A.K.A. “Hey Kid, Get off My Lawn! (and Leave My Customers Alone)”
The new kids on the block are a’knocking, and they’re armed to pitch with an arsenal of tech buzzwords like “innovative,” “wearable,” and “cloud technology;” words we’ve heard all too often in recent years. Among this collection of tired jargon: “disruptive,” one once-powerful word that’s been overused so rampantly that it’s become near completely void of its intended meaning…and oh-so-easy to dismiss with an eye roll and a chuckle.
But not so fast, my dear PM friends, what happens when that one scrappy company shows up and actually is disruptive? Well, if you weren’t so busy rolling your eyes you would’ve seen it coming, which is precisely what this post is about: identifying potential disruptors and making swift decisions to protect your product.
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What is Disruptive Innovation?
I could go all passive-aggressive Merriam Webster up in here– but I’ll refrain because disruption is more than a word, and deep down I want to believe that every PR firm that has ever sent me a press release with the word “disruptive” in the headline simply misunderstood the difference between disruptive as a word and disruptive as a concept–a girl can dream, right? After all, disruption is a somewhat complex concept that has been defined, redefined, and even rejected because folks just can’t seem to use the term responsibly. So here’s a brief history lesson:
Clayton Christensen’s Theory of Disruptive Innovation
The concept of disruptive technology as we once knew it was initially described by Harvard Business Professor, Clayton M. Christensen, who coined the term “Disruptive Innovation” back in 1997, in his first book The Innovator’s Dilemma. According to Christensen’s definition, disruption is any technological development that changes the status quo of the current market and its available products by offering something that’s more simple, more convenient, more easily accessible, or otherwise more affordable than current offerings.
According to Christensen’s definition, innovation and disruption are not one in the same, “Disruptive innovations are not breakthrough technologies that make good products better; rather they are innovations that make products and services more accessible and affordable, thereby making them available to a much larger population.”
So while innovative companies and products make life easier, disruptive companies and products fundamentally change the way we do things and overturn existing products and business models. In The Innovator’s Dilemma, Christensen addresses the difficult decision businesses must make in the face of disruption: to hang on to their market by improving what they offer–keeping up with the Joneses, if you will–or, to test their luck in new markets by trying new things; becoming disruptors themselves.
While Christensen’s theory frames disruption as a positive force, it doesn’t fail to address what happens to incumbent (existing) businesses, products, and industries when they’re disrupted–the status quo gets knocked down in a process a man named Joseph Schumpeter previously observed and referred to as “Creative Destruction.” Disruption, is then, destructive.
Schumpter’s Theory of Creative Destruction
Decades before Christensen’s theory of disruptive innovation was published, economist Joseph Schumpeter observed and wrote about creative destruction, a “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.”
In other words, Schumpter’s theory, first popularized in the 1950’s, describes the end result or outcome of disruption; when a new, disruptive technology, business model, or product comes to market, it forces existing businesses to either restructure, evolve, or die, often having a domino-like effect on multiple industries or businesses. I’ll discuss how product managers can approach these difficult decisions later in this post, but wanted to explain first why PMs should care about disruption; it’s not about the disruption itself but the creative destruction that follows.
So now that y’all (hopefully) understand the concept of disruption (if you don’t, please pick up a copy of The Innovator’s Dilemma, I promise it’s a good read), you can learn to identify whether you need to worry that new competitors are going to uproot your business, product, or entire industry. There is (sadly) no rulebook that functions as a clear cut way to spot disruptive technology, but you can train yourself to look out for certain historically observed qualities to make more educated guesses. Here’s a few questions you may ask yourself based on Christensen’s theory of disruptive innovation:
Is it a sustaining technology?
Sustaining technologies, are improvements or developments to technologies that already exist. They may make life easier, they improve the way we currently do things rather than fundamentally change it and are not disruptive.
Is it developing a new market?
If a new product, service, or technology is serving a market of customers who previously went without or didn’t have access, it might be considered a New Market Disruption.
Is it cheaper than current options?
This one’s for the cheapskates. Clayton Christensen referred to innovations that allow for cheaper versions of existing products, as Low End Disruption.
