoming irrelevant. The company decided to transition its marketing magazines to online portals. However, it had to deal with strongly entrenched views in favor of remaining a print business. Many argued that online entry barriers were much lower; anyone could curate information to launch a website. Recruit’s leaders made a concerted effort to convince employees that a steep digital transformation was imperative. Over the years, Recruit’s leaders maintained a fine balance – steadily extending the envelope on change, but not so much that the organization would buckle under.
Bridging, Risk-making and Championing
In the early 2000s, despite the advent of the internet, beauty in Japan remained a high-touch, offline business comprising small and medium-sized salons. But Masanori Michimoto, head of Recruit’s beauty division, anticipated that, “The beauty industry will evolve like travel where consumers have already shifted to transacting online.” Instead of waiting for the online beauty market to emerge, Recruit decided to create it from scratch. Michimoto worked closely with his counterpart in the travel business to frame different options and hypotheses around what it would take to develop the right propositions for the SMEs and their customers. In 2007, Recruit launched its “Hot Pepper Beauty” online platform providing search functionality and online reservations (for hair stylists, nail technicians, relaxation treatments, etc). But how could it shift the SMEs to the online model?
A major advantage for Recruit was the strong relationships built by its sales representatives who had served tens of thousands of salon owners for decades. Michimoto leveraged this advantage to pitch the new online proposition. Although Recruit expected resistance, counterintuitively, it proved to be an easier sell. Recruit could demonstrate higher online return on investment (by tracking page views and click-through rates for reservations). However, onboarding SMEs on to their platform was not enough. How could it add superior value at scale to both sides of the platform, beyond optimal matching? What would Recruit’s next disruptive move be?
Once again, the answer lay with its 1,000-strong sales force – an unfair advantage from its legacy advertising business – that a digital native platform would not have. The sales team visited SMEs to identify the areas of inefficiency, dissatisfaction, and inconvenience. Success would hinge on Recruit’s ability to connect this domain insight with technological expertise to solve the right customer problem at scale. However, Recruit faced challenges in “productizing” these field insights because the IT engineers, data scientists, and AI experts who would drive the next level innovation were too far from the frontline.