Much fanfare has been paid to the term “disruptive innovation” over the past few years. Professor Clayton M. Christensen has even re-entered the fold clarifying what he means when he uses the term. Despite the many differences in application, most people agree on the following. Disruptive innovations are:

Cheaper (from a customer perspective)

More accessible (from a usability or distribution perspective)

And use a business model with structural cost advantages (relative to existing solutions)

The reason these characteristics of disruption are important are that when all three are present, it’s difficult for an existing business to respond to competition. Whether a company is saddled with fixed infrastructure, highly trained specialist employees, or an outmoded distribution system, quickly adapting to new environments is challenging when one or all of those things becomes obsolete. Firing hundreds of employees, upsetting your core business’ distribution partners, writing off billions of dollars of investment — these things are difficult for managers to even contemplate, and with good reason.

Historically, the place we’ve looked for hints of oncoming disruptions has been in the low end of the market. Because disruptive products were cheaper, more accessible, and built on new technology architectures, they tended to be crummier than the existing highest-end solutions. Their cost advantage allowed them to reach customers who’d been priced out of an existing market; Apple originally made a computer that was cheap enough for students to learn on, a population that wouldn’t have dreamt of purchasing a DEC minicomputer. Sony famously made the transistor-based television popular based on its “portability.” No one knew that you could reasonably do that prior to the transistor. New technologies, combined with business model innovation, provide the structural cost advantage necessary to take large chunks of the market over time.

But if you return to the definition above, the fact that low-end entry was typical of a disruptive approach was was never core to the phenomenon. Instead, it was a byproduct. Why? Because any new entrant is hard pressed to deliver superior value to a mature market, where products have been refined over decades.

But although the low-end approach was pretty common, it wasn’t what was holding incumbent firms captive. It was their own cost structures and their focus on driving marginal profit increases that kept those companies headed down the wrong paths. As long making the right decision on a short-term basis (trying to drive more value out of outdated infrastructure) is the wrong decision on a long-term basis (failing to adopt new technology platforms), CEOs are destined to struggle.

Unfortunately, the focus on the low-end approach of disruption is actually clouding our ability to spot the things that are: cheaper, more accessible, and built on an advantaged cost structure. Specifically, it appears that data-enabled disruptors often confound industry pundits. To get a sense for the point, just look to a few highly contested examples.

Is Uber disruptive? The wrong answer would be to say, “No, because their first product started in the high end of the market.” The right answer would be to acknowledge that the platform they ultimately launched allowed them to add lower cost drivers (in the form of UberX) and offer cheaper, more accessible, transportation options with a structural cost advantage to both taxi services and potentially even car ownership. The convenience of the app is only the most obvious, and easiest to copy, factor.

Were Google’s Android phones disruptive to Nokia? The wrong answer would be to say “No, because the initial smartphones they launched were superior in feature quality to Nokia’s own phones that dominated the global landscape.” The right answer would be to acknowledge that the approach of creating an ecosystem of application development atop its platform allowed them to build far more comprehensive solutions, that were (on the whole) cheaper, more accessible, and structurally cost advantaged over Nokia.

Is 23andMe potentially disruptive to pharmaceutical companies? The wrong answer would be to say, “No, because they compete in completely different verticals.” One in ancestry and the other in drug development. The right answer would be to acknowledge that 23andMe has a vast amount of data that could enable them to start developing drugs in a cheaper, more accessible, and structurally advantaged model.

In every one of these examples, the ultimate end is disruption. In every one of these examples, incumbent managers have a short term incentive to ignore the challenge — making best use of their existing infrastructure. Taxi companies tried to leverage regulation to preserve the value of their medallions and drivers. Nokia tried frivolously to protect its closed ecosystem and preserve employment for their thousands of Symbian focused staff members. And you can be certain that Merck, Pfizer, and Roche have strong incentives to make the best use of their high-end R&D functions before embracing the radically different path that 23andMe might take.

And over the long term, each of these short-term decisions could lead to failure.

The conversation misses that something new is going on in the world of innovation. With information at the core of most modern disruptions, there are new opportunities to attack industries from different angles. Uber built a platform in a fragmented limo market that let it come into transportation and logistics more broadly. Netflix captured your eyeballs through streaming video and used the data it had to blow up the content production process. Google mapped the world, and then took its understanding of traffic patterns and street layouts to build autonomous cars.

There is no doubt that disruption is underway here. These players create products that are cheaper and more accessible than their peers. But it’s not necessarily starting at the low end of the market, it’s coming from orthogonal industries with strong information synergy. It’s starting where the source of data is, then building the information enabled system to attack an incumbent industry.

It’s time for executives, entrepreneurs, and innovators stop quibbling over whether something satisfies the traditional path of disruption. Data-enabled disruption may represent an anomaly to the existing theory, but it’s here — and it’s here to stay. The waste laid to the taxi industry by Uber is example that the new solution had extraordinary cost advantages and that they couldn’t respond. The new questions should be:

• “How can you adapt in the face of this new type of competition?”
• “How do you evaluate new threats?”
• “What capabilities do you need and where do you get them, when data is a critical piece of any new disruption?”

