Disruption has worked its way into every sphere of our lives. The rapid acceptance of disruptive innovations has led to a growing awareness in the business community that disruption is ubiquitous and accelerating.
Despite growing commercial awareness, only a handful of companies have successfully disrupted their own business models. For instance, Netflix switched its business model from one built on DVD home deliveries to one built on streaming. More recently, auto giant Daimler has begun experimenting with moves into car-sharing and ride-sharing.
Meanwhile, hundreds, perhaps thousands, of firms – from Blockbuster Video to Waldenbooks and Zenith Electronics – failed to adapt in time.
1. How is our understanding of disruption changing?
It is increasingly evident that disruption does not stem solely from technology or business innovations – it is also influenced by demographic shifts, globalization, macroeconomic trends and more.
It is also evident that the effects of disruption are beginning to extend far beyond the business world. For example, “sharing economy” start-ups such as Uber and Airbnb are already disrupting regulatory frameworks.
2. What are the root causes of disruption?
We see three root causes behind disruption. These forces – technology, globalization and demographics – are not new. Indeed, they have been around for centuries.
But they evolve in successive waves, and it is these new waves that generate new megatrends. Understanding the next waves of disruption – and the interactions between them – gives this root-causes-first approach more predictive power.
3. Why is responding to disruption so critical?
The business response to disruption is perhaps the most important strategic imperative facing companies, for three reasons:
- Everyone is affected. The pace of disruption is accelerating and impacting a growing list of sectors. The next wave of digital innovation – harnessing AI, robotics and virtual reality – will transform activities long considered safe from disruption.
- It's easy to underestimate the pace of change. “In retrospect, all revolutions seem inevitable. Beforehand, all revolutions seem impossible.” That observation, attributed to Michael McFaul, former US Ambassador to Russia, is just as applicable to business and economic revolutions as it is to political ones.
- Smart strategy and execution are not enough. It may sound counterintuitive, but organizations get disrupted not by doing the wrong thing, but by doing the right thing. The long list of companies that have fallen victim to disruption includes firms that dominated their industries for decades.
4. Why is it so difficult to respond to disruption?
Incumbent companies typically fall victim to disruption. Incumbents dismiss the initial disruption of their industry because it appears inconsequential relative to established products/services and fails to meet the needs of existing customers.
However, a small core of customers embraces the disruptive offering, giving market entrants a toehold, and the offering improves more quickly than incumbents expect. Its capabilities soon surpass those of the prevailing product or service – at which point existing customers, who have so far resisted the offering, adopt it en masse.
5. How do businesses seize the upside of disruption?
Fortunately, as disruption becomes mainstream, organizations have become more proactive in addressing the challenge. With the right response, disruption offers tremendous upside to firms that can harness its forces.
Discovering the upside of disruption requires both learning from those who do it well and being aware of the constraints that companies face in formulating their responses.
6. How does disruption lead to megatrends?
The three primary forces – technology, globalization and demographics – are evolving in a succession of waves. As these new waves interact, they give rise to a range of megatrends.
Exploring these megatrends in depth can give companies the power to understand a rapidly changing world and adapt accordingly.