Platt Perspective on Business and Technology

Putting change in perspective 3 – identifying disruptive change when it first begins to emerge 1

Posted in business and convergent technologies, strategy and planning by Timothy Platt on August 31, 2013

This is my third installment in a series on recognizing change and on evaluating its potential significance as it develops, so as to enable a more rapid and effective, and even a more proactive response (see Part 1: thresholds of change and disruption and Part 2: taking a 360 degree view 1.)

I began this series by discussing the more random fluctuations that any business experiences as part of its routine business practices, and as coming from its more routine and steady-state marketplace experiences. I then added in some of the issues that arise from ongoing evolutionary change and both as this develops within a business and as it is faced when coming from its competition. And the possibility of disruptive, game-changing divergence from these patterns: true disruptive change has been held over this discussion from the beginning too, but without my having discussed that in any detail. I have simply noted that really disruptive change happens – at least up to here. My goal for this posting is to begin to more specifically explore what disruptive change means, as a matter of basic form and scale and regardless of whether this represents potential blue ocean opportunity, potential disaster or both.

• The first point to note here is that really disruptive change always arises from unexpected directions and in unexpected forms.
• It might have its roots in what would seem to be a more modest and incremental evolutionary shift, but a truly disruptive New, emerges as a break-away from standard and ongoing and takes off in its own direction.
• This means you cannot rely on expectation to tell you when a small, early stage change is in fact the start of a break-away from the usual background fluctuations at the financial level, as discussed in Part 1 of this series.
• Moving from the late indicator of a business’ financials here, and to early indicators such as social media and the online conversation, neither new short term fads, nor new long term marketplace wants that become the new must-have norms start out identifying themselves as marketplace game changers, except as special and particularly fast moving exceptions (see Part 2 for its discussion of early indicators.) A new product or service goes viral and the message spreads and marketplace interest swells out from that, and it comes into focus that this represents an emerging marketplace-changing event.
• Evolutionary can be planned for and predicted as to timing in ways that revolutionary cannot be.

And with this in mind I turn to more specifically consider the source of disruptive change, and begin here with disruption as it arises from within an organization.

• You are the owner of a business, or a senior executive of one, and one of your managers or an inventor themself from your staff come to tell you that they have what may be a break-away new product or offering idea. That can happen, and particularly when a proposed innovation represents a sufficiently extreme quantitative improvement for a product that you already offer, for its performance or usability for this to qualify as a qualitative improvement for it too. That can be relatively easy to see as a new and very positive disruptive change opportunity.
• But what if that same innovator or the innovator and their manager come up to you to tell you that they have something really incredible, but that it is divergent from what the business does? And this question brings me to what might be seen a central mystery that I noted but did not adequately address in one of my earlier series: Keeping Innovation Fresh (see Business Strategy and Operations – 2, postings 241 and loosely following for its Parts 1-16, and particularly its Part 2 and Part 3.) Why is it that a company like Xerox, that blossomed from developing and marketing innovation, could create the foundation for so many new innovations and even whole new industries at its research park – and not pick up on and develop, or benefit from essentially any of them?

Coming out of this discussion, simply facing disruptive change in the competition may sound a lot easier than having to identify and deal with it within your own organization – and that observation can often be the exact truth.

• A truly disruptive change, as a qualitative change arrives as an unknown.
• Its potential upside – and here I consider a potentially positive invention or innovation, might be vast. But it is unlikely that its true marketplace is going to be known initially, and the same could be said for the level of market share and sales value that it might generate for any marketplace that it would take hold in.
• Potential costs, and particularly structural and fixed operating expenses that would have to be met to initially develop this for market, might be a lot clearer – with gaps but with enough of the details anticipated to at least offer a minimum order of magnitude investment requirement. And if this innovation does not make it in a marketplace and recoup those expenses and more that also arise, this potential success and potential positive for this business could become a huge negative, and a write-down and loss.
• I am going to delve in more detail into the issues of change valence, and positive and negative value change later in this series. But I at least raise some of the issues that will come up there, here too. Part of the cost of disruptive innovation, and I add part of the reason why it is called disruptive is the uncertainty as to whether it will work out and be written up in black ink, or fail and end up as red ink and loss. I focused a lot of attention in my Keeping Innovation Fresh series on building an organizational structure that can help identify the winners and help transition them from research and development and into meaningful production that is integrated into the overall business flow and that supports it. Ultimately, Xerox failed to nurture and develop its Xerox PARC innovations because its leadership never came to see them as reliable sources of competitive value that would benefit their business if developed there.

Truly disruptive change can be like that. A supply chain partner business’ factory suddenly closes down and just as suddenly some key components to your own business’ products have to be re-sourced. This can be a disaster. This forced change can also in retrospect turn out to have been a best of all possible events – if new sources that offer greater flexibility and stability of product flow can be found and certainly if their replacement-sourced parts are of higher quality and come at a better price point. (Remember, among other possible details that would be relevant here, that if a supplier disappears from its markets, so in most cases would any contractually binding agreements to source from them too.)

• Disruptive change from within the business carries special additional costs that arise as additional risks.
• It is not always or even often the case that the valence, positive or negative of a disruption will show early to be positive or negative. But it is all but certain that at least some of the significant up-front costs will come into focus before any clear and unequivocal benefits from it do. This asymmetry is functionally, experientially a defining quality of disruptive change per se.

I am going to continue this discussion in a next series installment where I will turn to consider disruptive change and its impact as it arises from outside of a business and whether it comes in from a competitor or from the marketplace itself. After that, as noted in Part 2, I will discuss additional indicators of developing change that operate on more mid-range time scales, coming into play before notable financials shifts could tell you anything and after well attended social media conversation might if effectively monitored. And as noted above, I will then more explicitly discuss the valence of change and its positive, negative or mixed impact, and both as a potential and as it is realized.

Meanwhile, you can find this and related postings at Ubiquitous Computing and Communications – everywhere all the time 2 and at the first page to that directory. And you can also find this and related material at Business Strategy and Operations – 3 and at Page 1 and Page 2 of that directory.

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