Disruptive Technologies and Innovation – Managing the change

Disruptive innovation creates new opportunities, markets, and displaces existing markets, products, and services. Disruptive technologies drive new growth, creates new opportunities, forms new companies. Most organizations are under threat of potentially wrenching competitive and technological change. Disruptive innovation has characteristics that traditional customer or industry segments may not want, at least initially. (E.g. taxi industry Vs Uber). These innovations may appear as cheaper, simpler, and more accessible when compared to existing products, and has a small segment of early adopters.

Companies are structured for disruptive change in large part because they have never had to be. Most companies focus on the client and user side of the business and their needs typically paying little attention to emerging technology change and innovations that may impact their industry segment. Disruptive innovation is difficult to forecast and it is not a repeatable process. In today’s dynamic and turbulent political and business environment, leading disruptive innovation is more about best principles than best practices, and requires a disruptive approach to operations and management itself. Whether going after disruptive innovations that leapfrog competitors and customer expectations, or focusing on ‘blue oceans’ that represent white-space opportunities to create entirely new markets, the leadership issues are similar. Leaders must embrace ambiguity, live with uncertainty for long periods of time, and confront the critiques of naysayer both inside and outside of their organizations. We are operating in an environment of continuous transitions and adaptable organizations.

Disruptive innovation that transforms or creates new markets has become the Holy Grail for many companies. Business leaders face big challenges when it comes to disruptive innovation. Many executives rise through the ranks of management, where predictability-control is valued and rewarded. Unlike operations management, disruptive innovation– whether creating or responding– involves uncertainty. Unexpected events, inevitable failures, and a fundamental lack of control are inherent to the process. But few leaders are formally prepared to deal with the realities of leading or responding to disruption. Perhaps the most defining characteristic of disruptive innovation is the great uncertainty that it creates for leaders, organizations, and entire industries.

While most organizations possess a general awareness of the importance and necessity of disruptive innovation and change in general, there is a gap when it comes to understanding the deeper leadership qualities necessary for driving them. Many leaders rely on research and data for decision-making to manage daily operations, but during times of disruption, waiting for hard data to make decisions can quickly result in failure and the risk of being left behind or even driven to bankruptcy. Leaders must be comfortable using whatever information they have on hand, integrating inputs from diverse sources around them, and then using their intuition to round out the decision making process. The challenge for any business is that the competencies necessary for leading disruptive innovation are not formulaic or quantifiable.

There are no educators, let alone companies, who can prepare their leaders to manage unforeseen events and disruptors and live with being misunderstood or criticized, especially for extended periods of time. When it comes to leading for disruption, recognizing the “disrupter” is the difficult job’ and can make the difference between success and failure.

The possible strategies that begin to address uncertainty or disruptive innovation and disruptive change are:

• Listen–Start with yourself, not the market: Contrary to conventional wisdom, disruptive leadership is not about analyzing customer needs, creating specifications to meet each need, and building great products and services to meet them. It is about what is coming at your possibly from multiple directions or regions.
• Explore – Go outside to stretch the inside: Leading through disruptive events requires an adaptable organization and flexible leadership minds that appreciate ambiguity. Disruptive innovators know uncertainty contains as much opportunity as it does risk.
• Act fast– Take quick small simple steps, again, again: Disruptive leadership involves putting a flexible stake in the ground around a specific opportunity, and then taking a series of actions to intentionally challenge assumptions and rapidly change direction as many times as necessary.
• Persist– Take the surprise out of failure: Leading for disruptive innovation involves creating ‘optimistic persistence’ in order to combat fear, pessimism and the tendency to retrench back into the safety of the existing business model.
• Seize the opportunities as they present themselves – Make the journey (change) part of the (moving targets) destination: Leading disruptive innovation is a process fundamentally laden with unknowns, the core essence of risks, and opportunities.

The term ‘disruptive innovation’ has become an industry buzzword.

Firms seeking growth via new markets are more likely to succeed than firms seeking growth by entering established markets, and the revenue opportunity is twenty greater.

Disruptive innovation, by its nature, destroys entire industries or segments of industries by making them obsolete. If you simply measure the economic impact on the fact that some industries are no longer present, or that those products are no longer being sold, you could argue that there’s a negative impact on the economy. But the nature of innovation is that we make things obsolete by making other things better and more powerful and changing the way we do things.

