Harness disruption or become obsolete: Forrester
- 05 April, 2011 18:03
Five years ago, Nokia dominated the smartphone market.
How quickly things change. But before you sit back and think, ‘that won’t happen to me’, take a look at the competitive environment in which your company operates.
Daunting, isn’t it? Disruptive technology is changing the way we do business. It is perhaps the CIO's greatest challenge. And, according to Forrester vice-president and research director, Mark Mulligan, the opportunities lie not in the disruption itself, but in how you respond.
“Companies lose control of their customers when disruptive technology enables them to interact with their products and services on their terms,” he told CIOs at Forresters Empowered event in Sydney. “When this happens, revenues are threatened and companies — unless they harness this technology and develop new products and services — fail. It’s really quite simple.”
Mulligan calls this process disruptive renewal. And although it is often rapid, it doesn’t happen all at once. There are three key stages:
1. Disruptive empowerment
“This is what happens when your customers have technology that enables them to use products and services on their terms,” Mulligan said. “Think the rise of the internet, or home broadband, or smartphones and the iPad.”
2. Discontinuous change
By this stage, according to Mulligan, the new technology hasn’t just opened up new behaviour patterns, it has permanently, and irrevocably, changed the way in which customers interact and engage.
3. A choice
“Either companies harvest this disruption and learn how to build and use these new paradigms into their products and services or they fail and face terminal obsolescence”.
Mulligan argues the most important factor in consumer technology in 21st Century is connectivity. And he is quick to point out that dramatically disruptive technology hardly new; witness the rise of radio and television.
“We don't have an exclusive on rapid technological change,” he said.
The problem for organisations is that as technology improves, people expect more from their products and services, often for less money sometimes for nothing at all. And, in the age of disruptive renewal, the customer has control.
“Good enough is just not good enough anymore,” Mulligan said.
If companies fail to respond to disruptive change, the can quickly find their traditional cannibalised by non-traditional competitors. Mulligan cites the music industry, which over the years has spent the majority of its time and effort fighting online music technology instead of trying to harness it.
“In just 10 years the disruptive of ‘free’ shattered the revenues with disruptive change — because of their response.
“It's not the disruption that decides what happens to your company. It's how you respond to it.”
Most companies do not respond effectively enough or quickly enough to disruptive environments and discontinuous change. Forrester asked product strategist across around the world about the issue, and 92 per cent said they think disruption will seriously challenge their products.
Innovation — the disruptive strategy
So how can CIOs respond to disruption? According to Mulligan, the more consumer technology disrupts your business, the more you have to innovate.
“There comes a point in time when you return on investment in disruption diminishes,” he said, adding it’s important not to overreach.
“Pick your battles,” he said. “That might mean sitting out an entire release cycle.”
It is better to come to market with a killer product, rather than wasting valuable resources and brand equity on something that is inadequately developed.
“You also need to know which disruptions to harvest. How to distinguish the game changer from the over-hyped fad.”
To understand which disruptions matter, ask yourself these questions:
- Does it enable your customers to conveniently do more than your product enables?
- Does it enable your customers to use your products in way you don't support?
- Does it deliver a dramatically different experience?
- Does it embrace innovations that are not in your product road map?
They can help you on your way to building a disruption threat analysis.
“If it does any one of those things, it probably means you need to embrace it.” Mulligan said.
Driving transformative innovation
To drive transformative innovation and embrace disruptive influences you need to:
- Embrace new devices and connectivity.
- Make products agile, adaptable and accessible.
- Support and syncronise multiple customer experiences.
- Differentiate by user experience — not functionality.
- Change the way you innovate.
The last point is a key one. And Mulligan acknowledges not everybody has access to global R&D budgets and innovation labs.
“That's great if you can afford it but most of us can't,” he said. “But there are many affordable and increasingly effective alternatives.”
More dynamic, less structured. Take the premise that innovation will occur more effectively and at a better pace when employees and partners are given the platform with which to have a dialogue that is not dictated by normal commercial constraints.
And never forget your customers.
“Your customers are the biggest innovation lab of all,” he said. “Listen to your customers and empower your employees to create a dialogue that becomes a virtuous circle.”
It requires great individuals across the organisation and senior management who can act as a “change enabler”.
“Build disruption into your product DNA.”
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