Disruption. The word tends to inspire fear among business and political leaders. Executives in incumbent firms worry about the upstart that will emerge, seemingly out of nowhere, and disembowel their business. Political leaders worry about economic and social dislocations from disruption. Even saying the word disruption causes one’s mouth to contort uncomfortably.
Leaders are only looking at one side of the disruption story. The essence of disruption is making the complex simple and the expensive affordable. It is the mechanism by which markets expand, bringing valuable products and services to broader populations. Yes, it often upends business models, but it always grows market. Newton’s third law holds that every action has an equal and opposite reaction. In the same vein, every disruptive threat creates an equal, if not greater, opportunity.
Consider photography. Digital imaging clearly disrupted printed imaging. Former market leader Eastman Kodak filed for bankruptcy protection in 2012. Did people stop taking pictures? Of course not. More people take more pictures than at any point in human history. They aren’t printing them, however. Rather, they are sharing them on Line, Snapchat, Facebook, Instagram, and more. Kodak certainly could have caught this wave of new growth.
Our world needs to harness the positive power of disruptive innovation. Hundreds of millions of people lack access to healthcare, education, or clean water. We have to figure out how to feed, house, and gainfully employ the close to 10 billion people that will populate the Earth by 2050. We have to achieve these goals without destroying our planet.
Market leaders are increasingly showing how to bend disruptive innovation to their advantage. A decade ago, Amazon.com translated an internal project to improve IT productivity into a cloud computing offering that generates billions in revenues today. Singapore’s SingPost more than doubled revenues from 2005-2015 in the face of systemic declines in its core business by developing a range of logistics and ecommerce solutions. By including disruptive payment offerings in its WeChat messaging platform, China’s Tencent has become the most valuable company in Asia. And Janssen, the pharmaceutical arm of Johnson & Johnson is in the early stages of disrupting disease itself, by “intercepting” diseases rather than treating and managing them.
More than 20 years of research and applied work has crystallized how to identify the potential for disruption early, and to manage some of the inevitable dilemmas that accompany it. Leaders who understand the mechanisms and implications of disruptive innovation can create and own the future, rather than be disrupted by it.