The Mind of a Disruptor
By Nigel Barlow
Disruption is the story of our times, not just a tale of technology transforming the business landscape. Social and political upheavals, the rising economic power of the East, the new agenda of sustainability, and the very different expectations of work that Millennials bring also contribute to a world that seems to have foregone the old certainties, values and received wisdom.
But like any word of the Zeitgeist, ‘disruption’ means very different things to different people. In business it’s often a label for a fast pace of innovation; in society for game-changing events like Brexit, the explosion of populism, E-government, or the so-called Arab Spring.
The expression is most frequently linked to new technologies and commercial models that subvert or make obsolescent the established ways of trading. The most often quoted examples are online retailing – the ‘Amazon Economy’- and indeed online everything, with value in industries from advertising and marketing to the management of supply chains and customers migrating to the web. At times there’s an actual product involved - witness the all-conquering iPhone. Just as often it’s the new connective potential of virtual tools and platforms exemplified by the success of Uber and Airbnb as well as delivery apps such as Deliveroo, and in Germany, Foodor.
For consumers it seems to be all upside: immediate price comparison and the ability to transact almost anything, from buying shoes to purchasing cinema tickets to finding a new partner, all with the click of a thumb on a small and relatively affordable handheld device.
Given the multitude of ways in which ‘disruption’ is used, can we come to a working definition so we know what we’re talking about? My default setting in these situations is to go back to the original meaning of the word.
Give me a break
Disruption comes from the Latin verb,rumpere, meaning ‘to break’. And what’s broken is typically the hegemony of an existing market leader or incumbent; witness Blackberry’s dominance in the business mobile phone sector subverted by the iPhone, or Blockbuster’s video rental stores destroyed by streaming, especially through its immediate nemesis, Netflix.
It’s not just the technology that breaks an incumbent’s stranglehold on the market – it’s just as likely to be a new business model, such as Google accepting $2 adverts rather than asking the buyer to invest several hundreds or even thousands of dollars to kick off their campaign. Those $2 quickly morphed into much larger investments, and this low barrier to entry for new customers is at least part of the reason why over 85% of advertising revenue online goes through Google and Facebook.
Wait a second, while we’re talking about breaking things, wasn’t that Facebook’s internal rallying cry: ‘Move fast and break things’? I suspect this is being quietly forgotten following the company’s alleged breaking of something that it isn’t desirable to disrupt – the trust customers place in a provider that their data (the new currency of the digital world) will be held responsibly. The Cambridge Analytica debacle, wiping billions off Facebook’s stock value, flags up the insight that not everything should be disrupted.
This is certainly the view of the originator of the expression ‘disruptive innovation’, Harvard professor Clayton Christensen. His seminal work, The Innovator’s Dilemma (1997), first popularised the term disruption, making it one of the most widely read and discussed industry concepts of the early 21st Century. The essence of his theory is that incumbents don’t see or respond to a new, often inferior outlier competitor until it’s too late; they have too much invested in improving their bread and butter product or service until, like the apocryphal frog boiled in a pan, it’s too late and their business is dead in the water, often in a few short months. They have too much invested in today’s success, a key ingredient in them not being able to embrace the new platform, offering or gizmo that customers didn’t see coming either, but swiftly realise they gotta have.
Disruption sounds negative, but only from the viewpoint of the incumbents. For them it’s shaken up their comfortable market leadership. For the disruptor it’s an innovation that customers love. For the disrupted it’s death to the old certainties and revenue models.
Disruption theory disrupted!
Christensen and his team have been alarmed by the loose way ‘disruption’ has been used, arguing in a more recent article that people have got it all wrong. He didn’t say that everything should be disrupted; where would Microsoft be without its flagship product, Windows, and indeed Apple without the iPhone? He’s also annoyed that not enough leaders even bothered to read his original article and book, and are indulging in a game of ‘Chinese whispers’ where the message becomes increasingly distorted.
I’m also a believer in accuracy and the true meaning of words. My legal background means I can be very picky about the true definition of words and concepts. Just get me going on the subject of how ‘innovation’ is misused, or that old consultant’s favourite, ‘paradigms’!
However, the cat is out of the bag, and few business folk are going to revisit the Professor’s original manuscript to check if they’ve got the theory right. There is a expression used in the military:
‘The map is not the territory.’
In other words, if the reality encountered on the ground differs from the map, then it’s the terrain you need to pay more attention to. Similarly, our business school, mental map needs constantly re-adjusting as the commercial battlefield changes. Apple have already massively disrupted one of the tenets of Christensen’s original concept, that a new entrant in a market will offer a lower-price, often inferior alternative.
When the iPhone was first announced at a price tag of $500, competitors like Microsoft CEO Steve Balmer publicly ridiculed the idea that consumers would pay, while a member of rival phone maker Blackberry said the chances of their business being overtaken in this field by Apple were ‘vanishingly small’!
Christensen points that the iPhone was really disrupting the laptop, as technology converged into ways of doing all business and leisure activities on a handheld device.
Fine. But try telling that to Nokia and Blackberry, global and highly-rated producers whose businesses collapsed a year or two after the iPhone’s introduction. And what was that Microsoft offering called? The Zune?
The territory - as opposed to the map - is that companies are realising that anyone can be dethroned from a dominant market position, and that the collapse can be almost overnight. A platform, app or piece of software is often the sword that attacks them, and the real innovator’s dilemma - in everyday rather than academic terms - is how to anticipate, head off, buy off, or do it themselves.
