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Surviving disruptive technology

As new technologies come along and threaten existing business models, those in leadership roles are often perplexed as to what actions they should take. One approach is to either ignore them or label them a fad and assume they will go away. Another is to assume a reordering of the business environment and that radical change is needed. Unfortunately, the correct response is often more nuanced. As a result, the business landscape is full of companies who have failed to react in time or have failed to understand that shifting an organization’s culture (e.g., social business) is not something that can be done overnight.

Most often the error lies in not realizing the full implications of a new technology on one’s core business and not acting quickly or decisively. When the Internet first become a major factor in business, Microsoft was slow to respond. Their business success was based on the very profitable Windows operating system and their Office Suite of products. Due to Microsoft’s agreements with hardware manufacturers, Windows was preinstalled on almost all PC’s and laptops, and Microsoft Office had become the standard for business. It was hard to see that this dominance could ever be disrupted. Yet, the World Wide Web, e-business, and open-sourcing did just that. Microsoft was simply not watching this space the way that they should have.

When the Internet first started to gain prominence outside of government and academia, it was still the realm of bulletin board users and computer geeks who knew Unix code and enjoyed being part of an exclusive “club”. It was only when the World Wide Web created a more visual and easier to use version of the Internet that the full potential of it as a business, commerce, and communications platform became apparent.

Microsoft failed to appreciate how the advances in the web were broadening its appeal. Most importantly, they failed to see that these shifts might lead to the proliferation of “dumb” terminals or devices, powered by Internet connectivity, which would reduce the need for Windows installations. This disruptive change would have severely damaged the company had Bill Gates not finally taken action.

In more recent times we have seen IBM struggling with cloud computing. Clearly, they were aware of it and had started down the path of a strategy to deal with it. But, in the beginning, cloud computing was not seen as attractive or as secure as on-premises computer installations. While not seen as a fad, its full potential as a disruptive force was not fully appreciated.

As with the Microsoft example, it is hard to see why IBM did not take more direct actions to deal with the changes that were occurring. But cloud computing was totally disruptive to IBM’s traditional business model of selling hardware, software, and services agreements. Accepting the possibility that this business model was under threat was apparently not something that IBM was fully prepared to do. And as revenue shortfalls started to appear, their approach was to cut investments in strategic intelligence.

When an organization has been successful, it is very had to believe that one needs to do things differently. Furthermore, those that have the most influence in the organization tend to run the parts of the business that are the most threatened by the changes afoot. Focusing on these new challenges would mean that they would have to allocate resources to more strategic initiatives and away from their core businesses. Simply put, for many business leaders, reprioritizing is not in their own self-interest. Thus, organizations fail to properly invest in the necessary market research, market intelligence, R&D, or strategy, and they keep on doing what they have done in the past.

Unfortunately, if we fail to learn the lessons of the past, we are doomed to repeat the same mistakes. Organizations need to ensure that they are not only aware of disruptive forces, but that they understand different scenarios and possible outcomes. Most importantly, business leaders must be willing to step up to the challenge, even if it means shortchanging some existing organizations to invest in the future.

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