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Industry Disruptions Proceed At Their Own Pace

The digital camera was invented in 1975, but it wasn’t until 2012 that Kodak officially went bankrupt. The Apple I was introduced in 1976, but it wasn’t until 1998 that Compaq’s acquisition of Digital Equipment Corporation signalled the end of the minicomputer era. The MP3 file format was agreed to in 1993, but it wasn’t until 2006 that Tower Records closed its doors. Time-sharing computers were developed in the late 1950s, but didn’t become the dominant form of computing until the rise of Amazon AWS, launched in 2006.

Industry Disruptions

The speed of disruption varies widely, but it is rarely sudden.

The speed of disruption varies widely, but it is rarely sudden.

We are often told that technology change now happens much faster than in the past, but this isn’t really true. The time it takes for a new technology to be adopted by 50 percent of US households has long been used as the basis for objective comparisons. Using this metric, it is generally agreed that both radio (eight years) and black-and-white television (nine) reached the 50 percent threshold much faster than personal computers (17) or mobile phones (15). Half of US households have had internet access since roughly 2002, so depending upon when you consider the internet to have been developed (a case can be made for the 1970s, 1980s or 1990s), you can get almost any number you like.

What about the extraordinarily rapid growth of Facebook, Twitter, Netflix, Uber, Airbnb et al? Economists rightly put these internet-based services in a separate category. They are more akin to TV shows, movies, songs or software application programs, which have often achieved widespread acceptance similarly fast (or faster) in the past. For example, in the late 1940s, the Milton Berle Show went from zero to roughly 80 percent of the available US TV audience in just a few years.

One of the reasons incumbent firms usually struggle to respond to new technology business models is that the pace of disruption is both slow and unpredictable. As first suggested by Clayton Christensen, disruptive changes typically go through three distinct phases. First they are seen as Toys, with many real deficiencies; then they become a Threat that somehow needs to be countered; then finally they are acknowledged as the Obvious solution. But since the Toy phase can last for many years, only those firms that are deeply committed or have fortuitous timing tend to succeed with the new model. Most established companies decide to wait until the Threat phase is clear, but by then of course it is typically too late.

Most established companies decide to wait until the Threat phase is clear, but by then of course it is typically too late.

Thus historically, the long but unpredictable length of the Toy phase has presented the most difficult strategic challenge, and this remains true today. The list of potential disruptions that are still in the Toy phase is long and growing – Bitcoin, MOOCs, the quantified self, 3D printing, wearable technologies, Google glass, self-driving cars, home robotics, drone-based deliveries, personalized medicine and more. The venture capital community will continue to fund new firms seeking to get past the Toy phase, while most incumbents will continue to watch from the sidelines. This makes future Kodaks, Digital Equipments and Tower Records all but inevitable.

This perspective helps us identify the most useful research focus. How can we help clients anticipate when technologies are about to move beyond the Toy phase? This will be a major goal of our research in 2015, and we look forward to working with those firms who wish to better understand the disruptive scenarios faced by their industries.

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AUTHORS

David Moschella
Research Fellow
David Moschella, based in the United States, is a Research Fellow for Leading Edge Forum.  David's focus is on industry disruptions, machine intelligence and related business model strategies.  He is the project lead for our 2017 research into Disrupting ‘The Professions’ – Scenarios for Human and Machine Expertise. David was previously Research Director of the programme. David’s key areas of expertise include globalization, industry restructuring, disruptive technologies, and the co-evolution of business and IT.  David is the author of multiple research reports.  His most recently published reports include Embracing 'the Matrix' and the Machine Intelligence Era (March 2016) and The Myths and Realities of Digital Disruption (September 2015). An author and columnist, David’s second book, Customer-Driven IT, How Users Are Shaping Technology Industry Growth, was published in 2003 by Harvard Business School Press.  The book predicted the shift from a supplier-driven to today’s customer-led IT environment.  His 1997 book, Waves of Power, assessed global competition within the IT supplier community.  He has written some 200 columns for Computerworld, the IT Industry’s leading publication on Enterprise IT, and has presented at countless industry events all around the world. David previously spent 15 years with International Data Corporation, where he was IDC’s main spokesperson on global IT industry trends and was responsible for its worldwide technology, industry and market forecasts.    

CATEGORIES

21st Century
Adaptive Execution
Assets/Capabilities
Identity/Strategy
Proactive, Haptic Sensing
Reimagining the Portfolio
Value Centric Leadership

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