The end result is, generally speaking (and, yes, there are exceptions), better for everyone, enabling them to do more with less and do so more productively. Progress has an amazing way of destroying old ways of doing business, and we shouldn’t fear or worry about that, we should celebrate it. More and more leaders and companies recognize that they must proactively disrupt or risk being disrupted. But business-as-usual leadership, where big visions are followed by detailed roadmaps and action plans do more than stifle disruptive innovation: They represent liabilities to success. Leading disruptive innovation involves adopting principles that fall outside the traditional training of managers and leaders. New leadership competencies are required to navigate disruption. This means uncovering one’s deeper motivations to drive meaningful opportunities for others; pushing personal boundaries to challenge one’s assumptions; taking steps into the unknown with the view that failure isn’t a failure at all but rather a stepping stone to learning and progress, and tuning into surprises as a kind of portal for gaining new insights and uncovering opportunities.

To lead disruptive innovation successfully requires that we disrupt the most fundamental mindsets and behaviors that have led us to our current success. For example, six-sigma and Kaizen and all other pearls of corporate wisdom that were, traditionally, the foundation for business success, but are now minor players in the rapidly moving and highly competitive digital age. An estimated 65-75% of all new products that established companies introduce into their markets fail. Business history is littered with wounded and extinct companies that failed to pursue disruptive innovation. Since companies innovate faster than customers’ lives change, most organizations end-up producing products that are– too good, expensive, inconvenient for many customers. By only pursuing ‘sustaining innovations’ that perpetuate what has, historically, helped them succeed, and companies unwittingly open the door to ‘disruptive innovations’– simpler, more-convenient, and lower-cost products… Although disruption is the key to new growth, companies must never ignore their core offerings and continue to pursue ‘sustaining innovation’ to maintain growth.

We live in a period of staggering technological change. While society is being transformed by disruptive innovation during this transition, it will be your own individual adaptability that will determine if you are a winner or a loser.

Every 24 hours, there are approximately 4 million smartphones sold, 8 billion hits on YouTube, 700 million tweets, 130 million Instagram uploads, and over 200 million sent emails. There are now more iPhones sold every day than babies born, and the world has more than 3 billion internet users accessing 1.2 billion websites. Facebook alone has more than 1.3 billion users, which translates to a ratio of 1 in every 7 people of the word. In fact, if Facebook were its own country, by population, it would be the second largest.

The onslaught of the information revolution is truly staggering and permanently reshaping our world.

It is causing massive disruption, propelling many people forward but leaving many behind as well. It is creating both incredible opportunities and significant risks, and in the words of the author William Gibson, who coined the term Cyberspace, “The future is here, it’s just not evenly distributed yet.” It is not the innovation itself that matters, but its implications during this transition. For the individual, the key will be how to take advantage of these changes, while protecting one’s family, business, career, investments and way of life.

Disruptive innovation, driven by new technology, has always been integral to human progress. It has moved humanity forward by creating new opportunities, building great wealth, and opening unexplored frontiers, from the vastness of space to the world of particle physics.

The Gutenberg printing press enabled the rapid spread of knowledge as books became cheaper and more plentiful, ultimately contributing to the dawn of the Age of Enlightenment. The compass gave us the Age of Discovery, not only opening new lands and resources but enabling the spread of industry and the development of nations. Paper currency is an innovation, though recently significantly overdone, which spawned electronic banking and global commerce. The discovery of electricity gave us new forms of heat, light, and communications.

These innovations vastly improved the quality of life and economic prospects for society. For instance, according to the U.S. Census Bureau, the standard of living, measured by GDP per capita, increased 21.7 times from 1820 to 1998. Average life expectancy at birth doubled during the last 150 years, from 38 years in 1850 to 76 years by the late 1990s. Our lives are dramatically better now, largely driven by technological change and innovation.

However, while society is better off on average, innovation has also produced both winners and losers, opportunity and risk, migration, and displacement. For instance, according to the U.S. Department of Commerce’s Bureau of Economic Analysis, over the last 150 years there has been a dramatic migration from the farm to the factory, and then from the factory to the office. In 1840, about 70 percent of U.S. jobs were on the farm, dropping to 10 percent in the 1950s, and today sitting at less than 4 percent. In the 1950s, about 40 percent of U.S. jobs were in manufacturing – today this number has been cut in half. Where have all the jobs gone? Into the service sector, where almost 80 percent of the jobs in the U.S. are today.

For many decades, the technology significantly advanced the quality of life in our economy, moving us from a hard, short life of farming, to today a longer life of work in the service sector.

However, I believe the world is changing dramatically and rapidly, and innovation is driving us to a new inflection point.

