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Forces of Change

What drives disruption? (and it is not technology)

Disruption is simultaneously intimidating, challenging, and exciting. We love the stories, they are exciting and sexy, and we devour the case studies as if we were there. In conversations, meetings, and workshops, we play strategy bingo with phrases such as “what would Google do?”; “How would happen if Amazon would launch in our market?” or “lets design like Apple!”. These questions also suggest a preoccupation with not only the rapid advances in technology but also the impact of disruptive technology. When in fact, the reality is that in most cases, technology is not the underlying game-changer; it is merely the enabler.

So, if it is not just technology, what drives disruption? What is it that underpins real advances? Big questions, worthy of research and more thought, but from my observations, I think there are four key drivers that I have seen operating.

People power

Change is human-centered. Never forget this. It cannot be overstated.

Real change and disruption are designed for humans. It is underpinned by a real understanding of the customer with deep insight into their mindset, and how this is translated into action. Organisations which struggle to keep up with innovation, often lack a real connection with their customer and perhaps have stopped listening to what they are saying. Often their response is to roll out  Net Promoter Score research and start an innovation lab; it does not work.

Meanwhile, organisations that are successful in market leadership and disruption understand the customer and are indeed connected. They know the actual cost to a customer when they make a purchase, whether it is price, time or effort. Amazon makes it easier because not only does it have a lower price, it is simply easy to choose a book and get it delivered.  They have provided convenience and choice. That is the disruption- technology has enabled it.

Lesson: Continuously listen to your customers. Never stop. I mean it, don’t stop.

The new interconnected globalisation

Globalisation relates to politics, free-trade, migration, and standardisation of regulations and standards. The debate on the impact of globalisations has raged on for over a century, and no doubt will continue for another century. Eventually, this will become irrelevant as advances in technology have started to enable and shape globalisation. It can’t be stopped.

Technology makes any new idea very much portable, and it can spread like a contagion. Through the media, consumers are often excited and ready for any unique concept such as Uber, to arrive. Smartphone technology provides access; cloud technology allows the portability; the rest is just local compliance.

 

Consider Uber, which started in New York in 2010. Again, we can see the technology-enabled the customer and gave a voice for their desire to have lower fares, better service, accountability and ease of payment. What is striking though, is how fast Uber spread. In nine short years, Uber expanded from New York to be in over 60 countries. Along the way, it disrupted the taxi/passenger industry forever, who continue to complain and protest about how unfair it is that they were disrupted. (Hint, it is never fair).

Disruption is borderless, powered by customer connection, underpinned by technology.

Lesson: Look global, think global, act globally.

Disruption is market-based, not product-based

Real disruption happens when the structure of a market is completely re-imagined. Traditional boundaries are meaningless to a disrupter.

Think about it; a market is where the transaction happens, where buyers meet sellers exchanging goods or services for money. This market interaction is made up of a whole range of cultural norms that help dictate the processes, the cost structure, and even the user experience. Over the last hundred years, we have evolved from markets and stalls to online marketplaces where the buyer and seller only meet virtually. We all like marketplaces; we love the predictability, the stability, and the infrastructure which develops to help sustain a market.

Indeed, there will be occasions when a new product launches, and this can unsettle the market and create a competitive advantage. But it is always a short-term advantage, as any successful new product and service will eventually be replicated, and the market will evolve.

In effect then, markets are convenient social constructs, designed by businesses. When disruptive change occurs, any pretense of a stable, predictable market is detonated.  Apple’s iTunes helped explode the traditional marketplace for the buying and selling of music. It upended the conventional structure of the music market, and in its place, a new digital way of purchasing music was built.

Meanwhile, incumbents hold on to the old value chain, focus on cost out projects and tell anyone who will listen, that the new disrupter will not make any money. How sad, too bad.

Once again, while the role of technology was critical, the actual disruption is translating consumer insight into a new marketplace.

Lesson: The customer defines your market, not the industry norms.

 

Social license and trust

The concept of having a social license to operate has become ubiquitous over recent years. A term that is not defined, it continues to grow across all areas of society and permeates our everyday language. In the last couple of years, I have seen the Sydney Morning Herald with a headline “CBA puts profits before customers,” or the New Zealand Herald discussing how Fonterra has lost its social license. It represents a changing mindset from customers, and the disquiet they have trusting some organisations and their products. It represents a change in the power base.

When an organisation starts to lose its social license, and the level of trust begins to fall, then wait for disruption. Look at the Financial Services sector in the UK and Australia, where confidence has fallen, and the social licenses of the Banking sector have been questioned. What we see is a flourishing FinTech market across all financial services products, underpinned by direct or indirect support from the Government. Many of these FinTech startups very quickly build large customer bases, simply because they have more of a social license and are trusted more than the Banking Sector.

Lesson: Build and maintain a social license.

Questions you should ask

Instead of focusing on the advances in technology and asking what would Amazon, Apple, Google, or Facebook do, you should ask:

  • What real customer insight do we have?
  • How does the customer view the market?
  • What overseas trends could we learn from?
  • What Social Licence do we have to operate?
  • How does technology enable our future?
Tags : changeDiffusionDisruption;strategy
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