What a 'Big Bang' Disruptor Could Do to You
A new innovation theory suggests your product could be wiped out suddenly, and swiftly. Here's what you can do about it--and up-and-comers can too.
Disruptive innovation has been disrupted. The new threat to status-huggers is "big bang disruption," in which players not even in your market whip from their sleeves products that are both cheaper and better than existing ones. These innovations--mobile devices, in particular--are also better integrated with other products and services. So instead of starting in an underserved consumer segment and working up from there--as Clay Christensen described in The Innovator's Dilemma--big bangs seemingly appear overnight, and all segments snatch them up at once.
Consider standalone GPS systems. Companies like Garmin, Magellan, and TomTom thought they were competing with each other, until free, high-quality navigation apps began turning up, preloaded, on every smartphone.
"We're accustomed to seeing mature products wiped out by new technologies and to ever-shorter product life cycles," write Larry Downes and Paul F. Nunes, consultants at the Accenture Institute for High Performance, in this month's Harvard Business Review. "But now entire product lines--whole markets--are being created or destroyed overnight. Disruptors can come out of nowhere and instantly be everywhere. Once launched, such disruption is hard to fight."
Inc. editor-at-large Leigh Buchanan did an email interview with Downes and Nunes about the implications of big bangs for those who hope to ignite such disruptions--and those who hope to survive them.
Are there any advantages to large size in your model? Or do big companies eventually go away, to be replaced by shifting networks of small players?
There are still significant advantages to scale, but mostly to slow the inevitable transformation of an industry, or skew the trajectory of big-bang disruptors. Large-company advantages include the ability to control certain production or component facilities, to lobby and use regulation, and to have purchasing and channel power. But those advantages can quickly be outweighed by disadvantages: lack of speed and agility, high relative costs of learning and innovation, anti-trust regulation, and lack of trust from others in open innovation environments. This is definitely an environment in which small businesses and start-ups can seize the early opportunities. And early opportunities may be the only ones that matter.
Does this mean the decline of iterative improvement? Why spend time buffing something that is destined shortly for the dustbin of history?
You'd think so, but we found quite the opposite. The big-bang disruptors emerge from a hothouse environment where innovators are constantly launching market trials of new combinations of component technologies. In many cases, development costs are very low (think of hackathons and other quick-launch experiments). And early users can easily become co-developers, funders (think of Kickstarter, which just chalked up its first Oscar win), and long-term loyalists.
In that kind of ecosystem, you can keep iterating until you or someone else finally hits the right combination of technologies and a business model to deliver it. Then, bang! Incumbents misread those failed experiments as false signals that the disruptive technology isn't ready for prime time. But what's happening instead is that entrepreneurs are walking on target, narrowing in on just the right place to send the bomb.
Once a big-bang disruptor is launched, of course, the key to profitability is to continuously enhance, upgrade, and update it. Think of the most popular games and other short shelf-life apps, such as Farmville, Angry Birds, and Draw Something. You create a moving target for competitors, and, again, new digital development and distribution platforms make it relatively easy and cheap to iterate and to involve the loyalists in the process. As soon as you stop buffing, you're finished.
What should an R&D organization look like in this new world? How would it differ from what is now state of the art?
Something dramatic has happened to R&D in the last few decades. As Moore's Law continues to drive down the costs of core component technologies at an exponential pace, the cost of introducing new products and services in information-intensive industries (that is, all industries) has fallen faster than the cost of R&D in general. At some point, the lines cross, making the added costs from innovation less than the decline in costs from technology improvements. This enables the fundamental feature of big-bang disruptions: that they enter the market not only better than incumbent offerings, but also cheaper. That flips the wisdom of innovation theorists such as Clayton Christensen on its head. If you're looking for disruptors entering your markets at the low-end, you are looking in the wrong place.
Increasingly, successful R&D is virtual, taking advantage of the same platform for delivery as the platform for development. New products and services are crowd-sourced and crowd-funded. And rather than take on big problems head-on, they look for cheap solutions based on off-the-shelf technologies that can be introduced into new market segments.
One of the most intriguing new products we saw at this year's Consumer Electronic Show, for example, was something called PowerTrekk, which will be available soon in the U.S. Based on simple chemistry it generates electricity to charge mobile devices using disposable cartridges fueled by water and human-applied pressure (screw on the cap). In reality, what they've created is a personal hydrogen fuel cell, whose only by-product is sand. Its makers aren't trying to create an alternative to less sustainable forms of energy. But as they improve on their simple, elegant solution, they might just do it anyway.
What's the point of patenting something if it stands to become quickly obsolescent? Do we need to think differently about IP?
Very much so. There is growing consensus that both the patent and copyright systems are not working as well as they should and are counter-productive to Congress's goals for having them in the first place. The real problem isn't so much that patents grow quickly obsolescent. It's that the patent office has been extremely generous in granting them in the first place, forcing companies to use litigation after the fact to determine which patents are actually valid.
Which is not to say that the system can't be fixed, or even that existing patents have lost their value. Strategic assertion of IP assets can prove determinative for an incumbent industry participant trying to hold off the explosion of a big-bang disruptor, slowing it down just long enough to form an alliance, strategic investment, joint venture, or outright acquisition. Companies have little choice but to take advantage of the existing system to the extent possible.
Of course, the value of IP can also rapidly deflate once big-bang disruption is underway. In the article, we tell the story of Kodak, which was so closely associated with film-based photography that it just couldn't make the transition fast enough to survive in the age of digital. In bankruptcy, the only real asset of value it had left was its portfolio of patents. Unfortunately, delays in the process of liquidation saw that portfolio's value shrink from an estimated $2 billion to only $500 million--in a matter of months.
