Don\’t Overestimate or Misunderstand \”Disruption\”
DISRUPTIVE-INNOVATION_rd-600x352.jpg

Written by:

Share

Facebook
Twitter
LinkedIn
Pinterest
Email
Print

\"DISRUPTIVE-INNOVATION_rd\"Remember the phrase “innovate or die?” Well, it died. Taking its place today is “disrupt or die.”

Disrupt this, disrupt that. We’re in the throes of it. As I write, another disruptive concept is being born. And if you don’t see it coming and don’t adopt or adapt to it, you may get mowed down in its path. In fact, the true winners are disrupting and transforming themselves before an outside disrupter gets to them. The chic label of disruption aside, I would argue that innovation and disruption could be synonymous in their commercial results.

It’s all happening fast, faster, and like a pinwheel, and still accelerating in a whirling blur. It’s a new liftoff every day, rocket-fueled by venture capitalists that have invested close to $30 billion in 2013, a 7% increase over 2012. So if you’re in the game, don’t find yourself standing still on the launch pad. Get a blast on it.

The perpetrators of much of this disruption are 20- and 30-somethings, many of them now nearly-overnight billionaires. And by the way, do you remember the term “burn rate,” before the dot.com crash (how much cash one would burn through in a month)? It was the measure of success. Now the badge of honor is the “round of funding” one is on. I guess in the end, it’s pretty much the same thing. Just ask veterans Jeff Bezos, the Google boys, and Mark Zuckerberg — and new darlings, Brian Acton and Jan Koum

So What is Disruption?

One handy definition of these disrupters comes from us — our columnist for The Robin Report, Warren Shoulberg. In our upcoming print issue Warren says a disrupter is \”the guy who comes into your market and screws up your business by doing something different.\” That works for me.

However, “doing something different,” can “screw” up your business or market in three different ways. Furthermore, most of the disruption or innovation we see today is due to the technology era, including the Internet, providing the new tools for disruption. Note I said “tools,” precisely because that’s all they are — tools to facilitate innovative or disruptive ideas.

And this technology era is now in its third retail iteration: first, its boost to efficiency and speed from factory floor to the warehouse; second, from the warehouse to the store; and, now, in its final iteration, with the smartphone as its accelerant. The Internet and technology are driving the part of the value chain that connects with the consumer with incredible, fundamentally game-changing and disruptive new ways that also empower them with unlimited and instantaneous access to whatever, wherever, whenever and however, their little hearts desire.

So, what are the three levels of disruptive intensity that are meant to “screw up” your business or market?

First is an incremental innovation, which some would argue is not really a disruption. Lululemon, Whole Foods, and Gilt Groupe, in my opinion, are incremental innovations. They are easily knocked off, which we have seen happening more than once. How long it takes to “copycat” the model varies. But while they are dominating the new space, they have first-mover pricing power, until of course, competition enters and that power gets leveled.

The second and third disruptive levels consist of fundamental innovations, either changing the game, or creating a whole new game. These disrupters are not easily copied. Starbuck’s changed the coffee shop model and consumers’ behavior along with it. Facebook created a whole new game, as did Twitter. Uber is changing the taxi model as Amazon changed the game of distribution. Since they are all ultimately able to be duplicated by other clever entrepreneurs, only time will tell if these icons will have the sustainable dominance to have created a whole new game in which new competitors may enter later, but will never share the number-one space.

Speed rules in this disruption game. Why do you think Jeff Bezos’ mantra from “Day One” as he called it, has been “get big fast,” and he has built on that mantra every year to get big faster. And we all know he has a complicit Wall Street behind him, willing to go along with his top line “get bigger faster” mantra at the expense of making nothing on the bottom line.

I believe a lot of the disrupters in tech world, many with truly unbelievable valuations, are benefiting from an Amazon-like growth strategy — to say nothing of round after round of insatiable funding. The challenges are enormous for last century’s business models to adopt and adapt technology and the Internet as tools to disrupt themselves to achieve the new century’s measures of success, all without Wall Street’s complicity.

However, if a business sees \”disruption\” coming their way, they can avoid being \”screwed up,\” or worse, decimated, by acting fast and embracing whatever the disruption is that’s headed for their space. Furthermore, in many cases, \”disruptees\” may very well gain a competitive advantage by adopting disruptive concepts that fit their models and leveraging these innovations to their already powerful brand and customer base. And watch out! They have the potential to turn around and disrupt the original disruptor. And so it goes in the never-ending spiral of disruptive innovation.

At the end of the day, if we are not creating new today, we will be gone tomorrow.

The “Great Disruption”

Finally, the “Great Disruption” is yet to come. At some point along the way, retail and wholesale models will cease to exist (along with their increasingly irrelevant terms), as technology will enable goods and services to be seamlessly and instantaneously transferred from creator to consumer. And in another wave of disruption, creator and consumer may just be the same person.

Related

Articles

Scroll to Top
the Daily Report

Insights + Interviews right to your inbox.