Disruptions are changes of significant magnitude and complexity, often unexpected. They can upend and dislocate existing markets, industries, businesses, and organizations. They alter how market participants, organizations, and customers interact.
Rarely occurring in isolation, they frequently join up to form “perfect storms”. They originate and occur everywhere, externally from innovative technologies, new market entrants, shifting customer expectations, and changing vendor relationships and internally from new and better ways analyze information, new adaptive organizational models, and changing workforce demographics.
Disruptions used to occur infrequently and evolve over time. Think about how long it took from the invention of planes to their full military and commercial use; from the invention of the automobile to the introduction of the assembly lines, robotic manufacturing, and now autonomously driven cars; and from the invention of the telephone to developing networks, extending service nationwide, introducing cellular phones. Each took place over decades. As these businesses grew and became more complicated, their organizations became bureaucratic, hierarchical, and complex too.
Now, compare this to the greater frequency and ever-increasing speed of recent disruptions. Time is no longer measured in decades, but in weeks, months, or less than a few years. Look at the frequency, scope, and magnitude of technology disruptions that occurred from the early development of computers to today's frequent introductions of more advanced mobile devices.
Disruptions are the new norm in business, government, and non-profit worlds. They have upended the stability and predictability, the bedrock, we have built and operated our businesses on. Yearning for the past, or wishing to stay the same, is a futile exercise. The Era of Disruption is here to stay.
DISRUPTIONS CAN TURN OUT VERY GOOD OR VERY BAD
Case in point, Amazon started as a simple online bookstore in the mid-1990s. Most questioned the concept and thought it would be a fluke. With the introduction of the Kindle, it created a new business and business model. This radically altered publishing, to put it mildly. While expanding to sell virtually everything, Amazon now allows others to sell through its platform. Its constant flow of disruptions reverberates with implications across the retail universe. Today it is an ever-expanding marketplace and an economic ecosystem. It is still altering retail as it expands into groceries and other categories and offers new delivery options.
Amazon’s agility made these changes feasible. It enabled Amazon to see, take advantage of, and exploit other disruptions. Examples include increasing bandwidth and data transmission speeds and the rapid adoption of mobile technology. Amazon has disrupted other industries including package delivery, distribution, and supermarkets, but it is not alone in doing so. Major disruptions have occurred in industries like healthcare, financial services, and entertainment. Bottomline, companies who ignore major or even lesser disruptions do so at their own peril.
Conversely, companies such as Kodak and Polaroid, once leaders and renown innovators, succumbed to change. They ignored early opportunities to adopt new technologies and chose to ignore increasingly louder market signals. They thought they knew their customers' needs and preferences better than they did. Leadership feared disrupting their existing and highly profitable cash cow businesses. These mindsets prevented both companies from exploring and taking new directions. Other companies with household names such as Radio Shack, Sears, and even GE (dropped from the Dow Jones) have or may face similar fates.
Nonetheless. success stories abound for existing companies including Apple, AT&T, Bank of America, IBM, and Samsung. They each reinvented themselves increasing and defending their relevance. They innovated and adopted new technologies and products, expanded into new markets, and established creative relationships with partners to drive their success.
DISRUPTIONS MATTER IGNORE THEM AT YOUR OWN PERIL
At best, disruptions lead to new and radically improved markets and companies. They bring to the forefront newly created industries and businesses and better business models. These companies thrive because they quickly realize and adapt to the new reality of changing games, rules, and players. At worst, disruptions ultimately lead to the demise of industries and businesses. Frequently this happens because these companies fail to realize what is happening around them. Others are delayed in doing so. They are slow to see the need to adapt. They attempt to do so but are often too late or simply fail in their efforts. Quickly understanding disruptions, making decisions and acting splits those who thrive from those who do not.
While some disruptions are unexpected, many simply hide in plain sight. They are "unintentionally" unseen or not recognized by those currently in the market. There are many reasons for this “blindness”. Their leaders' (wrongly) think they can ignore the disruption since they feel insulated by their current market position. They may think that it is just a passing fad. They may feel it can be simply and easily addressed with a quick, superficial fix. These reasons hinder them from seeing and understanding their new reality. They soon realize that there is nothing worse than bad news late.
Having fallen behind, it is harder, and often too late for these companies to effectively recover. At worst, are those organizations that simply act like “deer in the headlights”. These organizations are frozen in fear and unable to see and react to their new circumstances. This is not a good combination for a deer, let alone companies.
Disruptions upset the status quo and make us uneasy. That can be good when we see a predator and instinctively run. However, we strongly dislike continual disruptions. They stress us and run us down unless we learn how to address them and build up our resiliency.
From a business perspective, they challenge the very being and nature of our organizations. They test, and often defy, long-held mental models, mindsets, and assumptions relative to our business, operations, and customers. They challenge mindsets regarding the structure and composition of industries and how companies operate in them. They force us to question who our customers are and what they need, want, and value. Instinctively, most organizations and leaders avoid change and want to maintain the status quo because it worked. However, like Fidelity’s frequent and well-known admonition concerning investments, the truth is “Past performance does not predict future performance.” Many err in believing that this does not apply to them and are surprised when they suffer the consequences. There is much to be discussed in connection with mental models, mindsets, and assumptions, which we will pick up in our next article.
HOW WE GOT HERE
There has been an ever-increasing number of disruptive forces at work, individually and collectively. Over the last decade, some have had “cataclysmic” and widespread impacts. These have included:
The rapid pace of technological innovations (described below).
The birth of new markets and businesses.
Introduction of revolutionary business and organizational models.
Dramatic and ongoing changes in customer expectations.
Major shifts in how businesses and customers interact, individually and collectively.
