Managing For Disruption
Tradition embraces stability. Time honored principles get that way because they have strong track records of success. The tried and true, extrapolated into the future, often looks like a sure thing, while deviating from historical norms can look downright foolish.
Yet the funny thing about the future is that there’s no guarantee that it will look like the past. Contexts change and when they do, old rules no longer apply. Following them blindly does not honor the past, but diminishes it by confusing fealty with wisdom.
Since 1960, the average lifespan of a company on the S&P 500 has fallen from more than 60 years to less than 20. The power of technology will increase as much in the next 18 months as it has in the last 30 years. Clearly, technology cycles have begun to outpace planning cycles. We need to learn to manage not for stability, but for disruption.
How Data Lies
In the old days, it paid to be data driven. You researched the market, developed insights and planned a strategy. It wasn’t enough to have an innovative idea, you had to show the numbers.
Unfortunately, the numbers were always wrong. Sometimes, they were off by a little, sometimes by a lot, but they were always wrong. They were backward looking and based on small samples. Even if they were prepared responsibly—often they were not—and statistically significant to 95% confidence, there was still ample room for error.
The new age of disruption requires a big data mindset, where we’re not trying to be right, but to become less wrong over time by collecting and analyzing real world information in real time and adjusting accordingly. Strategy also needs to take a more Bayesian approach, where “plan and execute” is replaced by execute, evaluate and revise.
Another promising approach is using big data to build simulations in an approach called agent based modeling. This differs from previous methods that optimized for one variable or another by taking into account the interactions among a variety of factors, which are then reconciled with real world data as it comes in. Accuracy is often as high as 90%.
Failing in the world of bits is far cheaper than failing in the world of atoms, so simulations allow us to test any number of “what if” scenarios before we invest in any particular approach.
Co-Opting Disruption Through Open Innovation
Big organizations generally don’t do disruption well. They tend towards stability because that’s what people want from them—good quality products and reliable service. You can count on established firms to give you what you want, when you want it, ship on time and be around tomorrow if a problem arises.
However, that creates a problem because as Rita Gunther McGrath writes in her new book, The End of Competitive Advantage, “Stability, not change, is the state that is most dangerous in highly competitive environments,” because it “allows for inertia and power to build up along the lines of an existing business model.”
One solution to this problem is open innovation. Businesses as varied as Microsoft, Nike and The New York Times have created accelerator programs to encourage young firms to build ecosystems around their products. There are also platforms such as Innocentive that help match problems within an organization to those without who can solve them.
We need to stop treating intellectual capital as if was just another asset class to be leveraged and start thinking of brands as open API’s that serve as platforms for collaboration.
Disrupting The Disruptors
Ten years ago Al Qaeda seemed like an unstoppable force. Yet, as political scientist Thomas Rid points out, there are now cracks in the jihad and not just because of western military actions, but also because rifts have broken out between global elements, local elements and factions who seek to profit off of criminal activity.
In a similar vein, the mobile Internet certainly disrupted Microsoft. Its share of the operating system market has fallen from 97% in 2000 to less than 20% today. The company’s answer has been to improve its mobile offering, but even more importantly to invest heavily in the cloud technology that will represent the next phase.
So rather than trying to follow faster, it’s sometimes better to think about where the choke points are going to be and get there first.
It’s Not The Nodes, But The Network
When a company’s human resource director would like to get a message out to the organization, she often asks the CEO to send out an e-mail because, after all, nobody has more authority than a CEO. Top executives are considered “opinion leaders” and “influentials.”
However, sometimes a smarter strategy is just to tell a smoker. Smokers tend to have a high degree of network centrality because when they go out for a puff, they socialize with a cross section of the entire organization. No other group of people can spread information as fast.
By following the same thinking, we can improve our organizational agility by networking the enterprise. Open office plans, training and best practice programs that bring people together from diverse parts of the company and encouraging people to work a varied geographical and functional positions all contribute to better informational connectivity.
At its core, disruption is an informational problem more than anything else. The answer to it isn’t trying to dig in to protect individual nodes, but to create a network that is at once more cohesive and expansive.