What is disruption? Where does it come from? What drives it? Literally, these are the $64 billion questions leaders, academics, media and entrepreneurs want to know.
Often the easy answer to this (and similar over-asked questions) is to look at where digital innovation is at, and perhaps plot a similar path with an ‘old school’ product or industry. Perhaps, this approach can be seen with the ‘Internet of Things’ where product and market development can be centred on digital and developing new ‘things’ or markets to apply it to.
We need to look much harder at this subject, as it will provide insight in any organisation’s strategic management, so it needs to be understood. The problem is there is certainly no homogenous answer here- just google the question- and you will see the variety of thoughts that exist. And anyone who thinks there industry will not be disrupted, is naive.
Clayton Christensen and friends describes disruption as a “process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses…. Entrants that prove disruptive begin by successfully targeting those overlooked segments, gaining a foothold by delivering more-suitable functionality—frequently at a lower price. Incumbents, chasing higher profitability in more-demanding segments, tend not to respond vigorously. Entrants then move upmarket, delivering the performance that incumbents’ mainstream customers require, while preserving the advantages that drove their early success. When mainstream customers start adopting the entrants’ offerings in volume, disruption has occurred.”
Good description (and there are many)- Christensen et al describes the process and evolution of disruption, and perhaps gives some insight into what are the drivers of disruption. I wonder though if the concept of disruption is confused with other key management functions of an organisation. There will always be underserved segments available to be exploited- this is just a function of strategic marketing. And new products and innovations could always create new segments and markets- while it some cases it causes disruption- isn’t this the role of product development, market research and innovation?
This doesn’t explain the level of excitement that can come with the term disruption. Sure, we quite rightly celebrate the success of disrupters such as Apple, Uber or Netflix and learn about their great insight that lead to their market changing innovation(s). We quite rightly shake our heads about Nokia, taxi companies or Blockbuster Video and wonder why they didn’t have the leadership to prevent the disruption. We love the stories, we read the many books and watch the documentaries. We forget that many organisations whose industries have been disrupted, have failed (are failing), more often terminally.
So, is disruption then more about organisational failure-; a failure in leadership, a failure of strategy, a failure in understanding the customer and a failure to get access to capital. Perhaps a disrupted organisation has all of these in place, but still failed- then for me it is a failure to be nimble and agile.
It does make you wonder, what industries are prone to be disrupted? What are the characteristics that make them a potential target. If you understood this, then maybe an organisation could be prepared and prevent the disruption. Imagine if Borders had started selling books online, before Amazon?
Again, a little research can provide the usual suspects. Industries that have not embraced the digital age, industries which have slow growth, or industries that have high profit margins. But as with the discussion on what disruption is, deeper thought must also be applied to this question. And once again, there is no homogenous answers.
One I see as important is the role of unresolved market tension whether it driven by consumers, the media, competitors, or the Government. For any market, you can see the existence of tension (usually from the media) where it can range from simple disagreements between stakeholders, complaints about product quality or products not delivering up to expectation. Or even an out-and-out dispute with regulators or the Government. Some times its fleeting, sometimes it features on consumer television, and sometimes the media gives it a logo and makes an extended story out of it (which you most definitely don’t want).
So how does it drive market disruption. First of all it provides a signal- tension says there must be a better way; tension says solve the dissatisfaction, make it easier; tension says to those who like to disrupt, there is an opportunity here.
For example, let’s consider the success of Uber. Is it their digital offering which made them successful? Or is it the fact that Uber solved the tension of an interaction which for the consumer had so many issues from safety, reliability, to pricing or ease of use. The fantastic digital app that is needed to use Uber- is simply the vehicle which resolved the tension (pardon the pun!).
Remember all the controversy about pirating music with Napster. For those who are young, it was software which allowed sharing of MP3s from June 99 to July 2001, when it was shut down as an outcome of a complex legal dispute, centring on breach of copyright. What it did though is address the tensions which may have existed for consumers about access to music- not only how they purchased it, but also how they listened to it. While ultimately Napster did not have the legal vehicle to solve some of these tensions- it did bring the issues to the collective consciousness and arguably helped Apple in their launch of iTunes.
Unresolved market tension is not the only driver of disruption- but I think it is a key ingredient. Thus, it makes sense from a strategic planning perspective, that an organisation should look at the tension which exists in their market, now and in the future. It should look at media commentary, the direction of regulation and themes from any complaints that maybe received. These are all market signals; not just of stakeholder tensions and dis-satisfactions, but also of where potential disruptions will come from. They are signal then of change.
So, let’s get over the hype of disruption and think deeper. Disruption is just a theory about why organisations and leadership fails. It’s not more than that. It doesn’t explain change. It’s not a law of nature. It’s an artefact of history, an idea, forged in time; it’s the manufacture of a moment of upsetting and edgy uncertainty. Leaders to do their job properly, should stop being transfixed by change, and being blind to continuity- they should read the market signals.