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Disruption is dead, long live disruption

innovAGEING > Media + Blog > Blog > Disruption is dead, long live disruption
Posted by: INNOVAGEING
Category: Blog

A ‘business-as-usual’ approach can become untenable for those who are not attuned to capitalising on opportunities.

The science fiction writer, William Gibson, once offered that: “The future is already here. It’s just not evenly distributed.”

So, if you want to better understand the future, you need to work with people and organisations that are already living in the future. Disruption doesn’t just happen from nothing. It’s the by- product of successive commercial decisions. Progress doesn’t just fade away when past its use-by date, it accumulates. Much of what we see today is the result of recombining technologies, and business models that are already there. As the economist Martin Weitzman noted: In such a world, the core of economic life could appear increasingly to be centred on the more and more intensive processing of ever-greater numbers of new seed ideas into workable innovations.

Hence, you can trace the antecedents of bitcoin and blockchain in the late 1990s and early 2000s with file- sharing services like Napster, Gnutella, and BitTorrent. It is technology borne from a model where architectural implications take precedence over business implications. At an industry level, we’ve seen at least two boom periods that fermented disruption. The web boom between 1997 and 2006, saw the establishment of companies such as Facebook, Google, and Airbnb. T smartphone app boom between 2007 and 2016 saw the creation of businesses like Uber, WhatsApp, Instagram, and Twitter. Although many of us still understand innovation and disruption through the lens of start-ups that quickly became multibillion-dollar companies, much of the tech sector has consolidated with first-tier companies, namely, Alphabet, Amazon, Apple, Facebook, and Microsoft now among the top-five most valuable companies in the world.

The columnist, Farhad Manjoo, characterised the present state of play as such:

Because today’s giants are nimbler and more paranoid about upstart competition than the tech behemoths of yore, they have cleverly created an ecosystem that enriches themselves even when they don’t think of the best ideas first. For the Five, the start-up economy has turned into a heads-I- win-tails-you-lose proposition—they love start-ups, but in the same way that orcas love baby seals.

Much of this seems to be similar to what’s happened in the pharmaceutical industry, where there is a healthy ecosystem of start-ups, and merger and acquisition activity, yet 8 of the top-10 largest pharmaceutical companies are over 100 years old. It would be safe to offer the packaged food industry as a second example. As of late, there is considerable talk of a third technological boom, largely comprised of artificial intelligence, augmented and virtual reality, blockchain, self-driving cars, and the ‘internet of things’. Unlike previously mentioned technologies, this next wave of technological advancement plays to incumbent strengths. These technologies are complicated, expensive, and favour organisations that have scale. In other words, they are not as accessible to start-ups on a zero-to-hero growth path as was the case with the web and smartphones.

It is no wonder that IBM’s recent C-Suite Study uncovered the following:

  • 23 per cent of executives say that competitors from outside their industry are a significant source of disruption
  • 72 per cent of executives say that innovative industry incumbents lead the disruption in their industry
  • 68 per cent of executives expect organisations to emphasise customer experience over products.

 

This is not to say that disruption has disappeared. It means that incumbents now understand they need to invest in new opportunities. As such, disruption is no longer solely the preoccupation of start-ups. To some extent, this bodes well for incumbents in the aged care industry. If they can convert technological advancements into viable business models and deliver services that older Australians want to access, they would, in effect, have created a differentiated competitive advantage.

Additionally, aged care businesses modelled after start- up marketplace platforms face supply-side constraints in light of industry regulations, skilled workers, and the sheer breadth of services delivered in the industry. Still, nothing is guaranteed, and in an environment where disruption is the state of play, anything can happen. This is particularly prescient for industry incumbents.

Here’s an illustration.

In 2001, a young start-up approached Blockbuster with a $50 million acquisition proposal. It was the end of the dotcom boom, but the internet was still changing people’s lives. Blockbuster didn’t understand the forces around this, passed on the start-up, and continued with what it did best as a market leader – renting DVDs and videos in physical shops. By 2013, Blockbuster was dead, and the start-up they passed-up was Netflix.

Today, aged care providers need to generate more output from the same (or less) inputs. This is the call for increased productivity and better service, which sits at the core of what innovation is about. We misunderstand disruption if we think it to be the proverbial ‘grey tsunami’ that is anticipated to make landfall on our industry, or changing government regulations. In fact, these are existential industry challenges that may present opportunities. Disruption happens as a result of those capitalising on these opportunities, and rendering business-as-usual untenable for laggards. Not understanding innovation’s productivity imperative is to risk giving the right answer to the wrong strategic question.

The question is, can you afford to make this mistake when the future is ‘not evenly distributed’?

Author: INNOVAGEING