The Age Of Disruption

We are witnessing an unprecedented era of disruption in the business world today. Mobile devices are disrupting PCs. E-Commerce is disrupting traditional retail. Fintech is disrupting the banking industry. The wave of disruption is sweeping industry after industry and is pushing incumbents towards oblivion. To survive this age of disruption, you need to understand three powerful trends of this age of disruption and know how to deal with them.

This age of disruption is evident by three key trends in the business world.

• Increasing Prevalence of Disruption:

In the 1990s a handful of industries were being affected by forces of disruption. Today this effect is pervasive. Uber, Airbnb, VOIP, Netflix, and LED are just a few examples of disruptive forces across industries. Even when incumbents survive these disruptions, they still face massive pain.

In the past, companies in consumer staples with rock-solid brands were immune to disruption. This is no longer the case. Consider the example of a small unknown company like Dollar Shave Club. It came out of nowhere and grabbed a nontrivial share of the shave care market. DSC did this in the presence of an 800-ton Gorilla like Gillette.

It seems that no industry is immune to disruptive forces anymore.

• Increasing Speed of disruptive events: 

It took 30 years for digital cameras to disrupt analog cameras and 15 years for quartz watches to disrupt mechanical watches. But, it took 5 years for iPhone to displace Blackberry.

Facebook has 1.65 billion users. It was born in 2004 – just 12 years ago.  If Facebook were a country, it would be the largest in the world. Dropbox, Spotify, and Airbnb were born in 2008 and Uber in 2009. All these companies have had a major impact on the incumbents in different industries.

The young age of these companies tells the story of increasing speed of disruptive forces.

• Multiple disruptions per industry:

How many disruptions did a typical industry face in the 20th century? The camera industry, watch industry, and the mutual funds industry faced one disruption each. Today every industry faces more than one disruption. Watch makers have already seen two disruptive events since the turn of the century. First, mobile devices reduced demand for watches. Second,  smart watches are trying to take overt the wrist real estate. Financial services industry is being inundated with many disruptive threats coming from the fintech wave. Insurance industry is witnessing 9 disruptive events.

 

 What does the age of disruption mean for big and small established players?

The speed, prevalence, and force of disruptive events are overwhelming even the strongest firms. These forces are eroding the competitive advantage of successful companies. This makes them vulnerable to future shocks. As a result, even the most successful companies face an uncertain future.

The increasing speed of disruptions needs a lightening fast response from incumbents. Kodak had over 20 years to respond to the digital challenge and Swiss Watchmakers had 10 years to respond to quartz challenges. Those long time spans appear to be a luxury compared the time companies have today to respond to disruption.

 

Strategic Imperative in the age of disruption

What does the age of disruption and these trends mean? They mean that you are under more undiscovered threats than any time in the past. They imply that you do not have the luxury of waiting for a disruption to arrive before reacting. You need to have a befitting response ready even before a disruption arrives on your horizon.

Above all, these mean that you need to build capabilities in disruption management. With such capabilities, you will be able to predict potential disruptions before they arrive. Such capabilities will enable you to be proactive rather than reactive. They will allow you to track forces of disruption rather than be surprised by them.  Above all, these capabilities will help you design a broad set of response options than you do today.

What are you doing today to manage disruption in your business?