Disruption. Just the sheer word can cause a 62 year-old middle manager to shuttlecock himself through a plate glass window screaming about his compound growth rate and value-driven business model. By the way, if you want to have some real fun at a bar, do this anytime sometimes mentions Uber:
- Friend: “I’m calling an Uber.”
- You: “Disruption.” (said in Batman voice.)
Believe me, it’s more fun than you think.
The fact is, disruption is legitimate. There are certain industries that are somewhat protected against it, sure — like airlines, maybe. You can argue that Southwest “disrupted” airlines and maybe they did, but you can’t really “digitally scale” a person flying around the globe, so … it’s a little bit different.
You’ve got this paper from Cisco and IMD called “Digital Business Transformation” — in other words, disruption — and it’s arguing that 4–5 in 10 standard companies can be disrupted in the next decade.
There are a few issues with how we talk and think about disruption, though, so it’s time to get a little frank on the topic.
Disruption: Some facts
I mentioned some of these in a post I did on change management, so if you read that, apologies. Here’s a new article from Wharton connected to some of those same authors and thinkers. Right up top, they outline this:
- A decade ago, the five most valuable companies on the S&P 500 were: Exxon, GE, Microsoft, Gazprom, and Citigroup.
- Today, those five most valuable are: Apple, Alphabet/Google, Amazon, Microsoft, and Facebook
That’s a big shift — but kudos to Microsoft, eh?
Similar stat: 88% of the 1955 Fortune 500 companies no longer exist.
At this point, hopefully we’ve somewhat established that disruption is (a) real and (b) seemingly moving faster than before.
Disruption: The psychology
Now, though, you need to consider the mindset of guys (predominantly men) who run companies. It’s impossible to do anything except generalize here, because thousands of men run companies, and they’re all somewhat different. In general, though, research has shown us that people who rise to senior leadership roles tend to:
- Really fear incompetence (i.e. they’re human beings)
- Worry greatly about their relevance (again, most human beings)
At that intersection point, usually what happens is people cling to the things they know and understand. This makes you feel good/relevant, and it prevents feelings of incompetence. But when you cling to what you know/understand, well, you don’t let new ideas in. That’s why you leave your digital exposed, get blind-sided on customer experience by some startup out of a coffee shop, and start losing market share.
That right there is disruption. Disruption, you see, comes from psychology. Remember: work ain’t logical, it’s emotional.
Most executives, when confronted with the idea of disruption, pound their chests and talk about how they slayed it last quarter. That’s great. It’s also super myopic. Disruption might happen five quarters from now, or 15. I don’t know. Your industry is different than what I do. But if you focus on the stuff you know and understand, as most senior leaders do, well … disruption is coming. It’s just a question of when.
Disruption and business models, industries
I just want to shove an interesting point in here. Because of disruption + globalization + proliferation of digital tools, the whole idea of “industries” and “verticals” is pretty much meaningless now. For example, Apple’s most recent pickup probably means they’re headed towards being a health care company. They’re already 191 different types of company. Sure, you can call them “tech.” That’s fine. But most companies nowadays do five or six different things, so grouping companies by “industry” is f’n pointless.
Here’s a better concept:
Now of course, no long-held oil executive is about to say “I’m an asset builder.” He’s been saying “I’m an oil guy!” for 35 years. Change isn’t easy. We all know this. So will these terms seep into business vocabulary? Of course not — and plus, “network orchestrator” just sounds like a douchebag thing to say. But these terms are way more relevant now than “I’m a leader in so-and-so industry.”
Disruption and business journalism
Nothing makes a business journalist more excited than the opportunity to write about disruption. If you took every article written about Uber and Amazon (just those two) being disruptive in the past 5–10 years, you could probably cover the Earth in five layers of paper. While we’d all be suffocating on buzzwords, Bezos would probably make another $4B. He probably owns all the paper.
The fact is, most business journalism is bullshit. It speaks of disruption in 1 of 2 ways:
- “This is a great thing that we should embrace!”
- “If you don’t do this other thing that you’ve never cared about, you will be disrupted!”
The second bullet refers to stuff like “treating employees as more than pigs who drive a Saab to work.” Executives have never cared about people — it’s all product and process, baby! Print that cash! — but now there’s this line of thinking that “If you don’t care about people, you don’t get good people, and then disruption comes!”
Again, go back to the psychology above. Executives are most scared of disruption in the context of themselves. What happens if the business they built or guided over 20 years tanks? What’s the legacy now? They might have some kids, sure — and that’s great. But always remember: for many people who rise up in companies, the building of the company and the acquisition of the subsequent wealth was their basic definition of “fun.”
Can you stop disruption?
Sure. Some industries will naturally do that. Yay.
If your business model could be disrupted, though, there are two paths you can consider.
The common path is this:
- Constantly talk about how great you’re doing
- Throw a lot of no-context numbers in the face of people and journalists
- Talk vaguely about the future
- Maybe mention once or twice how great your culture is and how millennials are responding to it
Here’s the less common path, and maybe the better one:
- Look at your disruptive rivals
- See where their advantages are
- Squash those advantages with your resources
- Meanwhile think about how to organize teams and hierarchy so that decisions can be made faster and with better data
- Stop treating employees like garbage
- Understand that disruption comes as much from human psychology as from “product marketing mix”
That’s my two cents. What else would you add on disruption?
My name’s Ted Bauer. Here’s more about me.