To succeed in this new environment, threatened businesses need a thoughtful approach to identifying potential threats combined with the will to make the right long-term investments — despite short-term profit incentives.

Source: Harvard Business review

Data is at the very core of the business models of the future – and this means wrenching change for some organizations.

We tend to think of our information systems as a foundation layer that support the “real” business of the organization – for example, by providing the information executives need to steer the business and make the right decisions.

But information is rapidly becoming much more than that: it’s turning into an essential component of the products and services we sell.

Information-augmented products

In an age of social media transparency, products “speak for themselves”– if you have a great product, your customers will tell their friends. If you have a terrible product, they’ll tell the world. Your marketing and sales teams have less room for maneuver, because prospects can easily ask existing customers if your product lives up to the promises.

And customer expectations have risen. We all now expect to be treated as VIPs, with a “luxury” experience. When we make a purchase, we expect to be recognized. We expect our suppliers to know what we’ve bought in the past. And we expect personalized product recommendations, based on our profile, the purchases of other people like us, and the overall context of what’s happening right now.

This type of customer experience doesn’t just require information systems; the information is an element of the experience itself, part of what we’re purchasing, and what differentiates products and services in the market.

New ways of selling

New technologies like 3D printing and the internet of things are allowing companies to rethink existing products.

Products can be more easily customized and personalized for every customer. Pricing can be more variable to address new customer niches. And products can be turned into services, with customers paying on a per-usage basis.

Again, information isn’t just supporting the manufacturing and sale of the product – it’s part of what makes it a “product” in the first place.

Information as a product

In many industries, the information collected by business is now more valuable than the products being sold – indeed, it’s the foundation for most of the free consumer internet. Traditional industries are now realizing that the data stored in their systems, once suitably augmented or anonymized, can be sold directly. See this article on the Digitalist magazine, The Hidden Treasure Inside Your Business, for more information about the four main information business models.

A culture change for “traditional IT”

Traditional IT systems were about efficiency, effectiveness, and integrity. These new context-based experiences and more sophisticated products use information to generate growth, innovation, and market differentiation. But these changes lead to a difficult cultural challenge inside the organization.

Today’s customer-facing business and product teams don’t just need reliable information infrastructures. They need to be able to experiment, using information to test new product options and ways of selling. This requires not only much more flexibility and agility than in the past, but also new ways of working, new forms of IT organization, and new sharing of responsibilities.

The majority of today’s CIOs grew up in an era of “IT industrialization,” with the implementation of company-wide ERP systems. But what made them successful in the past won’t necessarily help them win in the new digital era.

Gartner believes that the role of the “CIO” has already split into two distinct functions: Chief Infrastructure Officers whose job is to “keep the lights on”; and Chief Innovation Offers, who collaborate closely with the business to build the business models of the future.

IT has to help lead

Today’s business leaders know that digital is the future, but typically only have a hazy idea of the possibilities. They know technology is important, but often don’t have a concrete plan for moving forward: 90% of CEOs believe the digital economy will have a major impact on their industry. But only 25% have a plan in place, and less than 15% are funding and executing a digital transformation plan.

Business people want help from IT to explain what’s possible. Today, only 7% of executives say that IT leads their organization’s attempts to identify opportunities to innovate, 35% believe that it should. After decades of complaints from CIOs that businesses aren’t being strategic enough about technology, this is a fantastic new opportunity.

Design Thinking and prototyping

Today’s CIOs have to step up to digital innovation. The problem is that it can be very hard to understand — history is packed with examples of business leaders that just didn’t “get” the new big thing.  Instead of vague notions of “disruption,” IT can help by explaining to business people how to add information into a company’s future product experiences.

The best way to do this is through methodologies such as Design Thinking, and agile prototyping using technologies should as Build.me, a cloud platform that allows pioneers to create and test the viability of new applications with staff and customers long before any actual coding.

Conclusion

The bottom line is that digital innovation is less about the technology, and more about the transformation — but IT has an essential role to play in demonstrating what’s possible, and needs to step up to new leadership roles.

Source: timoelliot.com, November 14, 2016

Hammer, market intelligence organiseerde een discussie event over Disruptive Intelligence. BI-kring was erbij. Eén van de vragen was: als je disrupties tijdig kunt waarnemen, kun je die inzichten dan ook gebruiken om zelf disrupties voort te brengen? De aanwezigen discussieerden onder ander over dit thema en de conclusie was een optimistische: Market intelligence kan worden ingericht om disrupties tijdig waar te nemen en om ze voort te brengen. Om disrupties te herkennen is de primaire vraag natuurlijk: wat zijn disruptieve innovaties?