But here’s the deal: you can’t simply play lookout and react; you must be vigilant about building and planning around all of those competitive “what ifs,” because being paranoid…really paranoid, is what distinguishes the “good product manager” from the “really good product manager.” And don’t think you’re off the hook just because you’re “first” to market, as Jeff Lash writes:
“If you want to be a good product manager, plan, protect, and position yourself for future competition. If you are entering a market where there are competitors today, it is fairly certain that there will be new competitors tomorrow. If you have found something “new to the world,” it is guaranteed that others will follow you into the market if you are successful. As a product manager, you need to plan for future competition, protect yourself from it, and position yourself to actually use that future competition to your advantage.”
Secondly, you’re going to have to set your ego aside. As technology evolves at a breakneck speed, there is no room for overconfidence in today’s market. Brand new products are not going to be launched with all the fancy bells and whistles existing products have; but that doesn’t make them inferior, so don’t write them off just yet. A Steven Sinofsky article on The 4 Stages of Disruption warns PMs not to fall into the trap of ignoring new competitors when they first appear and the first conversations about disruption happen:
“One of the historical realities of disruption is uncovering the “told you so” evidence, which is always there, because no matter what happens, someone always said it would.”
But as we know, conversations about new “disruptive” technology are happening every day. Treating and reacting to every new self-proclaimed disruptor like it’s a legitimate threat would lead to total chaos–something Sinofsky observed would give your competitors a leg up. Perhaps that’s why we can’t seem to escape the word.
It’s sort of a PM catch 22; you have to be really paranoid about new technologies, but you can’t be too paranoid. While catching the next disruption and taking action early is helpful, spending too much time obsessing about disruption can distract you from your long term product goals.
Dealing with Disruption
So what’s a Product Manager to do if they are fairly certain they’ve identified a competitive threat? Your wisest move in the face of disruption is to develop a plan and take action…quickly, whether that means adapting to follow the path carved by the new product, repurposing your product, or doing nothing at all–deciding what course of action to take falls into the “product management as an art” category, and beyond using your smarts and product manager Spidey Sense to make the right call, your best bet is to learn from those before you.
A few notable examples of disruptive innovation in action (and the incumbent’s reactions):
- Blockbuster vs Netflix
- Taxis vs Ride Share Companies
- Borders vs Amazon
- Horse and Buggy Whips vs Automobiles
There’s no shortage of speculation out there about how companies should respond to disruptive innovation, however, as the examples above show, there is no “right” incumbent response; no foolproof way to predict the outcome of your actions.
For a long time Clayton Christensen himself believed the best response was to develop a disruption of your own, but he’s since admitted that disrupting all of the things is an oversimplified reaction, suggesting companies analyze the disrupter’s strengths against their own advantages and look at the factors that could help or hurt the competitor absorb them. With that information you’ll be able to find your own weak spots and choose to reinforce them or move in favor of another plan of attack:
Acquire the Disrupter
If you cant beat them, buy them. If the disrupter is fairly early-stage, they likely don’t have a ton of customers or a ton of money in the bank…yet. Key word here is “yet,” if you’re going to take the acquisition route, earlier is better, if you wait too long you might end up paying a whole lot more money for a company that is still yet to get everything right. (I’m looking at you, Facebook.) But when all’s said and done, it’s rarely too late to buy the competition–for the right price. Regardless of what stage the company you’re looking to acquire is in, keep in mind that price isn’t the only factor to consider before acquiring.
Compete Cooperatively, or Co-opt
The “if you can’t beat em’ join em’” strategy; or more accurately, the keep your friends close and enemies closer approach. Find a way to build a strategic partnership with the disruptor. Analyze both your strengths and weaknesses and your competitor’s and find a way to work for each other by combining forces to improve the end product. Take Ford and Toyota’s 2011 hybrid vehicle technology partnership.
If at first you don’t succeed, try, try again–and build something new. If it’s pretty clear that you’re no match for the competition and it’s too late to acquire or partner up, you can always leverage your existing resources and strengths to move into new territory, whether that means focusing on a new market, building a whole “new” product, or simply using what you know to start over. Richard Branson knows a thing or two about this strategy; from Virgin Records to Virgin Group, he may well be King of spinoffs. It’s important to note here that not every spin off is successful, it is, however far easier to spin off than start from scratch, which leads to my final point:
Not every company, product, business model, or industry can survive innovative disruption.
I want to leave you with this important bit from Joe Capperella’s advice to product managers handling disruption:
“Be morbidly realistic: If the disruption is so game changing, and course correction so costly to an organization, it very well may be necessary to come to terms with the fact that there is likelihood that adoption is impossible. It simply happens.”