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A new kind of innovation is changing the rules of business. Executives are accustomed to seeing mature products wiped out by new technologies, and many have adapted to ever-shorter product life cycles. But now entire product lines—even whole markets—are being created or destroyed overnight. These disruptions do not follow conventional strategic paths or normal patterns of market adoption, and can wipe out incumbents in a flash. We call them “big-bang” disrupters.
To survive them, incumbents need to develop new tools to detect radical change; new strategies to slow down disrupters; new ways to leverage existing assets in other markets; and a more diversified approach to investment.
A collection of Big Bang Disruption resources is available at Big Bang Disruption: Lessons for Executives.
Disruptive innovations have traditionally started out as cheaper and lower in quality than products offered by established incumbents. They gradually improve in quality until they finally dominate the market. Today, digital platforms such as the smartphone are enabling innovations that offer customers both a better experience and a much lower price, right out of the gate—think of free GPS apps versus dedicated GPS devices.
Big-bang disrupters share three defining characteristics: product development that is unencumbered by corporate budgets and rules; growth that is unconstrained by the usual slow-ramping product-adoption curve; and strategy that is “undisciplined.” That is, rather than limiting itself to just one path of either “low cost” or product leadership or customer intimacy, it delivers on all three simultaneously.
Bold strategies are the only way to cope with big-bang disruption. Four approaches that incumbents have used to survive and even thrive are:
See it coming. Try interpreting the real meaning behind seemingly random experiments by finding and listening to visionaries or “truth tellers” who can predict the future with insight and clarity. A truth teller may be found within the company, and sometimes but not always from the ranks of senior management—or on the outside in the guise of a customer, supplier or investor.
Slow the disruptive innovation to outdo it. The best survival strategy may be to ensure that disrupters can’t make money from their inventions until you’re ready to acquire them or you can win with a product of your own.
Be ready for a fast escape. To compete with “undisciplined” competitors, you have to be ready to get rid of once-valuable assets.
Try a new kind of diversification. Intangibles can be your most valuable assets in this fight against a big-bang disruption—and all that you have left as fit-for-purpose physical assets quickly lose their value.
How do you launch your own innovations? Make sure future strategies are built on a platform that can easily be extended and experimented with and quickly scaled both up and down. The profitable life of a big-bang disrupter may be short, and you’ll need to be ready with the next one before someone beats you to it.
Big-bang disruption will keep executives in every industry, especially technology- and information-intensive businesses, on their toes. It may be lurking within the failed experiments of many professional services, manufacturing, distribution and retailing segments; big-bang disruptions in many of these industries may not be far off.
But these disruptions hold immense potential for those who can quickly replace their current business by something more dynamic and unstable but also more profitable.
Larry Downes is an institute research fellow, consultant, author and speaker on developing business strategies in an age of constant disruption caused by information technology.
Paul F. Nunes is executive director of research at the Accenture Institute for High Performance based in Boston, Massachussetts.
February 22, 2013
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