In a sun-filled boardroom overlooking lower Manhattan, I was sitting with a group of chief strategy officers for part of our Outthinker Roundtable discussion. Professor George Day, leading expert on innovation and marketing, and faculty member at Wharton Business School, shared a concept about disruption that has been infecting my thoughts ever since.
We hear the word “disruption” thrown around profusely today. Harvard Business Review knows the word sells magazines. Startup entrepreneurs know it helps them raise capital. Executives fret about pending disruptions from blockchain, artificial intelligence, and platforms.
But how much of the uncertainty we are experiencing really is disruption?
What is disruption?
The term disruption, coined by Clayton Christensen, speaks to a very specific strategic dynamic. A disruptor targets a customer site that is considered of little value to the incumbent. The disruptor offers a product that’s considered inferior by the incumbent. By doing so they gain a foothold and from that beachhead, expand incrementally upward, improving their product, capturing ever more valuable customers.
Disruption occurs when incumbents find themselves on the horns of dilemma: to protect their core business or embrace a new innovation that may put their core business at risk.
Not all change is disruption
But we throw around the term too loosely today, labeling anything seemingly new, that incumbents may be slow to respond to, a disruptive innovation. George Day argues that much of the activity that we call “disruption” instead is simply “turbulence” – changes that fail to meet the criteria of a disruption. Some are new, yes, but that does not necessarily force incumbents into the innovator’s dilemma.
We are experiencing an historic volume of turbulence because multiple technologies are now interacting with each other and when innovations collide, their impact multiplies. Consider, for example, mankind’s original transformative innovation: the scratch plow. This simple stick, when dug into dirt, creates a line in which you can plant seeds. Those seeds grow, and you have a garden. You could argue that this innovation led the way to the transformation of humankind from hunter-gatherer societies into agricultural ones.
But what enabled the scratch plow to transform society was another innovation underway at the same time: the domestication of the ox. Until we had an ox that could pull the scratch plow, we could not grow gardens or farms at significant scale. When two innovations collide, radical transformation begins.
And today we are experiencing multiple interdependent innovations emerging at the same time. The Internet of Things (IoT), for example, is of little value until you have the ability to make sense of massive amounts of data (data analytics). It is made even more valuable when you add artificial intelligence that can respond to the insight from the data.
Responding to turbulence
Such rapid change creates turbulence, but not necessarily disruption. You CAN respond to turbulence. Your struggle to do so comes not from a dilemma but from the speed with which you can make sense of what is happening and respond. Calling it “disruption” implies we are helpless. But calling it “turbulence” can guide us toward action.
And incumbent companies are waking up to this realization. You see this in the fact that blockchain technology, which many consider disruptive, is proving to not be disruptive at all. Its advance is being led by giant incumbents like IBM, Amazon, and Morgan Stanley. IoT is similarly being driven by behemoths like DHL, Google, Hitachi, and Huawei.
Turning turbulence into opportunity
Once you enable your organization to distinguish disruption from turbulence, you can turn today’s rapid change into opportunity. This requires three steps:
- Sensing the environment. Distinguishing weak signals from noise, making sense of the flood of new information, to orient yourself to what is really going on. Cisco, for example, sees that the growth of IoT with analytics, the cloud, and artificial intelligence is opening up for it the opportunity to lead what it calls the “intelligent network.” Its bet is paying off. Its stock price has nearly doubled in the last three years.
- Deciding on a response. As a new future emerges, assessing what opportunities and threats that represents, and deciding how to take advantage of the former and shield yourself against the latter. Consider Adobe, which assertively transformed its business model, abandoning perpetual licenses for a cloud-based subscription service. Its stock price has quadrupled in three years.
- Taking action. Rallying the resources, activating the minds of your people, building a sense of urgency so that you act on your decision. Microsoft, for example, has moved mountains to reprogram its core office programs to prepare them for the cloud and build a cloud service business that, at over $17 billion in revenue, is now larger than Amazon Web Services. Its stock price has more than doubled in the last three years.
So be honest. Don’t get caught up in the “disruption” hype. Don’t confuse disruption for turbulence. Gather information to create a possible vision of the future, decide what your company might do in response, and activate a response.