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Tuesday, September 10, 2013

A Strategy for Disruptive Technologies

New technologies create opportunities. They can also destroy your business in the blink of an eye, and leave you without the resources needed to land on your feet. 

Waves of disruptive technologies have been distinguishing features of industrial revolutions, and we can trace typical responses to them by taking a look at the first European industrial revolution. An early knee-jerk reaction was to burn down factories and pass laws that did not admit the importation of new technologies such as, say, mechanical felt-making. The goal was to protect jobs by blocking labor-saving technologies. 

However, establishing walls of tariffs and blocking the implementation of new technologies did not work. English Luddites found that all their efforts did were to strengthen the position of the low-cost offshore competitors, who manufactured felt hats using the new processes in other countries, thereby destroying markets for high-cost felt hats made by hand in England. Banning the import of machine-made felt hats did not work, either. It simply created an underground economy and a black market for smuggled in new, stylish, high-quality, yet inexpensive machine-made felt hats. 

Another approach, which involved confiscating the intellectual property of innovators and declaring it a “public good” and property of the state did not work, either. Nor did imposing high taxes on royalties or profits made from new technologies work to protect against disruptive technologies.  Instead, the innovators simply left to work in more hospitable environments where they were able to receive royalties and to implement their new processes and equipment without a huge penalty.  

Clearly, blocking or attempting to neutralize the impact of new technologies does not work.

So, what can you do if you’re in an organization that is facing potential disruption? In point of fact, all organizations are vulnerable, so it is important to have a strategy in place. 

Here are five steps to take to develop a strategy for disruptive technology, innovations, and processes.

1.  Identify potential areas of disruptive change that will affect your organization’s core business:
a.  new technologies
b.  new processes
c.  new services
d.  new ways of organizing your business

2.  Describe what it is about your core business that is unique and valuable; explain why your customers choose your products and services, and then explain what you might do to disrupt yourself to create a new product that supplants your existing one. (Think like your competitors).  Where is your “extendable core”? 

3.  Identify the group that will hang onto your existing core products and services to the bitter end.  How can you build and enhance their experience? 

4.  Detail the steps and investment required to develop a parallel product that will capture the market that would go to a disruptive product (technology or service). How will you develop both at the same time and keep from cannibalizing your existing market, but at the same time beat your competition (which seeks to capture your market by introducing a disruption) at their own game?

5.  Describe the team you’ll develop to effectively develop the new parallel products, and how they will behave in complementary ways that will cross-market products, without confusing the public or muddying your brand identity/identities.

The goal is not to resist or block change. Nor is it desirable to disavow your entire heritage and legacy line. Instead, strengthen your legacy core while you bring a new line into existence and compete head-to-head with the innovative / disruptive new products or services.

Useful References

Raynor,  M. (2011). The Innovator’s Manifesto: Deliberate Disruption for Transformational Growth. NY: Random House. 

Wessel, M. and C. M. Christensen (2012). Surviving disruption. Harvard Business Review. December 2012: 56-65.

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