I find it interesting to see how buzzwords are part of the conversation in business conferences and meetings. A few years back it was ‘Cloud’ and now I hear ‘Disruptive Innovation.’ These buzzwords are indications of ongoing trends, and people are keen to understand how these trends impact their business. How can businesses cope with disruptive innovation, and how do we handle or adapt to these in our day-to-day life?
In his book, The Innovator’s Dilemma , Clayton Christensen coined the term ‘Disruptive Innovation’ describing it as an innovation that creates a new market by discovering new categories of customers, while displacing an existing market. A classic example would be of Kodak, which used to be a renowned film-based camera manufacturer but was caught napping when the digital photography era began. By the time Kodak entered the digital camera domain, its market was already seized by the likes of Canon and Nikon. The irony being Kodak had invented the core technology used in the digital cameras, yet it failed to capitalise the digital camera market. It was not that Kodak was not innovative, just that it was slow to adapt to the transition to digital photography. And now we have all of them struggling to catch up with mobile phones that have tripped them all.
This is a pattern that can be observed through history; a company dominating an industry and with the dawn of new technology, struggling to maintain its top spot. These disruptions happen with every new technology and trend, but the challenge that organisations face is how to anticipate, adapt and approach these sudden changes.
The world we are in is changing every day, with new technologies – 3D printing, Internet of Things, wearables and robotics – that could affect us in a very disruptive way. The way an organisation approached doing business could be at risk because an innovative product from new technology could either create a whole new market or the way a product/service is delivered could undergo a radical transformation.
Disruption drivers
This process of creation, disruption and destruction is happening at a rapid pace. Speed and ability to predict is, therefore, key.
A few years back nobody envisaged that with a 140-character-message limit Twitter could become a platform for real-time information media, or Facebook could have any business use. Twitter and Facebook have been able to carve their own space on the social media front. Likewise, Flipkart and Snapdeal have shaped the Indian e-commerce market. These companies with market-place models and minimal/zero inventory have almost rocked brick-and-mortar retail over a short span.
Similarly, Uber changed the way cities travel. When it entered India last year, indigenously developed Taxi for Sure and Ola – also app-based cab haulers – were ready to take it head-on. And with these three cab aggregators spreading roots, traditional cab services – Meru and EasyCabs etc – (business models where companies owned cars) faced threat. Only recently, Meru launched Meru-genie, but looks like it is a little late in the day.
Disruptions in the e-tailing or the cab-hauling space did not come from competitors in the same industry. Nor did new technologies follow a planned strategy. The disruptors came with a bang and addressed a consumer need with an innovative and mass appealing solution. The users did not decide or plan to make the switch, but naturally transitioned to newer solutions over other traditional solutions. The traditional companies were not able to recognise the threat from the disruptors, as they stole their customers and ended up reshaping the entire industry.
Digital competence
As our world is becoming digital rapidly, the potential is huge for companies that have proactively invested in digital competence. The advent of social media has actually forced companies to explore the platform for delivering innovative customer services; else the platform has the potential to tarnish their brand image. If an organisation overlooks a trend or technology, there is a risk that its competitors will move faster by following that trend or technology.
The decision to take this strategic risk has become a top priority for companies. While companies want their CEOs and team to evaluate strategic risks of adopting new technologies, the challenge with such risks is that often there is no historical information to analyse impact. These risks, if spotted early and mitigated well, can be game-changing, but if followed late then it becomes difficult to gain ground from competitors.
Disruption is not a business model that organisations can adopt or plan; rather, they can prepare themselves for mitigating such disruptions. As technological advances will continue, this will not only have the disruptive influence on the companies but also on the job market. 3D technology can redefine the prosthetic limbs market. Wearable devices like wrist bands for remotely monitoring body vitals can be used in healthcare.
Self-driven cars improve city traffic. All of these are potentially disruptive technologies that can redefine the market terrain. The disruption will never announce itself, it will happen, and an innovation would be the trigger. If organisations overlook the possible disruptive trends early on, history will repeat itself.
The writer is Managing Director, Monster.com