The dilemma of disruption

The dilemma of disruption

When Apple launched the iTunes software 15 years ago, the company knew what its consumers wanted, long before the latter realised the need themselves. And within just a decade, the recording industry had been completely reshaped. The launch of the App store in 2007 with only 500 applications was just the beginning of the next Apple-driven revolution. Less than a decade later, the platform now offers over two million applications, downloaded more than 130 billion times. Services like Skype or Twitter have revolutionised the way we communicate. Platforms like Uber or Airbnb have transformed the way we travel. And networks like Facebook or LinkedIn are changing the way we connect privately as well as professionally. Disruptive innovations alter the way we live and pose a real danger to established companies and business models

The phenomenon of outsiders quietly rewriting the rules and suddenly attacking established systems is not a phenomenon restricted to business. The fall of the Berlin Wall in 1989 was a response to rising societal pressure which ultimately heralded the rebirth of democracy in Central Europe. More recently, democracy itself has surprised the world: British voters’ decision to exit the European Union called into question the idea of the EU itself, and might soon fundamentally change Europe.

In one way or another, we are all affected by disruption, a term introduced by Clayton Christensen in the 1997 book The Innovator’s Dilemma. Two decades later, Christensen’s theoretical framework is by no means unchallenged. But even critics acknowledge that the sudden demise of industry leaders and political systems is occurring with growing frequency. The debate around disruption shows three things: First, disruption is happening more often and affecting areas which had been spared from radical changes in the past, such as the healthcare industry or the financial world. Second, there is no simple answer to the question of whether disruption is good or bad. While pioneering progress in the healthcare industry is appreciated by the vast majority of our society, radical changes in political systems that jeopardise balance and stability might be dangerous. And third, what we are witnessing at the moment might be just the tip of the iceberg: The age of real disruption might be right around the corner.

Few management theories have had as much influence on the business community and our society as the concept of disruption. The 47th St. Gallen Symposium will take up the theme under the headline The dilemma of disruption, looking at the breeding grounds for radical change, assessing the tough decisions that come with it and directing participants’ gaze beyond the strict business definition.

The breeding grounds

For any change to happen, a receptive environment plays a vital role. In this context, three elements seem important: First, political and personal freedom are prerequisites for progress as well as for flexible and adaptive reactions to change. Second, mobility of goods, money, labour, people, and ideas across borders are key promoters of disruption. And third, society’s ability to question itself might be the most important factor in creating the basis for innovations such as education and healthcare delivered at a fraction of the cost charged by today’s market leaders.

Tough Decisions

Established companies often lack the ability to embrace new ideas and abandon past successes. This especially applies when it comes to choosing between sticking with existing markets and getting better incrementally or entering new markets by adopting new business models and embracing new technologies. While some companies, like IBM, successfully managed to reinvent themselves, others - like Blockbuster or Polaroid - are about to vanish or already have disappeared. Since the year 2000, over half of the companies in the Fortune 500 have either gone bankrupt, been acquired or ceased to exist.

Beyond the business definition

Although the concept of disruptive innovation is deeply rooted in management theory, identical tendencies and radical changes have been seen in media, politics, academia and society. Electoral systems, which are more open and less predictable than ever before, are fundamentally transforming politics. At the same time, demographic change - said to be no ordinary disruption but still posing similar challenges - is one of the most pressing issues our society faces. Ageing populations will transform everything from healthcare to real estate. Workplaces will be reinvented by a labour force dominated by Millennials. Cities’ economic and public policy clout will increase through urbanisation. And last but not least, migration will have profound impacts on labour markets and economic development.

Few management theories have had as much influence on the business community and our society as the concept of disruption.

Comments

We really live in a very interesting time as the Chinese saying goes. In the past, we have seen how the music (napster) and photo (kodak) industry have been disrupted. That was only the beginning and now a similar disruption is poised to happen in many other industries as they are being digitized. With all these emerging technologies like fintech, big data, IoT, robotics and many more we are sure in for an interesting ride. The question is whether we can put those technologies to good use and make them serve humanity or whether we will use those those technologies to further entrench inequalities around the world.

Thanks for your comment, Roy. I think it is not so much a question of “whether … or” but a question of timing. While many technological innovations have caused inequality in the short-run, they have just as much brought benefits and improvements for humanity in the long-run. And although the link between technology and inequality seems obvious, Piketty suggests, the explanation for the rise in inequality is not a simple one (see https://www.technologyreview.com/s/531726/technology-and-inequality/). What’s your take on this perspective?

Well you are perhaps right in saying that over the long-run technology has brought many benefits to humanity. It is probably "better" to be poor today compared to 200 years ago. Today, it is fairly easy to get access to phones and through this access to internet and apps that can do a variety of things. One can educate oneself, do basic health checks etc and benefits like this are likely to increase in the near future. There is a good chance that in a few years phone will even be free, because companies are interested in making money with the data that phone users generate so owning a phone and accessing the internet will become even easier. However, if you are poor today and you are struggling to meet your basic needs do you really care that you are supposedly better off than if you lived 200 years ago? 

Hardly.

If you are living in squatter camps in appalling conditions just like the majority of people you know then it seems people and the media who are saying technology is bringing progress sounds like a big fairy-tale with little resemblance to reality. And it's not only you and your immediate community who are struggling to meet basic needs. It's billions of people around the world. If technology really does reduce inequality, how do we explain the billions of people who are struggling? It's not like technology was only invented yesterday. 

In my humble opinion, technology comes with tremendous potential that if we leverage it correctly could certainly help to wipe out poverty but whether and how we leverage that potential remains another question entirely. There is no guarantee that we as humans will use technology to create abundance for everyone. What is stopping people who create viruses and use technology in a negative way, to use technology to enrich themselves while keeping the weak trapped in poverty? So for me, technology offers a lot of potential and possibilities but no guarantees or certainties. 

 

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