“Disruption, in its broadest sense, happens when an industry is upended by changes in society, government, competitors or consumers. As a result, the way an industry functions and the hierarchy of the players within that industry are altered dramatically. It’s not a new thing; disruption has been around for as long as we’ve had commerce and trade. However, what is new is the rate at which it is occurring. This is largely due to technology, which has created an exponential increase in potential sources and methods of disruption — and as a CEO, you need to ascertain whether your company is in a position to disrupt an industry, or whether it is vulnerable to disruption from sources that may be hard to detect.
CHRISTENSEN’S DISRUPTIVE INNOVATION Technological disruption specifically has come to be defined as ‘disruptive innovation’, a term coined by the leading thinker in the field, American academic Clayton Christensen. As Clayton puts it, “Disruptive innovation describes a process by which a product or service takes root, initially in simple applications at the bottom of a market, and then relentlessly moves up market, eventually displacing established competitors.” Clayton frames this as not just being about one type of technology displacing another, or making it redundant — something we see happening all the time with competitor disruption — but about a new product fundamentally reshaping the structure of an industry. So, rather than being a simple case of Product A being better than Product B and so displacing it, disruptive innovation means Product A is not necessarily better than Product B but has tapped into a consumer base that Product B could not reach, principally due to pricing.
This process can be seen in the way smartphones and tablets have become de facto personal computers for many people, to the point where PC sales have declined as smartphone and tablet sales have grown. In effect, the biggest competition for PC makers like Dell has not been from other PC makers but from smartphone makers. Another example is the progressive trend among consumers to move away from buying music or movies via sites like iTunes, and towards subscription-based businesses like Netflix or Spotify. In this case, it’s about a business model upending the conventional way consumers access products. The new model gives consumers what they essentially want — in this case, access to music and films — at a far cheaper price.
MORE WAYS TO DISRUPT AND BE DISRUPTED Innovative disruption has become such a powerful concept because it is driven by the transformative power of technology. Uber, for instance, came out of seemingly nowhere (well, actually San Francisco) and redefined how we think about urban transport, leaving the taxi industry flailing to stay relevant. And it’s all because it used its app technology to better solve the problem of customers who wanted to get from A to B. At the base of the smartphone revolution is the power of chipsets that have managed to squeeze incredible amounts of computing power into smaller units and at cheaper cost. The subscription model used by streaming companies like Netflix and Spotify has become sustainable because of improvements in broadband and wi-fi, as well as cloud-based services. Innovative companies have used these advances to enter markets, then disrupt and reshape them.
In the next few years, we will see myriad industries shaken up by technologies such as robotics, automation, virtual reality, driverless cars, and the Internet of Things. Across all industries, there will be those companies whose business models will be irretrievably broken by disrupters, and there will be the companies that make us all rethink our role as consumers and how we go about our everyday lives.
How will the power of something like virtual reality impact on the travel and entertainment industries? Will robotics and automation change the way we look after people in healthcare settings like aged-care homes? We’re already seeing 3D printing put small-scale manufacturing into the hands of craftspeople, artists and small businesses. What industries will it upend and disrupt?
And so business leaders need to have a 360-degree perspective on disruption because it is something that can come at them from any direction. They need to think beyond the traditional parameters of their industry and see how their operations connect and interact with new technologies. In doing so, the opportunity exists not only to look out for disruptive threats but also, more importantly, to identify the possibilities for their companies to engage in some disruption of their own.”
Article by: Fi Bendall