What Technology Disruption Always Does For (or To) Your Business
Technology disruption often catches us off-guard, but shouldn’t. Here’s how to see it coming and use it to your advantage.
Go back just a handful of years. Which of us would have predicted a new way for a person to catch a ride from point A to point B would cause protests, riots, government action, and widespread news coverage?
Yet, this and more is what the emergence of Uber (and to a lessor extent its more well-mannered cousin, Lyft) brought as it disrupted the long-standing personal transportation services industry.
Part of the industry shock came from the suddenness with which Uber and services like it entered the marketplace and stole customers from the legacy providers.
This effect coined a new term that was eventually used in other industries to refer to a sudden undermining of a long-standing business model by a new, technology-centric entrant: “being Uberized.” But specific ride-hailing companies aside, what did this new business concept really do?
And why did we suddenly see it appear now and not, say, 30 years ago? The answers are found in what changed, and yet also what did not change.
Customer needs in this space have not changed, namely: to be picked up and transported from place A to place B via a vehicle (presumably operated by some kind of driver, though in the future, additional technology might even remove the human driver/barrier from the equation.)
In the not-so-distant past, to make this into a service — a taxi company, for example — you’d need a staff of drivers, a captive fleet of vehicles, and you’d need to ensure geographic coverage through advanced planning and scheduling.
To make on-demand contact between passengers and drivers, you’d need to have a central office to receive phone calls to dispatch drivers. Since the dispatcher would need to be able to contact drivers, you’d also need radios in each vehicle, and since payment would have to be taken at the point of service — the vehicle — you’d need mobile ways to measure/meter the fare and receive payment.
All that technology ended up being fairly specific and dedicated to taxi services, not something ubiquitous to all vehicles nor something any ordinary person would have the means to easily acquire. Such were the requirements for being able to form and sustain such a business model.
For newcomers, those were also the barriers….until the smartphone came along, and it brought: GPS for pinpointing vehicle and pedestrian location, persistent data network connectivity to allow applications to send/receive/exchange data, and cloud-based digital payment methods.
Because this one device (and related “always-on” services) could suddenly take the place of the highly dedicated existing technologies, the entire model was poised for disruption, not necessarily as a punishment for a bad old model but just “because it can be different or better now.”
There wasn’t anything inherently “wrong” with the existing concept of transportation-on-demand. Sure, it had its nuisances, but it also wasn’t totally broken. So why did it get disrupted thus? Because new technology eliminated the former constraints.
Consumers never stopped wanting the same core need to be met; they could just get it more conveniently with the newer technology which eliminated the barriers to their need resolution. As Uber’s founder put it: “push button, get ride.” The new service met the exact same need but served it, in the customers’ eyes, better*.
Eliminating barriers to value is what disrupts and upends old business models, and new technology excels at this.
Take Netflix as another example. How did home video rental originally work? You’d take your preferred vehicle (or your feet) to the video store, browse the selection to see what movie was available, pay in person, take the physical media home, and then you could enjoy your rented film.
Netflix’ first method of disrupting this was to use the power of the World Wide Web to bring a catalog of movie selections right to your home, forgoing the requirement for you to physically go somewhere to browse the options, make a selection, and submit payment.
And using the good old postal service, they eliminated the hassle of you having to ferry the physical media. The travel barrier for the customer was completely removed.
And of course, once home internet connection speeds became fast enough to stream digital versions of the videos themselves, Netflix axed the physical media and transportation component of the formula altogether, using the latest technology provide what the real consumer desire was all along: watching that movie you want, whenever you want.
This is what new technology always does, whether we (and our existing businesses) like it or not. It interferes with assumed and well-established patterns by removing the constraints that former businesses and industries were based on, oftentimes the reason they existed to begin with.
Want to be a disruptor? Eliminate constraints to create new value. If you’re a newcomer to the market, this (technology capable of eliminating constraints) is your advantage.
If you’re in an established industry, this is what you need to watch out for, because parts of your model are at risk of having the rug yanked out.
It may sound overly simplistic, but any given business model is in essence just a formula or a pattern, an assumption that value can continue to be produced by repeating a well-planned set of steps which exploits needs, gaps, or opportunities in the market (the external environment.)
All businesses are based on a model — they’re following some such formula, recipe, or set of patterns — because there is a requisite efficiency in business traditionally gained through steadily maturing the model — fine tuning the patterns as they are followed and repeated, to the profit of the business.
But disruption literally disrupts these patterns. It breaks a part of the formula. From personal internet service disrupting the music industry to social media’s disruption of traditional authoritative publishers to Blockchain’s potential disruption of transaction authorities.
We can see abundant examples today where the conventional limits of distance, proximity, capacity, time, cost, authority, and scarcity have been relaxed or eliminated through new technology leading to the elimination of some part of a model.
This begs the question: Why do we so often not see technology disruption coming for us? It’s easy to miss trends heralding underlying shifts, because when a model works for some time, we quickly form the habit of seeing certain businesses, processes, or value chains only that one way.
