A very interesting question has been asked by one of the readers, who has been going through my postings on disruptive innovation in last few weeks. His query seemed to convey that as neutral observer, I must not only write about how established companies can outrun disruption but also how disrupters can still out manoeuvre the incumbents who are trying to outrun the disruption. A catch 22 situation indeed!
To answer this, I did little bit of research and found certain examples and insights of companies who are out manoeuvring the incumbents plan of outrunning the disruption. I am expressing some of the key insights and data points I have accumulated from these examples. This is purely based on secondary research and this entire data is available in public domain.
Key patterns
One pattern that comes to light immediately is that recent disruptors are using the power of digital extensively and offering product and services that are as good as those offered by established companies. My other observation is that the disruption here has not come from competitors who are in in the same industry or even from companies with a remotely similar business model. These lightning disruptive innovations (Larry Downes and Paul Nunes have coined the word "Big Bang Disruptors") have come out of now here, combining existing technologies with offerings that are not even related to offerings by established companies. However, these offerings achieve a dramatically better value proposition. In real sense it’s quite possible that a lightning disrupter may have assumed a blue ocean for its offerings and may have not even thought about existing competitors. Users made the switch in a matter of weeks. And it wasn’t just the least profitable or “undeserved” customers who were lured away. Consumers in every segment defected simultaneously—and in droves.
In some of the cases, I have observed that disruptors took an alternate or a unique approach to solving customer needs and did not paid attention to providing the same kind or a better service than an established company at better prices! Which is contrary to what strategic management talks. If you think about a Microsoft's Kinect or even an Amazon, they simply came up with something unique which was tried, tested and adopted by customers creating a entirely new business that never existed before. Thus, creating a challenge for established companies to create new innovative strategy business models and marketing approaches.
Another observation that I have is that these lightning fast disruptions last for few months, but they disrupt the market in a way that it becomes impossible for the established company to get back to old days with multiple other players trying to fish in the newly created market.
What they are doing different.
The three important characteristics of what these lightning disrupters are doing.
a. Light weight product development, b. Exponential Growth, c. Chaotic strategy.
One common hallmark of these lightning disruptors is that they require relatively little in terms of capital. These innovations are often built out of readily available components that cost little or are free. As disruptive technologies become cheaper to manufacture and deploy, innovators can experiment with new applications at little risk to investors, abandoning prototypes that do not quickly prove popular. Digital channels eliminate middlemen. These companies create a direct relationship with their customers. This gives them powerful feedback loops in which they can more rapidly experiment, iterate, and customize offerings with far more flexibility than a traditional retailer. The best disruptors create a complete end-to-end experience, capturing the customer’s attention, loyalty, and data through the entire process rather than sharing it with anyone else. They outsource much of the operations, joining ecosystems built on digital platforms, where infrastructure becomes a shared resource. Contracting for asset usage on an open market allows them to scale quickly. These companies don’t compete on better distribution or supply chains — they can put together complex supply chains in a fraction of the time and expense it would take in an analog world. Instead, they compete on what really matters: a better customer experience.
Exponential growth
The lightning disruptors are known to have disrupted the product life cycle graph as we have known it. The Everett Rogers’s classic bell curve of five distinct customer segments—innovators, early adopters, early majority, late majority, and laggards has now been modified in only two segments: trial users, who often participate in product development, and everyone else. The adoption curve has become something closer to a straight line that heads up and then falls rapidly when saturation is reached, or a new disruption appears.
Exhibit 1
The new product cycle has become much faster and now comprises of three basic stages: development, deployment, and replacement. This faster product life cycle seems to follow what Gordon Moore predicted way back. The computing power that is getting multiplied by 2 has become very big and that accelerates the rate of disruption. It seems Moore’s law is taking over and Roger’s law is getting out of fashion. The rapid disruptors have also been known to work hard and celebrate failure. They fail fast to learn fast and this rapidly failing cycle finally leads to the right.
Chaotic Strategy
Classical strategy of management has always preached that businesses should align strategic goals along one—and only one—of three value disciplines: low cost, constant innovation, or customized offerings. Failing to choose, said the experts, meant “ending up in a muddle”. The new age lightning disrupters, however, are thoroughly undisciplined. They start life with better performance at a lower price and greater customization. They compete with mainstream products on all three value disciplines right from the start. By continually and dramatically working on all three at once, today’s technology makes it possible to sell new products and services more cheaply than the inferior alternatives they displace. Customers are so accustomed to this effect that they are coming to expect every product or service to get cheaper and better with each passing day.
Conclusion
What I have here is the amalgamation of the best ideas and thoughts, that I could get from secondary research. However, as the world changes at rapid pace, there is a tremendous amount still to be learned about how to compete in a world moving at the pace of digital. This brings to front the ability to learn quickly, experiment, and then pivot to reflect the insights gleaned. Established firms need to focus on digital strategy with a mind of a learning organisation.
References:
The New Disrupters, Rita Gunther McGrath, Sloan Management Review, MIT, Jan 2020.
Big Bang Disruption, by Larry Downes and Paul Nunes, HBR March 2013.
https://www.inc.com/leigh-buchanan/innovation-strategy-big-
bang-theory-larry-downes-paul-f-nunes.html
Surviving Disruption by Maxwell Wessel and Clayton M. Christensen,HBR December 2012.
Disruptive forces in the industrial sectors Global executive survey,March 2018,McKinsey & Co.