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The advent of bitcoin has led to the ability to work outside of traditional banking systems using blockchain technology, leading to disruptive innovation by countless new entrants. It is hard to think of a sector that has not experienced disruption. This has led to business leaders everywhere looking for ways to dramatically disrupt their industries to reap the rewards for themselves.
So what exactly is disruption?
The concept of disruption emerged in the 1990s, led by Clayton Christensen, the father of disruptive innovation theory. The Harvard professor first published his ideas on disruption in 1997 in ‘The Innovator’s Dilemma’. As Christensen’s theory of disruption went, disruptive firms could enter the market in niche areas at the bottom due to the fact that more established organisations may have abandoned their customers here.
This invokes David versus Goliath type imagery, as small new entrants into an industry change it irreconcilably, and become market leaders in the process.
A word of warning – it is important to beware of thinking that everything is “disruptive”. The term is horribly overused. The true meaning of disruptive innovation is “A process by which a product or service initially takes root in simple applications at the bottom of a market—typically by being less expensive and more accessible—and then relentlessly moves upmarket, eventually displacing established competitors” (Christensen Institute).
The challenge for long-standing industry players
Industry incumbents have been struggling to compete, especially as disruptive innovation is, for them, very difficult to achieve. In 2015, the McKinsey Quarterly reported that this was at least in part due to the fact that; “every industry is built around long-standing, often implicit, beliefs about how to make money”.
As they explain, disruptive innovators come along and “violate” these long-held beliefs. Stalwarts continue, business as usual and get knocked sideways by the massive curve balls these disruptors throw at them.
One of the myths of disruption is at the heart of why you don’t have to be disruptive to outperform others within the industry. There is a long-held belief that doing cool stuff with technology is what is needed to disrupt. This is not in fact the case. In 2019, in the Harvard Business Review, Teixeira pointed out that “Disruption starts with unhappy customers, not technology”.
The argument goes that disruptors steal away customers that are dissatisfied with certain activities within a given industry, and that it’s not technologies, but the innovations that customers adopt that really lead to change in an industry. It follows logically from this point that businesses need to analyse customer pain points and find ways to add value if they truly want to succeed – and that disruption is just one way of going about it.
The alternatives to disruption
If adding value for customers and removing pain points is what is needed, you don’t necessarily have to be disruptive to achieve business success. While larger firms may not be as nimble or agile as disruptors, they can still innovate to succeed, and this need not be “disruptive” to achieve tremendous success.
McKinsey recommends following a process of challenging core beliefs within the industry and the supporting notions underlying these, so that companies can find ways to transform. After questioning beliefs which may not hold true, it is then possible to ask, “What if?” and come up with a new idea that could work.
While some of the new ideas may not be viable, and some even non-sensical, some may be winners. When going about this, it is recommended to look at business model innovations rather than product and service innovations, as the former can translate well from sector to sector, even if what the organisation does is very different.
Technology can also be a part of driving success in business, without it needing to be disruptive. This will come with a massive sigh of relief for executives clamouring to find ways to disrupt with digital. In their 2019 article ‘Digital Doesn’t Have to be Disruptive’ for the Harvard Business Review, Furr and Shipilov highlighted how Aeroflot reversed its plummeting fortunes by implementing digital for business transformation.
As they put it, “Russian airline Aeroflot has transformed itself from one of the world’s worst airlines into one of the best, with a Net Promotor Score that rose from 44% in 2010 to 72% in 2016 and a passenger load that grew from 64.5% in 2009 to 81.3% in 2016.”
Did Aeroflot disrupt to achieve this? No. But the company did transform what they do by implementing digital technology to work on improving across all key areas of the business to transform operations. Meanwhile, the purpose of the company has not changed – it still sells seats on flights.
The key lesson from Aeroflot’s story is that you don’t have to be disruptive, but that doesn’t mean you don’t have to adapt to change. This means looking for ways to transform and add value for customers, so they’re not tempted away by flashy new concepts, or so that they can be won back when they’ve drifted away.
While small, agile new entrants are taking big risks to disrupt industries, incumbents and other new entrants are innovating to succeed, without the need to be disruptive, and they are reaping the rewards of doing so. This is why you don’t have to be disruptive to add value and succeed in business.
Paul Armstrong runs HERE/FORTH, an emerging technology advisory, is the author of ‘Disruptive Technologies’ and regularly writes about technology and society for Forbes, Reuters and Cool Hunting. He is also the creator of TBD the conference which attendees described as ‘TED… without the bullsh!t’.
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