Can you disrupt any market or industry? This is a question that many ask given how popular the term disruption has become.

Although disruption has been a buzzword for the last few years, economists and sociologists have been studying it for decades. Joseph Schumpeter may have been one of the earliest scholars to work on disruption. He coined the term gales of creative destruction to connote disruption. In fact, he developed his theory of economic innovation from the works of Karl Marx. In eight decades since Schumpeter’s book was published, thousands of scholars have worked on understanding disruption.

Although disruption has been a buzzword for the last few years, economists and sociologists have been studying it for decades

Theoretically speaking, you can disrupt any industry but in reality, it is a difficult goal to achieve. It’s hard because for a disruption to take place two things need to happen. First, the forces maintaining status quo need to change. Second, the incumbents have to be unable to respond to such change. These two conditions can take place but to achieve them deliberately is often hard.

What maintains status quo?

There are many ways to conceptualize what maintains status quo in any industry. One way is to look at what protects existing profits and the firms reaping those profits. I have explained this framework in great detail in chapter 2 of my book The dark side of innovation. As long as forces that preserve industry profits remain in equilibrium, status quo continues. I conceptualized four forces that protect profits in any industry. Using the example of car for hire business, let me explain these four forces

The Four Cs of status quo

1. Consumer and industry paradigm.

It is acceptable that using a taxi to travel is a worthwhile activity. And a result, there are cabs and cab users in the world.

2. Consumer norms and routines

It is normal that you can hail a cab on the road or call one using a phone. The alternatives included Limo service, buses, and trains. For personal transportation, renting a car or hiring a taxi are two options people often face.

3. Capabilities of suppliers

To serve consumers, many companies created car rental businesses. Similarly, many firms also operated taxis. As a result, these companies built a set of capabilities that enabled them to serve the customers. These capabilities included fleet management and customer service.

4. Consumption bundles:

People either rented a car for a day or use a cab. These were the consumption bundles.

You can think of these four Cs as cascading forces that maintain status quo.

For a disruption to take place, one of these four must change in a major way. In the car for hire business, new firms with new capabilities arrived on the scene. Uber brought a way of using underutilized spare capacity in private vehicles. Zip car bought the ability to rent a car for an hour. These two changes in service offerings led to a change in the consumer norms and routines. People could use an app to get an Uber or use Zipcar to rent a car. This allowed for a change in the consumption bundles.

Using the framework to predict disruption

When the four Cs in cars for hire industry change significantly, conditions for disruption will arise. But if these changes affect only a small part of the market, they would not lead to disruption.

[easy-tweet tweet=”When one or more of these 4 Cs shift in any industry, it becomes ripe for disruption”]

You can use this framework to understand disruptive forces in any industry. Digital camera was a new consumption bundle that required new capabilities for camera makers. It led to a change in consumer norms of not needing film or photofinishing. It also changed the paradigms around when and how often to take pictures. You can use this framework to understand disruptive forces in any industry

Sometimes, disruption can start from a change in norms. For example, watching tv and reading the news over the internet are new behaviors becoming normal. They initiated the conditions for disruption in newspapers and cable TV industry respectively.

Inadequate Incumbent Response

No matter what causes a change in status quo, as long as incumbents can adapt to that change there won’t be any disruption. Kodak experienced disruption because of an inadequate response to digital camera threat.

When search on the internet moved from desktop to mobile, it was a change in status quo. But Google adapted to that change and thus there was no disruption for Google.

Video consumption moved from physical discs to consuming streaming video over the internet. But Netflix responded in a way that it continued to serve the customer in the new world. As a result, Netflix did not face disruption.

Only if the incumbents are unable to respond do they fall behind and get disrupted. This inability to respond happens for three reasons which I detailed in another post here.

Why is disruption hard?

The four Cs change slowly and often give enough notice to the incumbents. Furthermore, incumbents are more likely to respond to changes in status quo than not. This incumbent response makes disrupting an industry difficult.

There is another reason why disruption is hard. I found this in my research as well as in research done by many others. Established firms often get a lot of leeway in responding to disruptive threats. Due to their brands, channels, and customer relations, they get a second wind more often than not. As a result, even when they struggle to respond, they do not automatically get disrupted. Established firms often get a lot of leeway in responding to disruptive threats

There are some challenges that incumbents find difficult to answer. I found in my research that cognitive biases often create barriers for incumbents. Due to these obstacles, incumbents often do not respond adequately to a change in their industry.  In such situations, incumbents underestimate the threat they face. Due to their complacency, they often lose time and fall prey to a disruptor’s strategy. Learn more about these cognitive challenges by downloading the free first chapter of my book here.

In short, yes it is possible to disrupt any industry in theory but in reality, it is a lot harder than it appears.