Tuesday, August 25, 2015

Should you welcome or fear disruption

I was scanning through my Twitter feed when I came upon a tweet where someone was excitedly welcoming disruption in the financial sector.  Strangely, it was from an individual employed in the traditional banking sector.  This made me think of the old Simpson's show where Kent Brockman, the news broadcaster, is announcing that there are new alien beings taking over the earth, and that he, for one, welcomed the new overlords. Much like the traditional banker who welcomes financial disruption in his industry, this welcoming of your own destruction seems a bit unlikely. My response is that disruption is something you want to create or anticipate, rather than welcome and react to.

Just ask Tower Records if they "welcomed" a disruption in the distribution of modern music.  Tower and other retailers owned music distribution until Apple decided to disrupt the market by changing the media (physical to digital) and the channel (retail stores to web downloads).  As interested bystanders, some of us were winners, and frankly some were losers.  If you don't like listening to iPods or MP3s, if you are an audiophile, then in some regards you may consider yourself a loser, as higher quality music is now harder to find. In any "disruption" there are winners and losers, but few people are completely isolated from impact. The truth is that we don't fully understand disruption, and it's far better to be the disrupter and able to anticipate where the bull you are riding is likely to go, than the disruptee or in many cases even the innocent bystander, who gets gored without ever trying to actually interact with the bull.

Schumpeter explored this idea when he wrote about creative destruction.  Innovation creates entirely new ways of solving customer needs and new value propositions, but almost always destroys existing means of creating value.  Look no further than Blockbuster if you want to understand disruption, by both Redbox (positional disruption) and NetFlix (technical disruption).  Every act of creation by one party is an act of destruction to someone else.  That's not to suggest we should fear innovation, but in fact we should respect its power, and harness it to our benefit, rather than simply expecting it to work on our behalf.  Innovation doesn't work that way; you are either the innovator, the intended beneficiary of the innovation, or you are what the military often politely calls collateral damage.  In this case collateral damage specifically refers to the business model or value proposition the innovation was meant to undermine, but it extends to the network of solutions or adjacent products and services that are no longer as valuable once the innovation is realized.  For example, it wasn't just Tower Records that was disrupted, but a whole value chain of suppliers, merchandisers, packagers and so forth, with ripple effects even to the music producers.

Rather than cavalierly "welcoming" disruption, you should fully understand its power:

 - Welcome its potential
 - Respect its power
 - Understand the blast zone associated with disruption
 - Be the disrupter or at least allied with the disrupter
 - Disruption is a blunt instrument with no sympathy for its victims - it does what it does, regardless of the impact or circumstances.  Therefore it's much better to be on board with the disruption rather than sitting by and welcoming it.
 - Become more proactive rather than reactive 

Welcoming disruption to your industry is naive and foolish.  Bringing disruption to your own industry is risky but can have benefits.  Disrupting an adjacent industry, doing what Apple did to Tower or Netflix did to Blockbuster, is the ultimate disruption position.
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posted by Jeffrey Phillips at 5:56 AM


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