Throughout time, technological progress has experienced the same cyclical patterns of disruptive technology, sustaining technology, to disruption again, and so on. Our industries, markets, and technologies are constantly in motion and evolving, and it is this pattern of disruption and sustaining innovation that perpetuates its progress. In discussions we often refer to ‘novel’ or ‘seminal’ ideas, concepts, and technologies as ‘Disruptive’, and in most cases the way that it is used is a misnomer. In more cases than not, analysts will weigh the cost-benefit ratio of an innovation purely on its consumer-solution alone to determine how innovative it is, and depending on the benefit created for the consumer stakeholder, they may label it as ‘disruptive’.
‘Disruptive’ has often been a label misused to describe ideas that are just simply different. We must ask ourselves what makes technologies truly disruptive versus a description of a technology that is simply different or incrementally sophisticated. If we study other parallels that are available to us, we might be able to broaden our lens to better understand what truly makes a disruptive innovation and new-category creator. If we better understand what are the characteristics of truly disruptive innovations we can better understand the role our creations play in catalyzing change that will transform systems and create progress.
Beyond our narrow lens of industry and technology, the natural world we inhabit experiences disruption that affects us more than we know. Our biological ecosystems experience interruptions that disrupt its natural functions and process through the introduction of invasive species that are not native. Such invasive species create significant change in incumbent ecosystems not because of its incremental differences, but because of its asymmetries that completely redefine the value exchange in the ecosystem. Very similar to biological ecosystems, in industry and technology, disruptive technologies are not innovations that are simply different, but they are innovations that have asymmetries that completely define a new value network. There is reason why certain technologies are able to create new categories and catalyze change while others cannot. There is a reason why certain technologies fail despite getting to market first and having first-mover advantage. Why did Tesla define the electric car and storage space? Why did Apple’s iPhone define the smartphone market? There were obviously others that tried in both cases (E.g. Fisker, Motorola, etc), and in both cases these firms were not first to try, but for some reasons these were the ones that were disruptive to industry and systems.
…invasive species create significant change in incumbent ecosystems not because of its incremental differences, but because of its asymmetries that completely redefine the value exchange in the ecosystem.
Invasive species have completely transformed natural ecosystems and those same invasive properties are similar to the characteristics of disruptive innovations that create systemic change in established technology ecosystems. Though we cannot completely compare the negative effect that invasive species have on the sustainability of our natural ecosystems to the progress that disruptive innovation promotes, invasive species have characteristics that are illustrative of asymmetries that create change in incumbent systems. Invasive species have properties that exploit the opportunity in incumbent ecosystems that redefine the value network. If we translate these same properties to the innovations we create, we will better understand how to put in motion truly transformative change. The type of change we choose to make will be up to us.
Invasive Species have properties similar to disruptive technologies that redefine the value network of its ecosystem:
1. No Natural Predators
2. Tolerance to Environment and Plasticity
3. Voracious Appetite
4. Dispersal Ability
No Natural Predators: When invasive species are introduced into a new ecosystem, they have no natural predators. Without predators, invasive species populations cannot be balanced or defended against and the result is the invasive species overtaking incumbent species to establish a new ecosystem (e.g. destruction of biodiversity, etc). Truly disruptive technologies are not disruptive because of its unique technological differences, but because it has asymmetries across their value network that prevents incumbent firms from being direct competitors. When firms try to compete directly with each other on product differences, the incumbent firm will always have the advantage. When a firm introduces a technology that addresses the same consumer solution, but relies on a different value network, incumbent firms cannot easily replicate or adapt, and the result is disruption.