Disruptieve innovaties

Wat zijn disruptive innovations eigenlijk? Waarom moet je daar als organisatie informatie over verzamelen? Disruptive innovations zijn innovaties die een hele markt kunnen transformeren. Volgens de bedenker van de term (Clayton Christensen) gaat het om:

“Innovations that transform a whole business into one with products that are more affordable and convenient”

Voorbeelden zijn pc’s (die de mainframe business totaal veranderde); Amazon (boeken), en meer recent betaal-tv zoals Netflix of HBO waardoor de DVD-markt instortte. 

Uit onderzoek blijkt dat disruptive innovations een kenmerkend verloop hebben. Ze beginnen vaak als ‘inferieur’product dat slechter presteert op de ‘kern’eigenschappen dan de dominante producten in die markt. Echter, ze zijn wel goedkoper en hebben vaak andere eigenschappen die de gangbare producten niet hebben. De producten zijn daarom aantrekkelijk voor de onderkant van de markt of voor een deel van de markt dat die extra eigenschappen waardeert. Langzaam worden de inferieure producten ook beter op de oude  kerneigenschappen en worden ze aantrekkelijk voor de rest van de markt. En voor je het weet hebben ze de oorspronkelijke producten van de markt verdrongen. 

Volgens veel auteurs is geen enkele markt immuun voor zulke innovaties. En daarom is het goed om te weten wat disruptive innovations precies zijn en welke eigenschappen ze hebben. Die kennis kun je gebruiken om ‘disruptive intelligence’ te vergaren. Dat wil zeggen: informatie die aangeeft of disruptive innovations de markt bedreigen en je kan helpen je ertegen te wapenen. Of informatie die je helpt om te onderzoeken of de markt rijp is voor het zelf lanceren van zo’n innovatie.

Disruptive innovations leiden tot producten en diensten die goedkoper en beter toegankelijk zijn. ‘Beter toegankelijk’betekent: 

1. makkelijker (met minder moeite) bereikbaar (bv. zorg zonder wachttijden; aanschaf/gebruik via internet) 

2. met minder kennis aan te schaffen / te gebruiken (bv. online beleggen) 

3. gemakkelijker te produceren (bv. gestandaardiseerde oogoperaties) 

Herkennen van disrupties

Het proces waarmee een disruptive innovation een business overhoop gooit kent een patroon, hieronder beschreven in de volgende 5 processtappen: 

1. Ze ontstaan in een markt waarin producten/diensten een reeks ‘sustaining innovations’kennen. Een sustaining innovatie is een verbetering van een bestaand product door functionaliteiten toe te voegen of door het belangrijkste kenmerk van het product te verbeteren (Bv. betere dvd’s – blue ray, verhoogde opslagcapaciteit; of plattere TV’s; nog snellere auto’s met meer gadgets). Sustaining innovaties leiden tot ‘betere’producten – en daarmee tot duurdere producten met vaak extra mogelijkheden.

2. In zo’n markt wordt een deel van de klanten vaak ‘overserved’– ze krijgen producten die dingen kunnen die ze niet echt nodig hebben of willen (denk aan het aantal ongebruikte extra’s op mobiele telefoons).

3. In deze markt kan een disruptive innovation worden geïntroduceerd. Die is vaak minder goeddan de bestaande producten. Toch hebben ze eigenschappen die interessant zijn voor het onderste marktsegment – het segment dat het meest ‘overserved’is. Ze kunnen zelfs eigenschappen hebben die interessant zijn voor non-consumers. Bv. de eerste transistor radio’s hadden een veel mindere geluidskwaliteit dan de bestaande radio’s, maar ze waren draagbaar – een eigenschap die ze ondanks het slechtere geluid gewild maakten.

4. In de loop van de tijd wordt de disruptive innovation beter en wordt ook interessant voor andere marktsegmenten. De eerste pc’s hadden bijvoorbeeld maar een fractie van de rekenkracht van mainframes. Echter – door verbeteringen in (micro)technologie werd dat erg snel ingehaald.  

5. Zodra een disruptive innovation aantrekkelijker wordt voor een groter marktsegment volgt snel de neergang van de bestaande producten.

Disruptive innovations kennen drie zogenaamde ‘drivers’

1.Een technologische innovatie (die kan worden gebruikt om producten of diensten goedkoper of toegankelijker te maken)

2.Een ‘value network’(van partijen in de commerciële omgeving die nodig zijn om de nieuwe disruptive innovation te produceren en aan de man te brengen, bv. leveranciers, verkoopkanalen, onderhouds- en servicepunten). 

3.Een business model (dit geeft aan: (1) een value-proposition, (2) de aard van de processen waarmee producten of diensten tot stand komen, (3) human (en andere) resources die nodig zijn voor het voorbrengen van diensten of producten, en (4) een verdienmodel (dit verwijst naar high/low cost/volume en naar de manier hoe prijzen worden bepaald – fixed price, fee-for-service of abonnement.

Belang Disruptive Intelligence" 

Kennis van disruptive innovations kan helpen om strategisch relevante informatie te vergaren. Informatie die helpt bij het herkennen van markt-disruptie signalen en informatie die helpt bij het lanceren van een disruptie. 

Bron: Hammer, market intelligence

www.hammer-intel.com