The New Rules Of Disruption
Business used to be simpler. If you came up with a good idea and served your customers well, your operation would grow. Increased scale would increase efficiency and competitiveness, creating a virtuous circle. Success would breed more success.
And that wasn’t just true of business, in the scale economy bigger was always better, whether the arena was commerce, politics or culture. Now, it seems that no one—no matter how big or powerful—is safe anymore.
The rules have changed. Technology has made it possible for small groups to connect and cascade into large movements that upend the existing order. Yet the situation is far from hopeless. There are the natural laws that govern networks of connections and, by applying them effectively, we can manage disruption instead of falling victim to it.
Focus On Passion
One popular disruption strategy in recent years has been to identify and recruit so-called “Influentials.” These people, sometimes divided into neat little classes like “mavens” and “connectors” are supposed to have amazing powers to initiate trends that the rest of us will follow. It would be nice if it were true, but seeking out Influentials is a waste of time.
It’s not that some people don’t have more influence than others, they surely do. However, their influence is a function of something else, such as position (like a head of state or a CEO) or celebrity (like Oprah Winfrey). So calling these people “Influentials” obscures more than it reveals.
The truth is that disruption is largely a function of group dynamics and has little to do with any mysterious powers. In effect, everyone is a potential influencer. So we’re much better off seeking out those who are likely to be receptive and passionate about our idea, rather than wasting time and effort seeking out mysterious “Influentials”.
Once we begin to gain traction among early adopters, we can build up critical mass and start convincing other, more resistant groups. That’s how disruption happens.
Build In And Then Build Out
In 2005, researchers decided to study why some Broadway plays are hits and others are flops. They looked at all the usual factors, such as production budget, marketing budget and the track record of the director, but what they found was that what was most important was structure of the relationships among the cast and crew.
If no one had ever worked together before, both financial and creative results tended to be poor. However, if the networks among the cast became too dense, performance also suffered. It was the teams that had elements of both—strong ties and new blood—that had the greatest success. Subsequent studies of the technology sector and the German automotive industry confirmed the findings.
The evidence is clear. If you want to innovate, you need coherent, close knit teams that work together well, but you have to be careful that they don’t become too isolated or creativity will suffer. You need both teamwork and interaction among disparate teams to make it all work.
Silicon Valley, the most disruptive place on earth, forms these networks naturally. People work in close teams, but jump from place to place, forming connections as they go. Corporate boards, on the other hand, tend to be too densely connected, resulting in groupthink that makes it difficult for large companies to adapt to disruptive changes.
When Edward Snowden revealed that the NSA was collecting all of the metadata from our phone calls, people were horrified. Were they listening in on our calls? Why do they need my data? What good could it do? The answer is far less nefarious than many suspect.
For years, the NSA has been using social network analysis to evaluate terrorist threats. They employed it after 9-11, which is how they were able to decipher the leadership structure of the terrorist network immediately after the attack. Now, they use it in real time and can see threats as they form.
Valdis Krebs, of Orgnet, who wrote a widely admired paper on the NSA methods, says that learning how to weaken terrorist organizations has opened up new approaches to strengthen businesses. His company consults for a variety of organizations—from Fortune 500 corporations to non-profits—and helps them improve their internal networks.
Social network analysis is being deployed in a variety of fields and will be immensely valuable in the business world, but for more than just heading off threats. By mapping connections, we can evaluate how people collaborate, what steps can be taken to improve information flow and how we can target consumers more effectively.
Networks Trump Hierarchies
When Alfred Sloan created the modern corporation at General Motors, he modeled it after military organization. Orders flowed downwards and your rank determined your responsibility. Everything was designed to create efficiency, not value.
Yet today, we are operating in a semantic economy, where everything is connected and what goes on inside your team—or even your enterprise—is dwarfed by what goes on outside. We can no longer pretend that our charts and diagrams amount to anything more than wish lists. In a connected world, things have a way of self organizing.
So in our new disruptive age we need to treat our organizations as networks and create links within and without the enterprise. This needs to permeate every aspect of how we manage, from how we design physical spaces to how we train and promote employees.
Open Up Your Platform
Bell Labs was one of the most innovative organizations ever, whose inventions from the transistor to information theory practically invented the digital age. So when it was spun out of AT&T in 1996 as Lucent Technologies, investors couldn’t wait to get in on the action. It had one of the hottest IPO’s ever and its stock soared for years after that.
Yet it soon became clear that all was not well. It’s chief competitor, Cisco, found a more successful approach. Rather than maintain a large R&D effort, it scanned the world for smart technology developed by other companies. Often, these were startups formed by engineers at companies like Lucent and Cisco would partner, invest or buy them outright.
Today, open innovation has become a key strategy for companies to expand their innovation networks. Industry giants team up with small companies and startups to create connections that go far behind their corporate campuses and R&D labs, while high energy upstarts are able to access experience and resources from large organizations.
And the open approach has relevance far beyond research and development, brands themselves are becoming open platforms. From Apple’s App store, which harnesses the power of thousands of developers, to American Express Open Forum, which has done the same for small businesses, connectivity creates competitiveness.
Stop Planning and Start Adapting
In the industrial age, change was slow and expensive. Supply chains were intricate and complicated, factories took months to retool and financing was difficult to attain. With such high barriers to new entrants, it shouldn’t be surprising that somewhere along the way planning became synonymous with strategy.
Yet in the age of disruption, planning is not as effective. Technology moves too fast, new connections form and lines between industries blur or disappear altogether. A new disruptive competitor can emerge with blazing speed. It’s not even a question of coming up with the right answers anymore, coming up with the right questions is hard enough.
The upshot is that we need to take a more Bayesian approach to strategy where we are no longer concerned with predicting the future and “being right,” but rather becoming less wrong over time. Stability and certainty have become dangerous pipe dreams, we need to react to an increasingly complex world in real time.
And so, the formula for disruption is not necessarily becoming smarter, but becoming more aware and creating organizations that can adapt in real time.