We simply grow accustomed to “the way the world is,” know how those familiar patterns work, and we accept that framework as a given…until some innovator does something out of the ordinary and interrupts our ingrained habits and assumptions.
Even after the emergence of technology capable of removing constraints, the former habits and patterns often remain ingrained in the legacy players’ minds as they run their business. It screams “obvious” to say this, but the last thing you want to become is a barrier to value for your customers once they have a better choice.
When your processes or product are seen as something “in the way,” they’re barriers which someone will target to eliminate. It’s better for you to eliminate them first. But how?
Every once in a while we’ll see a traditional business take an evolutionary leap out of its own existing patterns, to disrupt itself. This self-disruption is rare because it’s difficult to both believe in and actually allow breaking one’s own successful pattern, a pattern that may still be working flawlessly at present.
Pause a moment and reflect on this very real dilemma. The objective of most businesses is profit, and if you’re achieving your objective by continuing to follow the same pattern, where's the incentive to disrupt that pattern?
Without a visible, looming burning platform, not only is there little incentive, it’s almost counter-intuitive by most business logic to do something radically new that could jeopardize your present success by upending the current profitable business practices.
However, with a sanctioned effort for the designated purpose of acting, on the inside of a company, like an outsider tying to crack in and invalidate the existing business patterns — almost like a hacker — it’s possible to conceive and act upon a disruptive idea before someone else can, and hence, maintain a competitive advantage.
But again, to sanction this, an organization’s leaders would have to both understand the risks of not self-disrupting and also believe that there is a real future in a new model that does not include portions of the current patterns — a future that could be perceived by customers as better than what’s presently offered.
It takes remarkable courage to ask those hard questions, like: “what could be better than what we are today” and “what do we want to be or are willing to become?” — questions that are often presumed to have been fully answered and already put to bed long ago, oftentimes deeply encoded into older organizations’ identities.
Within pre-existing successful (and well-capitalized) businesses, this is why executing on a familiar idea is theoretically easier than conceiving and visioning a new idea, because generating such novel ideas comes from first freeing your imagination from your habitual beliefs in the former constraints and models.
Hence, legacy businesses generally keep trying to find incremental improvements within their existing models or related models within the same industry, because staying in familiar territory and trying to mature what already exists is easier, and again, if it’s still lucrative, why change it?
The folly of that shortsightedness is exactly why it is imperative to think disruptively in advance, because disruption doesn’t necessarily come from within the originating industry, from traditional competitors on whom it is relatively easy to keep a watchful eye. I like how Marc Giget framed this reality:
“No candle-maker has become a bulb manufacturer, no carriage-maker has become a car producer, and the post office did not invent the email.”
I’ve sometimes seen this called “disruption from the side,” and to spot it (or help fuel it) you need to look to see what’s changing in the foundation of an industry that made the business or industry a necessity to begin with — the constraints it was (or still is) based upon.
And if new technology can shift or remove that foundation, the ground is fertile for disruption, for a newcomer who doesn’t see things as they are or have been, but how they could be, regardless of the previous patterns or constraints — a newcomer unafraid to answer those hard questions a different way, perhaps even with indifference toward the past.
In response to impending disruption, a business may suddenly declare it is going to “Transform” or “Innovate,” but the organization often also wants to hold onto what it has been in the past — the norms, models, conventions, processes, and culture.
Despite what is declared, the behaviors of those in the organization often demonstrate they either believe little could be drastically better than what they offer consumers today, or they naively hope to reach some form of disruptive innovation by trying to make linear incremental improvements.
However, truly disruptive technology innovations more often look like exponential leaps or tectonic shifts, tending to entirely leave behind those linear step by step improvements tied to the old patterns.
Remember, despite how valuable a product, service or company has been to a customer in the past, these days loyalty** is nothing when compared to convenience or other consumer benefits that result from simplifying and compacting processes.
So if you’re trying to predict who will be disrupted next (and wondering if it will be you), it’s really a matter of using your imagination and courageously asking hard questions like, “What do we believe can become better, or do we believe that something is already all that it could ever be?”
When a new technology emerges, ask yourself, “What part of our existing patterns, business models or value chains might it change that we perhaps presumed would not ever change? What parts of our formula for value and success are no longer needed?”
In taking this perspective, you may not only discover a new way of seeing your business, but you will likely also find yourself wondering what existing business we can realistically expect not to be eventually disrupted by new technology, which begs a final question: who do you think we will see Uberized or Netflixed next?
* Better can be subjective, but I tend to think customers believe something is better when it provides equal or greater value than a former/existing alternative and/or with more ease or convenience.
**Said with brutal, unvarnished honesty: customers grow more demanding, “selfish,” and “greedy” all the time, which often helps fuel disruptive shifts in the marketplace as newer offerings become available. This can be the bane of your business or you can use it to your advantage. Be open-eyed.
For further exploration, I suggest these readings, regarding:
- being Netflixed: Why Organizations Need to Innovate Their Business Model Now (an XPLANE interview with Saul Kaplan)
- asking hard questions: How Old Industries Become Young Again by John Sviokla
- innovation: Why you don’t want innovation by Tom Goodwin