In my prior post, I highlighted how technology disruptions can be difficult to recognize and respond to because it can take years, sometimes decades, for a new technology to disrupt the old technology. In research I published in both Harvard Business Review and Organization Science, with my colleague Dan Snow, we explored what strategies a leader can use to deal with disruption. We found that in many of these disruptions leaders employed a previously under-appreciated tool--hybrids--to learn about and shape their future.
Hybrids Can Be Stepping Stones to the Future
In our research we defined hybrids as technologies or business models that combine part of the old with part of the new. Classic examples include the Toyota Prius that combines internal combustion engine technology with electric engine technology or Netflix when their business model used to combine DVDs by mail with streaming technology.
Many times we overlook the value of a hybrid because once a disruption occurs, hybrids can look clumsy. Furthermore, hybrids are almost always temporary, and so they eventually get displaced by the new technology. But what we overlook when we only look backwards is that when you are facing forward into a technology disruption, the threat is immensely uncertain: Will the new technology destroy the old? When? For which customer segments? At what price?
Our research found that when you are facing this uncertainty, hybrids are a tool to learn about and even shape that future. Specifically we argue that you can use hybrids to develop three valuable forms of knowledge: supply side, demand side, and timing knowledge. This is a fancy way to say that hybrids are advantageous because you can continue to profit from the old technology while learning how the technology works (supply side), what customers want (demand side), and when the new technology will likely disrupt the old technology (timing).
To understand how this works, let's re-examine the famous Netflix "Qwikster" transition. Although Netflix received a great deal of negative attention for trying to separate out their streaming business from their DVD disc rental business, many of us now recognize what a disruptive technology streaming video was to the DVD business (by 2016 streaming represented less than 10% of revenue). However, most of us forget how uncertain a threat streaming video was when Netflix first created and offered a hybrid of physical DVD rentals and digital movie rentals. When Netflix first launched the streaming service it wasn't clear yet that streaming would disrupt the DVD business. Why? The quality of streaming was low, the selection of movies was very low, and the bandwidth required to use the service was not as widespread as it is today. As is the pattern with disruptive technologies, over time, streaming video improved until it became a clear substitute for the DVD rental service and Netflix tried to abandon it by splitting the different services. Today, most subscribers who use streaming exclusively look back and see the combo DVD/streaming as a bit clumsy. But that "clumsy" hybrid actually helped Netflix develop the immensely sophisticated technical skills to deliver videos digitally (each video must be re-encoded into thousands for formats instantly to fit our many different devices), understand what customers actually value, and recognize the timing of when to make the switch. In other words, the hybrid helped Netflix develop supply side (technical knowledge), demand side (customer knowledge), and timing knowledge (when to make the leap) which helped them make an uncharacteristically smooth adaptation to a rather radical technology disruption (remember that the disruptive transition from retail movie rentals to mail DVD rentals bankrupted the major players Blockbuster and Hollywood Video).
Different Hybrids for Different Situations
In fact, there are many hybrids for different situations. There are blocking hybrids, like hybrid hard drive/SSD drives which slowed the entry of SSD technologies into computers. There are also niche hybrids which satisfy a customer need that the new and old technologies cannot, like the Microsoft Surface which gives the form factor of a tablet but the functionality of a PC. There are also bridging hybrids that help firms or customers make the leap from one technology to another, like hybrid cloud computing helps big firms leverage the flexibility of the cloud but the security of enterprise computing (for a full summary see our article in Harvard Business Review).
Arguably we can even apply the theory of hybrids in our own lives. For example, if you are contemplating a big career change, could you create a hybrid to "try" on the new career for a bit before making the costly leap to a new career? To illustrate the power of such a "hybrid" career approach, research has shown that entrepreneurs are more likely to be successful, on average, when they first try out their entrepreneurial ventures while keeping their regular job. Their job helps give them the financial runway to discover the real opportunity and to start gaining some traction before making the leap to be a full-time entrepreneur! So next time you face a major uncertainty, in business or in life, consider if a hybrid can help you make the transition successfully.