In 2013, a study authored by Erik Brynjolfsson and Andrew McFee at the MIT Sloan School of Management argued that advances in technology are largely behind the sluggish job growth and flattening median incomes over the last 10 to 15 years. They believe that the recent rapid advances in technology are destroying jobs more quickly than they are being created, contributing to the recent stagnation in income and the growth of inequality in the U.S. For evidence, they studied productivity and total employment in the U.S. from the end of WWII, and demonstrated how they closely correlated with one another; the increase in jobs corresponded to the increase in productivity, and thus, the entire economy grew. However, around the year 2000, this correlation diverged, with productivity continuing to rise but employment levels stagnating. They call the gap between increasing productivity and employment ‘the Great Decoupling,’ and the authors believe technology is behind it.

What does this mean? While society as an aggregate is better off, individual workers are being displaced. For the first time in human history, innovation is taking away net jobs and technology are competing with humans for work.

The rate of technological adoption is changing as well. For instance, of nine significant inventions in the U.S. over the last 100 years (telephone, electricity, radio, television, computer, mobile phone, internet, tablet, and smartphone) the smartphone is on track to have the fastest adoption rate from the market launch to full market saturation (defined as 75 percent of consumers). It took the standard home landline telephone 80 years to reach market saturation and the mobile phone 20 years. Now, the smartphone is on track to achieve this in less than 10 years.

The nature of technology is changing as well. Prior to the advent of the Digital Age, much of our technological advancement focused on replacing arduous physical work. Machinery made it easier for the farmer, the miner, or construction worker to be more productive and safe. Today, we are in the middle of an information revolution. Initially, digital technology, such as the desktop computer, automated human mental tasks. Then, the Internet massively increased our access to information, and mobility unchained us from our desk. Today, advances in the automation of knowledge and software development have enabled machines to replace human mental tasks. For the first time in history, our need to think has been replaced. For instance, today robots are self-taught, and software can write its own code, music or articles.

A significant driver of innovation is the growing demographic change with the rise of the millennials (adults between the age of 18 and 30), who view the world differently and are shaping the technological landscape. The millennial population is growing rapidly; sitting at just 25 percent of the US workforce today, it is expected to grow to 50 percent of the US workforce by 2020, and 75 percent of the global workforce by 2030.

Millennials are changing much about the way we see the world and handle information, driving a social and collaborative economy, and rewarding innovative companies like Uber and Zip Car.

The final compounding factor is the collapse of the middle class. A study by the Pew Research Centre conducted in 2012 showed that income levels of the middle class are being hollowed out. The study used Census Bureau data to classify adults into the lower, middle, or upper-income tiers depending on the income of their household relative to the overall median income. It found that the share of adults in the middle-income tiers has fallen in each of the last five decades, from 61 percent in 1971 to 51 percent in 2011.

Our world is changing more than ever before and the rate of change is non-linear. The nature of the change is different, as net jobs are being lost to machines, just at a time when people need these jobs the most. Finally, the rise of the millennials and the collapse of the middle class are compounding this transition dramatically. While I am confident that society will be much better as a result of technology, the social and economic implications of the transition are staggering for the unaware or unprepared.

Indeed, with change comes risk and opportunity. The risk is in maintaining the status quo and the opportunity is for those preparing for, creating, or investing in the future.

I believe the best way to both survive and then thrive in this coming transition is simple; embrace it as an Age of Adaptability. There is nothing an individual can do to stop these massive global trends in technology, economics, and demographics, other than adapt. Even reacting to the trends is insufficient, since their scale and velocity are will leave you scrambling to catch up, not mind getting ahead. The only solution is to adapt by becoming a lifelong learner, failing fast if necessary, and learning to get ahead of the changes.

This ability to adapt starts with a mindset that the status quo is not a safe haven, but the place of greatest risk. It means accepting complete responsibility for your destiny, rather than subordinating your well-being to other groups of people. It requires you to take 100 percent control of your circumstances, particularly if you are responsible for a family, or other people in the form of a business. It entails moving to a state of absolute clarity and awareness of the coming onslaught of change and then taking a personal leadership role in making incremental, but permanent, changes to your life now.

Technology is reshaping and permanently changing our world for the better. In our lifetime, we will see unimaginable progress that will usher in a golden age of a socially-connected global economy, creating new opportunities on a vast scale. Humankind will successfully emerge from this transition, as we always have, and the winners will not be the strongest or even the smartest, but those individuals most willing and able to adapt.

Author: Dave Gajadhar

Contact us: ResultantGroup Your business modernization, transition, and blockchain advisors.

Email: dgajadhar@resultantgroup.com

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