Platt Perspective on Business and Technology

Putting change in perspective 4 – identifying disruptive change when it first begins to emerge 2

Posted in business and convergent technologies, strategy and planning by Timothy Platt on September 6, 2013

This is my fourth 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 Business Strategy and Operations – 3, postings 417 and loosely following for Parts 1-3.)

I at least began a discussion of disruptive change and its complexities, as it arises within a business in Part 3 of this series. And I said at the end of that, that I would more explicitly focus on outside sources of disruptive change here. And I begin that by picking up on an externally sourced example that I initially raised in Part 3: a supply chain partner business’ factory suddenly closes down (for example as a result of a fire) and just as suddenly some key components to your own business’ products have to be re-sourced.

This example may begin as an internal disruptive change for the business that lost its factory and a very negative one for them but this type of event just as suddenly and just as rapidly impacts upon every business that has relied upon that now closed factory for essential parts. So a crucial point that directly comes out of this is that:

• The lines between outside and inside can blur very quickly, and an outside disruptive change that has meaning for an affected business can all but instantaneously become an internal source of disruptive change for others too, and vice versa.

In this case, that means rushing to find new sources of at least comparable alternatively sourced parts to keep your business in operation so you can meet your contractual obligations and maintain a positive cash flow. When this type of disruption occurs, every business that has entered into business to business agreements with this factory faces this type of event at least initially as a negative disruption too.

• The other point that I at least hinted at in Part 3 was that even with an event like this, if the right alternative sourcing can be found and set up quickly enough, this negative can turn into a positive and at least for the more agile businesses that have been buying and using these parts. A sufficiently rapid and value creating remediation can flip the change valence from negative to positive.

But here, my point of focus is on how an inside disruption, positive or negative can ripple out to become a significant outside disruption for other businesses, and that an outside one can rapidly become an inside event for its causally related impacts.

The more closely connected businesses become as they enter into supply chain and similar coordinated business relationships, the easier and faster it becomes for disruptions, positive or negative to spread their effects through these larger systems, as operational dependencies become more complex and more sensitively critical.

• This level of risk and benefits analysis, I add, should be included in any due diligence evaluations made when considering entering into a supply chain system, where the reliability and stability of a proposed system’s member businesses become important for every potential partner business that might join in.
• And this type of due diligence analysis should be a part of any ongoing performance review of a supply chain system already entered into, along with more immediate reviews and analyses of cost and time from order placement to delivery, product or material failure rates etc.

Up to here, I have focused on partner businesses as potential sources of disruption, and on negative disruptions. What happens if a partner business in a supply chain comes up with a tremendously improved product of a general type that your business would acquire and use from them? This type of disruption can be just as significant and it can carry as much uncertainty for this business’ supply chain partners as the factory closing example that I developed earlier.

• Are these new components going to be fully compatible for use by purchasing businesses that would use them in their products, or for making their own products?
• If so, would this transition require retooling their own production lines, and if so at what costs?

But disruptive change can also come from direct competitors and from the marketplace and from consumers and their expectations, or from general economic pressures that would reshape overall business spending too. I wrote Part 2 of this series about taking a 360 degree perspective when looking for and planning for change and its potentials, and this posting in many respects simply expands and clarifies the scope of where and how you would look when doing that.

And this finally brings me to a point in this discussion where it becomes essential to think through and consider a wider range of change indicators, and not just the late and lagging indicator of financial impact, and the early and leading indicator that social media and a wider conversation can enable. I will discuss mid-time frame indicators and evaluation benchmarks in my next series installment. Then I am going to write a second full series installment on 360 degree change evaluations. After that I will round out a discussion that I have in fact been working on all along here, of the valance – positive or negative of change. 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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