Disruption: How It Happens and How Managers Should Deal with It
Disruption is a word which causes nightmares to some CEOs. It is also one of the most popular buzzwords in the business world. Everyone either wants to be a disrupter, or experiences the effects of disruption. But do we even have a clear view on what it means?
Disruption: Another Way of Saying Change Is Unavoidable
When the light bulb appeared as a competitor to petrol lamps, that was a disruption. When telephone replaced the telegraph — that was another disruption. In recent times, Uber and Airbnb are business models which cause disruption in the public transportation and hotel business, respectively.
A disruption is any significant change which seems to gather momentum overnight and cause business leaders to rethink their products, services and market share. It usually happens because the offer no longer matches the demand. Or simply because somebody thought outside the box and found a new way of doing things.
Certainly, not every start-up or brand new business idea causes a disruption. Some trends come and stay, others are nipped in the bud. But when a new trend is here to stay, business leaders and managers need to recognize it and decide how to act.
Ignoring disruption does not make it go away.
The Response to Disruption — Not a Paved Road
There is not a single, correct way to respond to disruption. Various particular situations require different approaches. One thing is for sure: ignoring disruption does not make it go away, in the sense that it leaves your business model untouchable and invulnerable. Left to their devices, disruptors will one day reach your own clients and woo them over with the change they bring.
The key solutions to disruption, as seen in practice, are the following:
1. Take the Idea and Make It Better
When a trend emerges, some companies opt to invest massively in research and development, trying to beat the odds and come up with an improved, more viable and more attractive version of the original disruption.
This is what Microsoft did with Internet Explorer when Netscape Navigator browser was gaining momentum. The company created a massive 4,500-employee division for the development of Internet Explorer alone, adding functionalities and features to it that would outshine whatever Netscape Communicator had to offer.
2. Buy Them Out
Many small disruptors on the market are bought out by large companies, with their idea being integrated in the corporation’s product offering, or simply squashed. There are many ideas which amount to nothing in practical terms of developing products or services, but which are bought out by large corporations out of precaution. Google does that frequently.
Speaking of Google, back in 1998 it offered itself for sale to Yahoo for a mere USD 1,000,000. Yahoo management did not think the disruption created by the new search engine was worth their money — and the rest is history.
3. Create a Counter-Disruption
If your organization has the power to develop something quite different and more appealing than whatever your disruptors have to offer — go ahead and do it.
Steve Jobs developed an outstanding product and business model and then he was ousted from his own company. And he left it to fend for itself, while he went on to buy out Pixar and focus on 3D animation and product design. And then he regained control of Apple and launched a series of iconic products which had little to do with the original business model (personal computers).
This counter-disruption showed that whatever aces others had up their sleeve, Jobs still held the trump card. If your organization has the power to develop something quite different and more appealing than whatever your disruptors have to offer — go ahead and do it.
4. Focus on Other Markets
Some companies choose to continue their business model, but in a different territory, or addressing a different market segment. These are companies who seem to slack in keeping up with the latest trends, but in doing so they service that particular group of customers who also find it hard to keep up with the trends.
We are talking about the aging generations, or about lower income people and anybody else who, by necessity or by choice, prefers things done “the good old fashioned way”. For instance, Sony has shut down its laptop manufacturing division, but is actively seeking older engineers specialized in vinyl disc manufacturing — as there is a surge of demand for music in this old time format.