Big-Bang Disruptions: The Innovator’s Dilemma in the Digital Economy

I recently read a very interesting article, - Big-Bang Disruption.  The article was written by Larry Downes and Paul Nunes and published in the March, 2013 issue of the Harvard Business Review.  It was later expanded into a book, Big Bang Theory: Strategy in the Age of Devastating Innovation published this past January. 

The authors’ key premise is that innovation is once more undergoing drastic changes, driven by the exponential advances in digital technologies.  Companies are now able to create products that are simultaneously better, cheaper and more appealing than those of competitors.  As a result, “entire product lines and whole markets are now being created or destroyed overnight.”  Examples include Skype, iTunes, the Kindle, Netflix, Facebook, Twitter, and smartphone apps like Google maps and Angry Birds. 

Big-bang disruptions are often unplanned and unintentional.  They are typically discovered through continuous market experimentation.  They upend the conventional thinking on strategy, marketing and innovation, giving rise to a new set of business rules.  “Nearly everything you think you know about strategy and innovation is wrong,” they note.

The article contrasts big-bang disruption with disruptive technologies and innovations, the well known concepts most associated with Harvard professor Clayton Christensen.  In his 1997 seminal book, The Innovator’s Dilemma, Christensen succinctly defined disruptive innovations as “new products, services, or business models that initially target small, seemingly unprofitable customer segments, but eventually evolve to take over the marketplace.”  Industry leaders are often blindsided by such innovations, because their attention is focused on their existing products and customers.  “No company or industry is immune.”     

Management experts have embraced Christensen’s work.  They all pretty much agree that companies must be on the lookout for such potentially disruptive changes, and try to spot them as early as possible.  Once it’s clear that the innovation is inevitable, the company must step up to embrace it, - whether it likes it or not, - with efforts like in-house skunkworks, marketplace experiments, collaborations with early adopters and evaluation of potential acquisitions.  If the business mobilizes quickly enough, it can turn the disruptive change from an existential threat to a strategic opportunity.

“But the strategic model of disruptive innovation we’ve all become comfortable with has a blind spot,” write Downes and Nunes.  “It assumes that disrupters start with a lower-priced, inferior alternative that chips away at the least profitable segments, giving an incumbent business time to start a skunkworks and develop its own next-generation products.”

“We’re accustomed to seeing mature products wiped out by new technologies and to ever-shorter product life cycles.  But now entire product lines - whole markets - are being created or destroyed overnight.  Disrupters can come out of nowhere and instantly be everywhere.  Once launched, such disruption is hard to fight.  We call these game changers big-bang disrupters. They don’t create dilemmas for innovators; they trigger disasters.”

“The first key to survival is understanding that big-bang disruptions differ from more-traditional innovations not just in degree but in kind. Besides being cheaper than established offerings, they’re also more inventive and better integrated with other products and services.  And today many of them exploit consumers’ growing access to product information and ability to contribute to and share it.”

In a recent Forbes interview, Paul Nunes was asked what a company can do to predict or defend against big-bang disruptions, given their speed and scale.  “Realistically,” answered Nunes, “there is no solution to the problem.  What we are advocating is gaining an understanding of the new realities of the market, and transforming your organization to better align with those realities.”

The key strategic action is to strive to be the best, that is, “the lowest cost provider of all the elements of value the customer seeks, and be able to provide that in a customer intimate way.”  Trying to guess what the market will consider the best is probably a fools errand.  “The market will tell you what’s best. . . you are better off to experiment constantly and in the market, learning and sensing, and creating a wealth of options, rather than trying to determine best a priori, at least so long as you can afford to do that.”

This all feels right, and frankly not radically different from my experiences with disruptive innovations over the past 15-20 years.  I like the concept of big-bang disruptions, but I don’t think of it as a new kind of innovation.  Rather, it’s an elegant way of framing the evolution of disruptive innovations into our Internet-based, hyperconnected digital economy.

Big-bang disruptions seem to be generally based on Internet-enabled services and applications.  They’ve been mostly enabled by the rise of the mobile Internet platform of smart devices, cloud computing and broadband wireless networks.  Such mobile Internet platforms make it easier and cheaper to conduct rapid market experiments, to continuously improve products based on user feedback, and to come up with innovation breakthroughs, especially in the area of user experiences.  They make it possible to quickly scale up those offerings that catch on, and shut down those that do not. 

Everything is indeed moving faster, but, as The Economist observed in its review article, “few successes happen overnight, so eagle-eyed companies still have time to neutralise the opposition. . . The web helps to spawn big new businesses.  But some turn out to be one-hit wonders, . . All of this means that the challenge facing incumbent firms is, therefore, to work out which threats are worth worrying about and how best to respond to them. . .  Messrs Downes and Nunes are right that the competitive heat has been turned up by new technology.  But cool heads are still needed when dealing with disrupters.”

In his review in Forbes, business author Steve Denning positioned big bang disruptions within the wider changes taking place in the world of business.

“The reality is that big bang disruption is a symptom of an even broader management challenge flowing from the fact that corporations are no longer at the center of the economic universe.  Technology has not only enabled vast new possibilities for producers but it has also empowered customers, who have instant access to reliable information and an ability to communicate amongst each other.  As a result, power in the marketplace has shifted from seller to buyer. Customers have effectively become the boss.  Big bang disruption is just one of the more dramatic symptoms of this broader and deeper economic phase change: the emergence of the Creative Economy, where continuous transformational innovation is the the game being played.”

I prefer to look at big-bang disruptions in the context of what we’ve learned about disruptive innovations in the last couple of decades.  More generally, I try to understand what our emerging digital economy might be like by comparing it to the waves of innovation of the past couple of centuries.

Innovation, in my opinion, is essentially how individuals, communities and institutions deal with periods of accelerating changes and historical transitions.  It’s our attempt to deal with a fast changing, unpredictable future from our vantage point in the present and from the context that comes from in the past.  A historical perspective is actually one of the most useful tools for imagining realistic scenarios of what the future might be like, what we should be doing and how to realistically get there.  

In the end, the future must somehow be linked to and co-exist with the past.  Technologies might metaphorically change overnight, but people and societies adapt to them on a more human time-scale.  The new economy we talked so much about during the dot-com frenzy did not wipe out the brick-and-mortar economy, as some were predicting.  The physical world is alive and well, co-evolving with the digital world into the Internet of Things.  Neither have people abandoned cities for greener pastures, even though they can now work and shop online.  Urbanization is one of the biggest forces of the 21st century.

Big-bang disruptions will give rise to many exciting technologies and innovations.  But, as has always been the case, the disruptions that survive beyond their initial novelty years, will be those that  not only bring us exciting new capabilities, but do so while successfully adapting to the way we live and work.

Comments

[Gordon Haff]

Nice piece! A specific example of the disruption model changing one sees with open source. Linux, as you certainly know :-), was hugely disruptive (in no small part due to IBM's participation). But that disruption was a matter of commoditization and democratization of, essentially, Unix rather than (at the time) a technological step forward. It was and increasingly became an innovation of collaboration and innovation, however. And we're now seeing that innovation model often trumping other approaches in new styles of databases, analytics, and many other areas so that the advances are often taking place in open source rather than in walled gardens. (Not exclusively, of course, but often enough.)