Tuesday, January 23, 2018

Why we should expect more disruptive innovations

I've used the example of Tower Records before - a behemoth astride the recording industry - brought low very quickly by a sudden shift in music distribution. The shift from physical media to digital media, and the shift from albums to songs as the distribution format made Tower suddenly obsolete. Similarly, Blockbuster experienced almost the exact same disruption. Using a business model based on real estate and limited selection of the top hits, Blockbuster was wiped out by a company with few tangible assets, no retail presence and an exceptionally broad catalog - Netflix.

What these two examples have in common is a rapid, sudden change brought about by innovation. In one case the innovation was in media, and in the other case the innovation was in business models and channels. What we ought to be paying attention to, however, is the amount of rapid change that's occurring everywhere - in every industry, in every function and every geography. The fact of the matter is, Schumpeter's 'creative destruction' will occur more rapidly and more frequently, and we need to be anticipating disruptive innovation, if not simply welcoming it and accepting it.

Drivers of Disruptive Innovation

What are the emerging drivers of more and more disruptive innovation? I think there are at least three key drivers:
  1. Ubiquitous information:  in the past, a new technology or solution took time to gain traction in a specific market.  Now, a compelling new technology or solution can be available to broad swathes of the world's population almost immediately.  Information travels very quickly, and people recognize a compelling solution to an existing problem and can adopt it relatively quickly
  2. Technology platforms:  They can adopt new technologies quickly because increasingly we have the platforms that new ideas are built on.  It took over 50 years for the telephone to reach widespread usage in the US, mostly because the cost of distribution in large, empty geographies.  But once those lines exist, voice, data and internet adoption were much more rapid because they were built on existing platforms. 
  3. International monetary flows:  There are fewer and fewer barriers to acquiring goods and services in almost any country.  We can quickly start a business and start competing in other geographies thanks to the internet and the global banking system. 
There are probably more drivers - in fact I'm sure there are - but you get the point.  Emerging societal, governmental, economic and technology trends are creating more and more opportunity for radical disruption of products, companies and industries.

In short, people can become aware of new ideas more quickly, adopt them more readily because of their existing infrastructure (and their increasing knowledge and experience of technology) and because global distribution and payment programs have progressed so quickly.

What does this mean for innovators?

What this means is that we should expect to see companies like Blockbuster, Tower Records and Kodak (as past examples) and their key solutions and technologies get disrupted by new entrants more frequently and more consistently.  New solutions will emerge - some will be valuable and will more quickly disrupt the status quo, while others will simply create incremental solutions and other introductions will fail.  That's the natural order of things.  But the number and frequency of "disruptions" will only go up, and perhaps exponentially due to the factors identified above and other ones.

This means as innovators we need to be constantly surveying the marketplace, identifying emerging trends and unmet needs, identifying who is creating really compelling new solutions and what may happen if those solutions scale quickly and become disruptive.  We need to find these opportunities for ourselves, and become much more adept at innovating faster and faster.  The days of long product lifecycles and safe markets are over. 

Past responses aren't good enough

In the past, to block disruptive innovation many companies would build walls, or barriers, or attempt to create customer 'lock-in'.  Rather than compete with new ideas and solutions they'd create barriers to resist change or slow customer adoption.  These defensive approaches simply aren't good enough.  For one reason, they don't create new ideas.  For another, they embed a defensive mindset rather than a creative, offensive and proactive mindset that is required to win in the emerging environment.

Whether you set out to disrupt a market or industry when you innovate is almost beside the point.  Customers and their adoption of your ideas will determine how influential or disruptive your products and services will be.  But you must enter this market expecting more and more disruption - not just of products but of companies and perhaps industries.  Doing that will create the urgency you need to not just sustain business but to thrive.
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posted by Jeffrey Phillips at 6:24 AM


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