This post is not about the “18 Disruptive Technologies of 2018,” or, “How to Become a Disruptor in Three Easy Steps.” It is about the failing attempts of disruption in the corporate innovation environment.
I will cover these main topics:
• Disruption is not caused by a single new technology; it is the last phase of a very long process.
• It cannot be done from within a single company; it requires new interconnections and new partners.
• The changes in your environment start way before the disruption becomes visible.
The term “disruptive innovation” recently became an all-inclusive buzzword, describing every new technology that has even a little impact on business. It expresses the whole spectrum of emotions from joyful inspiration to pure horror. Everybody wants to be a disruptor and at the same not to be disrupted. This lack of clarity can actually harm a company’s ability to respond to real disruption, let alone create it.
What Real Disruption Looks Like?
We usually think about a disruptive innovation in terms of instant success and unforeseeable creativity. A technology comes out of the blue, lands on a green field and turns into a billion-dollar business.
This is not what happens in reality. It is a much more complex process that depends on many (typically invisible) factors that need to be just right for the new venture to succeed.
Here are some examples:
• Ride-hailing is successful not because of the platforms that were developed for it but because of the myriad technologies that were already developed and adopted by the customers. Our mobile phones provide the connectivity, location and payment for it to work.
• Digital photography would still be a marginal technology if it was not for the internet, file sharing services, social networks, bigger computer monitors and mobile phones.
• Napster would not have become Lars Ulrich’s worst enemy if there were no MP3, no internet and no writable CDs.
• Video streaming platforms could not work if there was no fast internet.
The disruptors “simply” connect what is already available and fill in the gaps. However, there’s actually more to it than that.
How Does Disruption Work?
The existing value chains of the incumbent players, by definition, should be the most optimal. Years of experience and fierce competition made them lean and mean. They believe that there could not be a shorter, faster or more efficient way to produce and deliver their solution. If there was, they would have implemented it already.
To this, the disruptors say, “Hold my beer!”
First, they try to partner with the incumbents and help them improve. Then the incumbents laugh at their solution and say, “It can’t be done.” And then the disruptors say, “Watch me.” From that moment, the disruptors try to build a parallel value chain that has nothing to do with the existing players. They can’t afford to buy the expensive ingredients off the shelf, so they have to be creative and use whatever is available. The disruptor’s role is to find new puzzle pieces and glue them together in a sustainable, value-delivering chain.
Most of the time the disruptors fail. The incumbents appear to be right — there is no better way to do it. The disruptors move on and try again.
But sometimes the disruptors succeed. They prove a better way exists and short-circuit the existing chains.
In the beginning, their product is of lower quality with fewer features, but its lower price makes it suitable for a subsegment of the market. As time passes, the product gets better and better and starts serving higher-grade customers. The incumbents disappear one by one. Soon after that, the disruptor becomes the new “right way to do it,” and their method/product/service is ready to be disrupted itself.
What if the existing value chain is protected by regulations? In some cases, this could actually help the disruptors. The regulations make the incumbents complacent. They leave lots of inefficiencies and outdated practices in their value chains. The disruptors show a better way and the regulators side with them — just like what happened (mostly) with the ridesharing companies.
How Does This Relate to Corporate Innovation?
The corporate disruptors usually don’t recognize the existence of the alternative ecosystem outside. They take a new open source project and try to attach it to their core as an accessory instead of as an enabler of a new chain. It does not replace the most inefficient parts but the easiest ones. Even when the incumbents create a separate company, they are not desperate enough to push the accepted norms and regulations and will try to use the elements they already know.
What to Do Instead
Instead of trying to disrupt, using somebody else’s technology, take a look outside. Look how the environment changes. Check your customers — what new solutions are they already using?
Think like a disruptor: How can your business be built differently or with open source elements — from scratch? What is there? What is missing? What is cooking? What is protecting you now? Will it be valid in five years?
Figure out your options: Do you want to stop the alternative chain or do you want to be important in it? You might have time to influence the future development.
Measure: The environment will keep changing even after you created your strategy. So you have to set up metrics and trigger points. What needs to be true in order to switch your strategy? Can you influence the speed or the direction?
Act: You can get control over a resource that will be critical tomorrow or influence the regulators to ban the new chain. You can educate your customers or copy the new features and drop your prices. You can also acquire them and destroy your current competition and business model.
The only thing you should not do is stay in the lab, play with a new “disruptive” technology and pretend that this is where the magic happens.