Look, business people are smart, even if they don’t get their theories right. After all, most of them are working on the terrain, not in the map room. Encyclopedia Britannica may not have guessed that they would be nailed by Microsoft’s Encarta, or a decade later, Wikipedia and the web, but they developed their own floppy disk alternative to the physical dictionary in the late 80s. And most retailers sensed the Amazon threat by setting up a home-grown e-tailing businesses a decade ago. It’s just that it’s hard to move away fast enough from what you know, what you’re invested in (markets and real estate) and what’s brought you success in the past.
Types of disruption
By its very nature, a tight definition of disruption is tricky, so it might be more useful to look at exactly what forms it takes.
Technological. The technology does not have to be completely new, but can be wrapped up in a more desirable package that customers will embrace. For example, the iPhone merely connected together about 10 pieces of technology that already existed, some of them developed by the American military. The magic is in the connection, which is why Steve Jobs says that creativity is ‘just connecting things’.
Platform. Linked In and Facebook could be described as glorified mailing lists that allow people to interact with others globally. Once you have built a platform, it can snowball, given the readily available and inexpensive nature of online communications.
Business model. Elon Musk’s SpaceX is an incredible technological endeavour. However, the big game changer is that recyclable rockets make the whole thing commercially viable.
For consumers, the world is shifting towards a ‘do it yourself’ model – whether it’s booking flights, self-diagnosis in health care, or doing your own taxes online. The challenge is to support your customers by giving them the tools to order, manage and track their experience for themselves.
Software. It’s not surprising that Silicon Valley maven Marc Andreessen observed that, ‘Software is eating the world’. Physical and tangible assets seem to be disappearing, and in the world of B2B this is equally true. Drones are used for geological exploration and crop fertilisation, mining companies employ driverless trucks, and car manufacturers ping messages off satellites to service vehicles while they are still on the road. Almost everything is morphing from analogue to digital.
What is often forgotten is the effect of all this disruption on the customer. It’s time to change – or disrupt – the old mindset that customers resist change. Remember the stories of how people had to be bribed initially to use the faceless technology of an ATM instead of queuing for their cash in a bank? But when phones with touchscreen technology and no keypad hit the market, the adoption of this new way of working became a passion within a year or two.
What 21st Century customers want
In a disrupted world, there are three things customers want above all else:
Convenience. Think of how we all loved rooting around a traditional bookstore. I was in a branch of Waterstones a couple of years ago when I realised the three books I was searching for were on different floors. It was a hot day and this was when my commitment to traditional book-buying collapsed; I went home and ordered them on Amazon.
Quality is also trumped by convenience. As a music nerd, I may rage against the poor quality of Spotify’s streaming and the pathetic royalties they pay to artists. However, being able to immediately tap the world’s library of music is so seductive, that I find myself nearly always listening to a version on Spotify first. If I like it, I might purchase a better quality alternative, but in the meantime, I and millions like me are enjoying inferior sound simply because it’s easy.
Value. I strongly disagree that the so-called War For Talent is really happening. I do predict that over the next few years the War For Value is going to be significant in winning the hearts and minds of customers. Value has sadly become conflated with Price: witness the upsurge of price comparison sites. The challenge for disrupters, even those delivering a lower price solution, will be to make sure that the customer rates it as good value, whatever the cost.
Oscar Wilde’s statement that a cynic is someone who knows the price of everything and the value of nothing is well worth remembering. People will always pay for what they see as superior value.
The enterprises that most need to work on this, from my experience, are B2B. Any industrial offering can be sold not just in terms of performance and specification, but what it does to create value for the customer. Truly selling value means being able to describe the economic benefits of your bearing, elevator, crane, or service offering to the user in terms of increased profitability, waste reduction, pollution levels, etcetera. Show them the money!
Trust. At a time when trust in our major institutions, from government to the church, is at an all-time low, business providers need to realise that gaining customer trust is not just an add-on, but an essential wrapping around the product or service. Sometimes this may mean foregoing short-term profits to build a history of reliability with customers. It’s indicative of our technical age that a provider you have no physical contact with, like Amazon, can build up a better reputation for trust than many retailers who customers connect with face-to-face.
Trust is a complex emotion, but key ingredients include delivering, or even over-delivering on your promise, and your attitude to putting things right when there is (inevitably) an operational glitch. People will always pay for trust.
What will probably never be disrupted while customers have choice is their desire for these three qualities, Convenience, Value and Trust, embedded in what you offer them. Technologies may rise and fall, platforms come and go, but the imperative to become a legend for reliability in your customers’ eyes does not go away.
Successful disruptors rarely have this as their aim – they are merely aiming to deliver something better, faster, more accessible, and possibly cheaper for their buyers.
Disruption is the outcome, customer-focused innovation is the process. Even if you’re creating something they didn’t know they wanted, but once seen they cannot wait to have. Innovation is all about ‘newness’ – the nova in the word innovation. So how do you find what’s both new and appealing for customers? To be a disruptor yourself means a shift of mindset: continually challenging your own assumptions, being curious not just about technology but novel business models, attuning yourself to what’s happening on the periphery of your industry.
Easy to do? Not at all. We can be trapped by the laziness induced by success and the natural conservatism that’s built into our brains. We have to do what Ginni Rometty, CEO of IBM advocates: ‘Always disrupt yourself!’
It’s natural to add to her observation: ‘. . . before you are disrupted!’
Practising this is more difficult than it sounds, so I always begin with the theme of mindset before exploring technologies, markets and business models. The mind of a disruptor is open, challenging, curious, and even, in terms of conventional thinking, a little weird. Are you prepared to be that person?
Nigel Barlow, Oxford, October 2018