These days it feels like disruptions are lurking around every corner. Disruptions occur when a new technology sweeps aside an old technology in a wave of "creative destruction" (I'm using the term disruption in the colloquial sense of technology substitution rather than the more specialized form of disruption as defined by Christensen). From the way the world sounds in the popular press, every industry is under threat from disruption. But are the threats real and how can you be prepared to counter the threat or seize the opportunity? In some recent research I published by both Harvard Business Review and Organization Science, with my colleague Dan Snow, we explored this question and made some interesting observations.
In Hindsight Disruptions Appear Instantaneous but in Reality They Take a Very Long Time
While it is true that many past technologies and business models have been turned over in dramatic fashion (for example how mini-computers were completely replaced by personal computers) the surprising truth is much different than the popular image. In fact, most threats never materialize and when they do, they most often take a great deal of time to actually disrupt the old industry. For example, a look back at history shows that IBM sold both mainframe computers and mini-computers for decades after they produced the first mini-computers and personal computers. Just look in your own office and consider how the desktop was first disrupted by the personal computer, which was disrupted by the netbook, which was disrupted by the tablet, which was disrupted by mobile devices. If you are like me, you may just have all of these devices lying around and then ask yourself, were these really disruptions (defined as one technology or business model replacing another)? They may be one day, but that is still to be seen. Likewise, people have been predicting the demise of universities since the emergence of online education in the later 1990s. The first wave of disruption were online courses which didn't really materialize and now MOOCs are the latest threat. Although universities may one day be disrupted, the question is when?
The other big secret about disruptions? Contrary to the popular image of the blind and slow big firm that lets themselves be destroyed by a new innovation, often big firms make the opposite mistake of moving too early rather than too late. In fact, precisely because disruptions are so hard to predict in advance, research suggests that actually most firms leap too early into a new technology, conclude that it has no merit, and then abandon any efforts to adapt. When they are eventually disrupted, onlookers condemn these late movers as slow and stupid but in fact, they just couldn't figure out the right timing and so got a "false negative" from their first entry into the market.
Suffice it to say that contrary to popular myths, disruptions are slower and less threatening than many of our popular myths let on. In fact, it seems like it may be their slow takeover that makes them so hard to manage. Rather than give you the PhD primer on disruption, let me share three lessons about disruption that can help you as you face the threat of disruption:
- Many technologies that appear imminent threats never actually disrupt. Example: consider how worried movie producers were about how television would disrupt their industry when in fact it only made it stronger
- Disruptions rarely completely eliminate the old technology and rarely all at once. Example: Many of us are using desktops, laptops, and mobile devices, all of which were supposed to disrupt each other
- Disruptions often take a great deal of time to occur, often decades. Example: Online education may disrupt the universities but it has been twenty years so far. On average it takes one to two decades.
- The key to surviving disruption is to neither leap too early nor too late but rather to slowly build the capabilities you may need one day. Building these capabilities slowly allows you to recognize when the threat is real. In my next post I will describe how you can build these capabilities.
To illustrate this final point, consider how both Microsoft and Nokia were surprised by the Apple iPhone, in part, because they weren't actively building the capabilities to compete in these markets. By contrast, in the market for electric vehicles, both Toyota and BMW are actively building the capabilities to compete and, when the time is right, slowly scale up these capabilities to respond to disruption. The point is that disruptions take time, so the key challenge is how to see them coming and then have the capabilities to make the switch. I'll address this question in my next post: One Way to Profit from Radical Innovations.