When we discuss the smartphone industry as a convergence of other technologies, most people will reference Apple as being the disruptor. It is common to hear people reference Apple’s disruptive properties because of their attention to design and intuitiveness. This may have something to do with it, but design is not the property that disrupted to the telecom and smartphone space. Nortel’s Motorola Q had first-mover advantage on Apple’s iPhone with an established telecom value network. The Motorola Q did everything that Apple’s iPhone did: Internet, Calling, Instant Messaging, Music; and did it for $99 compared to Apple’s $500 iPhone. Nortel was an established firm in the space selling millions of phones at the time of the Motorola Q, and Apple was a computer company with no telecom history with zero phone sales. How is it that Apple ended up transforming the smartphone industry? Just like invasive species, Apple did not have any direct competition because of its asymmetrical value network. Apple had previously created the music player, iTunes, with the introduction of their iPod. iTunes would be the platform nexus between content and hardware that would be essential in a new smartphone space. Apple owned the relationship and value exchange not with just the consumer stakeholder, but also the creators of content (music, labels, artist, developers, etc). Nortel relied on an incumbent value network that was established in the telecom space and did not have the agility to change. With technology converging into the smartphone space, Apple concerned itself more about establishing a new value network that was not only viable for their solution, but one that Nortel could not easily compete with.
Tolerance and Plasticity: Invasive species are adaptive and opportunistic. Because they are usually introduced into an ecosystem that they are not native too, they must stay agile, opportunistic, and tolerant to their environment to survive. In some cases in biology, organisms will even show characteristics of phenotype plasticity that changes its biomedical or physiological properties as a way to adapt to new conditions. In contrary, species that are introduced in an ecosystem and lack the tolerance to new environment conditions diminish and cease to exist and their incumbent ecosystems prevails. This is very similar to technology and firms that have the ability to stay agile and opportunistic in the conditions of their space. New firms that lack the tolerance and the ability to stay opportunistic will naturally be defeated by incumbent firms that have the established value network and resources to defend itself. Invasive species are not only tolerant of their new environments, but very often they adapt themselves to exploit opportunities that other species might not be able to address. In technology and innovation, disruption usually comes from smaller agile firms that do not have a fully defined value network to rely on. These firms have the ability to be opportunistic and adapt their value networks to respond to conditional variance in markets, industry, co-innovation, and co-adoption. Larger incumbent firms have the challenge of innovating and preventing their own disruption from other invading firms. Like incumbent species, these incumbent firms lack agility and plasticity that retards their ability to innovate compared to smaller opportunistic firms. The larger firms rely heavily on an established value network that they are completely dependent on. Larger publicly traded companies have this challenge as they established value networks based on measurements such as EPS (earnings per share). When a publicly traded company evaluates opportunities to innovate, they must take away resources that would minimize their EPS to seed innovation that would bear fruit in the future. With stakeholders involved and fiduciary obligation, leaders of incumbent firms often choose a path of stagnation and vulnerability rather than being the makers of change. We now see that the average lifespan of a company listed on the S&P 500 is now 15 years (Richard Foster, Yale University). Most incumbent firms that do end up surviving end up innovating through the acquisition of smaller innovative firms rather than innovating within. The change is not coming from stagnant incumbent firms that are strongly rooted in their established value network, but they are coming from firms being ideated and incubated in a garage or dorm room that are still in the process of creating a completely new value network.
Voracious Appetite: In biological ecosystems, species that are invasive have voracious appetites that are satisfied by the consumption of available resources typically consumed by the species in the established ecosystem. Such a voracious appetite does not leave room for other species to participate in the ecosystem or more often they are the sufferer of their appetites. These invasive species are able to exploit vulnerabilities in the incumbent system because of its craving and as a result, it redefines the roles of the existing value network into a value network that aligns with its appetite.
In technology, voracious appetites only arise when a firm identifies an opportunity to exploit consumer needs that have been unmet. If consumer needs are met in the vertical than there is no appetite. If there is consumer opportunity yet to be fulfilled, firms will have the appetite to fulfill those opportunities. Depending in the incumbent system’s maturity, those consumer opportunities may be incremental, but when a system reaches its maturity and consumer opportunity has been overshot, disruptive firms have voracious appetites for consumer opportunity. Technologies progress through the fulfillment of consumer opportunity. You can measure the maturity of a vertical based on how current technologies fulfill consumer opportunity, whether it is not met, under-shot, or overshot.
