Understanding disruption

You can get a degree in it from USC. And there’s even a Global Index which tracks its impact on businesses. But what exactly is disruption? And what does it mean for you and your organization? Let’s find out.  

Where does disruption come from? 

When you read about disruptive technology or businesses, it probably refers to the term coined by Clayton Christensen in his book The Innovator’s Dilemma. In it, the Harvard Business School professor writes about a process where a smaller company with fewer resources challenges an established, incumbent business. [1] Disruptors fall into two camps: 

1) Low-end disruptors tap into the markets which organizations overlook. As incumbents improve their products and services for their most-valuable customers, they exceed the needs of some segments and ignore the needs of others. Disruptors get a foothold in the space between.  

2) New-market disruptors create a market where none existed. In short, they find a way to turn non-consumers into consumers. [2] 

Because these two markets are niche, incumbents often ignore them. But after satisfying the needs of the few, successful disruptors then ‘move upmarket’. They deliver what incumbents’ mainstream customers want as well pleasing the niche. [3]  

Uber can get in line 

Because of the specific description of what a disruptor is, Clayton Christensen and his followers get annoyed when people bandy about ‘disruption’. They have a particular beef with those who tout Uber as a disruptor. That’s because the taxi giant doesn’t tick the two disruptor boxes above. As StartUp Grind says, “It just took the typical taxi service model, and upgraded it with tech to make it more convenient and a little less expensive”. [4] 

Netflix killed the video store 

Netflix is often lauded as the archetypal disruptor. When it launched in 1997, its order online for postal delivery model didn’t appeal to bread-and-butter Blockbuster customers. They liked to pick up a film on the fly. At first, Netflix only appealed to movie buffs who didn’t mind waiting a few days to get their film. Because of that, Blockbuster didn’t see the threat.  

When Netflix started streaming high-quality, all-you-can-watch video, however, it appealed to everyone. In doing so, it effectively killed off video stores. As Al Pacino’s shabby, unassuming Satan says in The Devil’s Advocate; “no-one sees me coming!” 

The fear factor 

Christensen is at pains to point out that Uber innovates while Netflix disrupts. As Ian Bogost, professor at Georgia Tech, says, “The big difference between even disruptive innovation and plain disruption is that the former was focused on some improvement to a product or service or sector or community, while the latter is looking first at what it can destroy. Everything is fire and brimstone.” [5]  

For incumbents, there’s fear. For start-ups, there’s hope. As The Guardian writes about disruption, “There grew a sort of moral halo around the word, too.” And The Innovator’s Dilemma became a bible for small teams to upend industries. The New Yorker also picks up on the flip side of this fear factor. Journalist Jill Lepore writes, “Disruptive innovation goes further, holding out the hope of salvation against the very damnation it describes: disrupt, and you will be saved.” [6] 

The trouble for Lepore and other critics is that Christensen’s examples of disruptive companies aren’t doing so well today. Lepore points out most failed, while a separate study found that only 9% of Christensen’s 77 examples of disruptive companies actually follow his strict model. [7]  

As Leigh Alexander at The Guardian writes, “Most of the time, the march of innovation continues as normal, with new entrants to any market nosing softly at the needle and offering more choices for consumers, while the primary holders of economic power generally get to keep holding it.” [8] 

Paranoia 2.0  

Despite evidence that incumbents hold out pretty well, they still worry about disruption. Take Boston Consulting Group’s guide on How to Thrive in the 2020s. It suggests that the next decade will be “defined by accelerating technological, social and political change, which all point to an era of unprecedented uncertainty and volatility”. [9]  

Accenture’s Disruptability Index reveals that 63% of companies experience disruption. And 68% of execs expect new technology to significantly disrupt their industry in the next three years. [10]  

Thankfully, Accenture gives tips for businesses to hold their own. You can understand the patterns of disruption, respond to it and ride the wave. To do it, recognize and exploit four stages: 

1) Viability – be in a constant state of re-invention. Like Amazon which takes what it learns from its consumers to expand into new markets such as cloud infrastructure, video streaming, audio entertainment and robotics. 

2) Durability – sustain your competitive advantage through experimentation, opportunism, investments and acquisitions. And learn from disruptors and competitors. Like Audi’s 'Smart Factory' with automated vehicles that move car components around the plant. The efficiency wins give Audi time and resources to innovate and meet the new needs of customers. 

3) Vulnerability – long-established sectors must be honest about what’s working and what isn’t, then upgrade core functions. Like British Gas and its 'My energy' digital tool that helps customers understand and adjust their energy use. The app’s halved customer-service calls. 

4) Volatility – when a source of strength becomes a weakness, you must detach or split it from your core business. That way, you’ll cut costs and free up resources for new investment. Danish conglomerate Maersk achieved this “wise pivot” by separating its oil business into a new energy unit. It boosted performance and grew its core transport and logistics business.  

Disruption fatigue 

The Internet of Things will kill retail. AI will take our manufacturing jobs. And VR will change the way we learn for ever. Transform Magazine believes we’re at ‘disruption fatigue’ with promises like these.  

But that’s a good thing. Some healthy scepticism will help us slow down and accept that disruption or innovation needn’t happen at breakneck speed. Just look at the Amazons and Apples of this world. They introduce “radical new ideas to the world, but they hone and perfect the delivery of those ideas through years of incremental improvement to improve efficiency and profitability.” [11]  

So, stop worrying about big leaps and focus on the small steps. One at a time. 

Sources:

1] Clayton M. Christensen, Michael E. Raynor and Rory McDonald, ‘What Is Disruptive Innovation?’ (2015). Available at: https://hbr.org/2015/12/what-is-disruptive-innovation (accessed 2 February 2021).  

[2] Ibid.  

[3] Ibid. 

[4] Peter Daisyme, ‘What Is Disruption, Really? 8 Examples and What to Learn From Them’ (2018). Available at:  https://www.startupgrind.com/blog/what-is-disruption-really-8-examples-and-what-to-learn-from-them/ (accessed 2 February 2021).    

[5] Leigh Alexander, ‘Why it's time to retire 'disruption', Silicon Valley's emptiest buzzword’ (2016). Available at: https://www.theguardian.com/technology/2016/jan/11/disruption-silicon-valleys-buzzword (accessed 2 February 2021). 

[6] Jill Lepore, ‘THE DISRUPTION MACHINE’ (2014). Available at: https://www.newyorker.com/magazine/2014/06/23/the-disruption-machine (accessed 2 February 2021). 

[7] Nick Liddell, ‘Disrupting the disruptors’ (2020). Available at: https://www.transformmagazine.net/articles/2020/opinion-disrupting-the-disruptors/ (accessed 2 February 2021).   

[8] Leigh Alexander, ‘Why it's time to retire 'disruption', Silicon Valley's emptiest buzzword’ (2016). Available at: https://www.theguardian.com/technology/2016/jan/11/disruption-silicon-valleys-buzzword (accessed 2 February 2021). 

[9] Nick Liddell, ‘Disrupting the disruptors’ (2020). Available at: https://www.transformmagazine.net/articles/2020/opinion-disrupting-the-disruptors/ (accessed 2 February 2021). 

[10] ‘The future of all industry is disruption – and that’s a good thing’ (2018). Available at: https://www.wired.co.uk/article/the-future-of-all-industry-is-disruption-and-thats-a-good-thing (accessed 2 February 2021). 

[11] Nick Liddell, ‘Disrupting the disruptors’ (2020). Available at: https://www.transformmagazine.net/articles/2020/opinion-disrupting-the-disruptors/ (accessed 2 February 2021).