Larry Downes and Paul Nunes are
co-authors of “Big Bang
Disruption: Strategy in the Age of Devastating Innovation.” Downes is a research fellow with the
Accenture Institute for High Performance, where Nunes serves as global managing
director.
Writing recently in the New
Yorker, historian Jill Lepore contends that the prevailing theory of business
change — known as “disruptive innovation” — is grounded in poor research and
circular logic. While it’s true that talk of disruption is thrown around
carelessly (the meaningless advertising phrase “new and improved!” has been
replaced with “disruptive and innovative!”), it’s equally obvious to any
teenager with a month-old smartphone that the pace of business disruption is
accelerating.
1. Disruptive innovations begin as
inferior replacements for existing products.
Harvard business professor Clayton
Christensen, the focus of Lepore’s article, argued in his 1997 book, “The Innovator’s Dilemma,” that successful companies can be
upended by new technologies that first appear as cheaper products with fewer
features, but improve quickly and ultimately take over. Think personal
computers vs. mainframes.
But not anymore. Our research shows that especially in
industries dominated by digital technology, the disruptors now arrive better
and cheaper than existing goods, right from the start — think free integrated
smartphone navigation apps vs. stand-alone GPS devices. “Disruptive innovation”
is increasingly “devastating innovation,” or what we call “big bang
disruption.” Businesses that wait for the disruptor to arrive before figuring
out how to incorporate it in their products — as Christensen recommended — are
already too late.
Companies can compensate for the increasing pace of change by
watching for the early signs of emerging technologies while they’re still in
the lab. Then they can start experimenting before it’s too late. Or, almost as
good, before their competitors.
2. The further you
are from the technology industry, the safer you are from disruption.
It would be comforting if only industries at the center of the
information revolution — computing, communications, media, entertainment — felt
the pain of disruption.
But with computers getting faster, cheaper and smaller over the
past half-century, it has now become cost-effective to embed computing
capability in nearly every product or service. Even the most non-digital
industries — such as heavy manufacturing, transportation, energy and education
— are feeling the pressure of digital technology as entrepreneurs look for the
biggest opportunities for disruption.
In health care, for example, cheap sensors, cameras and displays
(made cheaper by economies of scale, thanks to the sale of more than 1 billion
smartphones and tablets since 2007) are being combined in wearable devices that
can track a range of vital signs — baby steps toward giving patients access to
their own health information and bringing spiraling medical costs under
control.
What is true is that the more regulated an industry, the harder
for the disruptors to enter. But those industries — health care, energy and
transportation are good examples — are often the most inefficient, making
disruption by better and cheaper technology irresistible. And often, when
innovators finally break through, the disruption is all the more explosive.
Recall how e-mail turned the U.S. Postal Service from a profit center to a
financial black hole.
3. The best
innovations come from proprietary R&D.
In the past few years, we’ve seen a wave of new companies — Oculus ,WhatsApp , Instagram — acquired for billions of
dollars, sometimes before they’ve even launched a commercial product. It’s not
as crazy as it sounds.
What these start-ups have in common is that each quickly built a
devoted audience of millions of consumers, often by giving away its
experimental products and encouraging users to collaborate with developers.
Cloud computing, reusable software and globally sourced parts make
experimenting easy.
Click here
for the full column in the Washington Post.