· Non-consumer Opportunities: Opportunities that identify pain-points in current innovations and technologies that prevent general consumer audiences from adopting. Markets that show signs of non-consumer opportunities within its market are typically emerging new markets. New market disruption is a result of a market taking advantage of non-consumer opportunity.
· Undershot Consumer Opportunities: Opportunities that show that an established innovation or technology attracts consumer adoption with more room for sophistication and improvement. Markets that show signs of undershot consumer opportunities are typically maturing markets that result in sustaining up-market innovation that are either radical or incremental. This creates innovation and growth within the industry vertical or augmenting to horizontal growth.
· Overshot Consumer Opportunities: Overshot consumers are a result of a mature industry or market with incumbent firms that have delivered all services and needs completely. Markets that show signs of Overshot Consumers often are established and matured markets that result in low-end disruption and displacing innovations.
By understanding how current technologies are fulfilling consumer opportunities in the vertical, you can understand when the appetite for firms will become voracious. Once an incumbent system matures and it is left with overshooting consumer opportunity, firms develop voracious appetites to deliver low-end disruption and redefine the roles by establishing a new value network.
Dispersal Ability: What makes new species invasive in a new ecosystem is their ability to be motile and disperse. Invasive species transform established ecosystems because they have the ability to be dispersed across the ecosystem in its entirety. If these species did not have dispersal ability it would have little affect on the impact of the incumbent system as a whole and their properties would be less invasive. Just like in biology, firms that introduce technology that incrementally sophisticate typically addresses needs in an existing value network and have little effect in changing existing systems. These types of firms either end up adapting and co-existing with the established value network, or it cannot add value to the established value network and through natural selection it becomes extinct. These incremental firms do not have the properties to change the existing system because of their inability to disperse the impact of its solution across the entire system. Firms that are disruptive are exponential in nature because they introduce change that redefines complete systems. Disruptive firms have properties that are not designed to integrate into existing systems, but they are designed to change industry on a global scale. When we think of truly disruptive technologies we think about firms that have shaped change on a global scale, away from the small narrow niche in existing verticals. We think of firms like Uber that has transformed transportation on a global scale. Uber’s friction against incumbents such as taxi unions and slow moving regulations are a testament of a firm that is redefining an existing system. If Uber had been a solution that addressed a localized need without the application on an exponential scale, it would be very unlikely that it would have the ability to transform the transportation system we experience today. Disruptive technologies have larger dispersal ability not because it decides to, but because their solutions are exponential across complete systems that can be applied on a global scale. Think of disruptive firms that have introduced innovation that has transformed systems and value networks. They are exponential technologies that not only think big but that have dispersal ability on a global scale.
Makers of Change
When studying invasive species and relating them to disruptive technologies, you understand the powerful role these innovations have to not just be different, but to create systemic change. Ultimately, makers of change in biological ecosystems are invasive species or the co-evolution of the species within an incumbent system. Both of these change-agents progress in different ways and paces. Even through it is difficult, it is still possible that incumbents just as entrants can bring on change. In biology coevolution can occur when species that are co-dependent on each other both evolve together. In biology, host species are species that have commensal symbiont that rely on each other. These relationships with host species within an ecosystem are the result of an established value exchange amongst species and can be liken to incumbent firms in industry with an established value network. Host species can set in motion coevolution that creates selective pressures that causes its dependents to evolve with it. It is possible for incumbent firms to set change in motion that would cause others to follow, but we know that is very difficult for those incumbent firms to make those changes without embodying the same properties that invasive species have. Whether an entrant or an incumbent sets change in motion, disruptive innovations are not technologies that are simply novel or different, but they are technologies that create transformative change amongst established value networks. They redefine the roles and the value exchange amongst the species of the value network. Like invasive species in biology, disruptive technologies have properties and characteristics that put change in motion by establishing new value networks — Change that completely transforms systems. Understanding these properties will make us more conscious about how we make change within established systems with our innovations. The type of change we choose to make will be up to us.