How to be the 'disrupter' and not the 'disrupted'
In his eye-opening 1970 book, Future Shock, Alvin Toffler said that changes in technology and trends were happening so fast that people and society could no longer psychologically keep up. Now, even the most innovative and technologically advanced companies can't keep up with the pace of change -- markets are now being disrupted in a matter of days, versus months or years.
Larry Downes and Paul F. Nunes, writing in Harvard Business Review, picked up on Clayton Christensen's disruption theme and suggest that the pace of disruption is now happening at breakneck speeds. They note that even Christensen's model of disruption -- new players taking over the low end of the market with a cheaper approach or technology, and gradually chasing the high-margin incumbents upstream -- may not describe what is happening these days.
Case in point: the disruption of the GPS equipment market with smartphone apps happened almost overnight, they illustrate. "Users made the switch in a matter of weeks. And it wasn’t just the least profitable or 'underserved' customers who were lured away. Consumers in every segment defected simultaneously — and in droves."
In the age of Facebook, Twitter, and Tumblr, "internet fads (or 'memes') can infect the whole world in a matter of days," they point out. Downes and Nunes call this new breed of players "big-bang disruptors," who often "come out of left field" from totally different industries.
The new breed of disrupters share some common characteristics the authors note:
- Unencumbered development: While employees at traditional companies are constrained within 9-to-5 routines, the engineers and developers at disruptive companies often are gathering for late-night “hackathons,” and are trying to outdo one another with new products and innovations, which are rolled out in a rapid-fire manner. There's lots of room for experimentation and failure. Twitter started out this way.
- Unconstrained growth: "Big-bang disruptions collapse the product life cycle we know," Downes and Nunes point out. The five distinct customer segments—innovators, early adopters, early majority, late majority, and laggards -- are slashed down to two segments: "trial users, who often participate in product development, and everyone else."
- New product cycles: Traditional companies have months-long and years-long cycles of innovation, in which new ideas are vetted, approved, developed, tested, and brought to market. "The innovators collectively get it wrong, wrong, wrong—and then unbelievably right," Downes and Nunes point out.
- Undisciplined strategy: Traditional companies have carefully laid-out plans and strategies, with different departments handling various phases of R&D, operations and sales, all being constantly tweaked to attain optimum results. "Big-bang disrupters, however, are thoroughly undisciplined," say Downes and Nunes. "They start life with better performance at a lower price and greater customization. They compete with mainstream products right from the start."
If you're with a traditional company (and most of us are), there is good news, however. "Big-bang disruptions hold immense potential for those who can quickly learn the new rules of unencumbered development, unconstrained growth, and undisciplined strategy," Downes and Nunes point out.
It may be worth noting that the disrupters often are in precarious positions -- living off investors' money, for example -- and often have difficulty sustaining their success. Perhaps this is a piece of the picture Downes and Nunes will need to look at more closely: how can disrupters, once they've turned a market upside down, keep repeating that success? How repeatable a process is disruption?
The authors offer some advice for dealing with, or even becoming a purveyor of, big-bang disruption:
- See it coming: "Filter out the noise generated by unencumbered development by finding internal or external seers who can predict the future with insight and clarity. They may be employees far below the ranks of senior management, working on the front lines of competition and change. They may not be your employees at all."
- Stall the disruption: "Many big-bang disrupters build market share and network effects by offering their early products free. You can delay their profitability by lowering prices, locking in customers with long-term contracts, or forming strategic alliances with advertisers and other companies critical to your rivals’ plans."
- Stay close to the exits: "To compete with undisciplined competitors, you have to prepare for immediate evacuation of current markets and be ready to get rid of once-valuable assets.... Industry leaders that fall behind may find their market worth is little more than the value of their patent portfolio and cash on hand, as bankrupt photo giant Kodak recently discovered."
- Try a new kind of diversification: "As industry change becomes less cyclical and more volatile, having a diverse set of businesses is vital."
- Launch your own innovations: "Make sure future strategies are built on a platform that can easily be extended and experimented with, and quickly scaled both up and down. The profitable life of a big-bang disrupter may be short, and you’ll need to be ready with the next one before someone beats you to it."
— By Joe McKendrick on March 4, 2013, 4:00 PM