Technological innovations have had and continue to have monumental and far-reaching impacts. Let's start with the unimaginable tectonic shifts in computing power, chip size, and network infrastructure. These ultimately resulted from disruptions in the design and manufacturing of computer chips, hardware, software, and networks. Of course, there is much more to tell, but that is a very long story.
The disruptions and impacts to the technology industry while significant themselves, are minuscule when compared to the innumerable and significant after effects they have had on how business is conducted and on businesses and organizations themselves. Consider:
Information and data, sparse, held by a few, and a source of power, is virtually unquantifiable, analyzable, ubiquitous, and accessible.
Telecommunications’ speed and stability, once barriers to business growth and operations, now enable new capabilities and activities never imagined before.
Mobile devices, once relatively rare and limited in function, have rapidly proliferated globally with incredible computing power and an array of applications now allowing enhanced functionality and market access to anyone, anywhere, anytime.
These effects acting in concert have unleashed colossal changes in the business world including:
New and changing competitors and bases of competition.
The creation of new industries and markets.
Design and implementation of revolutionary business and operating models.
Power shifting from the firm to customers, who have changing and higher expectations.
Rethinking and redesigning how organizations are structured, run, and managed.
For some, these changes create opportunities for developing new revenue streams, delivering improved customer and employee experiences, to developing new essential capabilities Collectively these changes drive relative improvement in financial performance. For others, unable, or unwilling to adapt, the outlook becomes ominous as employees do not feel enabled and empowered to do their jobs, become frustrated, disengage, and leave. Simultaneously, customer experience and satisfaction levels drop, customers find better options and defect, and financial fallout results.
While information and technology disruptions are significant and broad in impact, they are not alone. Other significant disruptions include globalization, shifting economic policy, changing regulations, and the broad reach of social media. Look back a bit, whoever imagined:
Companies would be virtual, not physical; valued by intangibles and not physical assets.
A financial hiccup in New York leading to market disruptions in Europe and Asia.
Organizations able to work collaboratively across functions and national borders.
Conducting business, accessing information, and communicating globally with a phone.
The business world has and continues to become more dynamic and complex.
HOW TO THRIVE – THERE IS HOPE
First, realize there are no “silver bullets” or simple, out-of-the-box solutions to the complex challenges we face. Each transformational journey is different as are the solutions that are developed. Where the path starts and goes is shaped by the changing circumstances faced by the organization, its people, and its customer. Given this, it is wise to start with a high-level, holistic assessment and discovery process to:
Discuss and define the organization's unique purpose.
Explore the state and fit of the organization across multiple perspectives like leadership effectiveness, operations, customer experience, and employee engagement.
Understand, discuss, assess, and challenge the models, mindsets, and assumptions that underpin the business’s and leadership’s thinking to ensure fit and relevance.
Identify and evaluate the performance and capability gaps, recognize potential interdependencies, and prioritize issues to discuss and tackle first.
Develop a high-level approach and roadmap, regularly updated, to start the journey.
Start with simple steps. Organizations need to improve their awareness levels using all their senses. It is important to develop “owl-like” capabilities. These include high visual acuity and keen hearing, each with 360-degree fields. Being able to fly up to see the big picture and discern changes and simultaneously to zoom in to see the details, find targets, and act is essential. These capabilities help organizations sense and understand disruptions and their impacts earlier, enabling them to act quickly and in an informed manner. Meanwhile, leaders must openly, effectively and efficiently share their understanding of the business and its environment enabling and empowering people to act and respond across the organization.
Equally important, organizations, their leaders, and employees must be far more open-minded. They must be willing and able to set aside and/or challenge long-held models, mindsets, beliefs, and assumptions. In doing so, they remove many of the organizational blinders that prevent them from seeing, understanding, changing, and acting on what is occurring quickly. It takes time and effort to change our thinking, believe in it, and build the necessary capabilities to embed these in our organizations.
This can be a daunting journey unlikely to be a straightforward or linear process. It is normal to frequently double back to adapt as more is learned and circumstances change. It is a tough, yet necessary trek if one wants to survive and thrive.
Organizations need to take that difficult first step to start their journey. Those who wait to see smoke and fire first before starting will likely suffer some dire consequences. Better are those who actively watch for early warning triggers and then start their journey. The best are those who are proactive and aware that their success will not go unchallenged. They regularly and carefully scan the horizon, vigilantly monitor, review and assess the state of the organization and its performance, and adapt as needed to drive continued success. This approach builds and strengthens their agility and keeps them ahead of the curve.
Lastly, having a credible trusted outsider to facilitate discussions, serve as an experienced guide and actively coach and assist the organization and its leaders through this process can be immensely helpful. Outsiders are not bound by internal biases and beliefs. They can ask the tough questions and serve as a catalyst for action. The best outsiders are experienced guides, questioners, catalysts, and navigators. Being conversant in industry basics helps but being an industry veteran or expert can be a hindrance.
SOME FINAL WORDS (FOR NOW)
This article just breaches the surface of this complex and challenging subject. It highlights the importance of developing awareness of the disruptions around us and their implications. It dispels some of initial fear and feelings of helplessness that first arise from disruptions. It provides insights, information and recommended approaches to proactively identify, begin understanding and start the journey to confront the inevitable challenges that arise to learn not only how to survive, but to thrive.
In future articles and posts, we will delve deeper into the topics raised and provide valuable knowledge, approaches, and tools to build the capabilities to help successfully and safely navigate this journey. Next up - identifying, testing, and changing models, mindsets, beliefs, and assumptions. Every transformational journey is a work in progress and so is this series of articles. Your experiences, suggestions, and insights are not only welcome but desired. Here’s to our journey, buckle up!