Adapt to thrive: How businesses create and respond to disruption
PremiumEven established companies and conglomerates can use disruptive innovation for value generation
It’s been a quarter of a century since academics, business writers and assorted analysts and experts began talking about disruptive innovation. Now a catch-all phrase to describe a vast variety of phenomena — from technological developments to counterintuitive business plans to the spectacular rise of start-ups to any change, however minute, to the established order — ‘disruptive innovation’ appears to mean anything a business or marketing executive chooses it to mean.
That said, how we use terms, is important. And ‘disruptive innovation’ has, in popular usage, come to express the basic truth that it is important to be aware of, and to adapt to new ways of thinking and executing within your industry. Large conglomerates are traditionally not considered as likely disruptors, though such companies are often ripe for being disrupted.
A couple of years ago, giving the keynote address at the HPE Discover conference, the venture capitalist John Chambers, best known as the former chief executive of Cisco, said that “40% to 50% of the Fortune 500 will not exist in a decade." Referring to the Covid-19 pandemic, he added, that it was “going to be a brutal change and these terrible events we’re now seeing will actually accelerate that. Probably 60% of the startups won’t exist in a decade and several of them won’t exist in two to three years. So, it’s a period where you either disrupt or you get disrupted."
You could argue that it is in Chambers’ interests as a venture capitalist to sound the bell for wholesale change and disruption, for the replacement of the established by the new. However, he makes an important point – how committed can, or should, an established company, a market leader even, be to change? When do you reassess a winning formula?
I believe the answer is that you reassess a winning formula when you’re at your peak as a business, just before complacency and self-congratulation creeps into your operations. The answer is for large, even huge, traditional businesses is to consciously create room for innovation and change. To ensure that there is a safe, protected space within organizations to explore ideas, ask difficult questions, consider wholesale structural and philosophical questions, and make extended criticisms. It is essential, as a business, to be able to introspect and interrogate yourself in order to anticipate disruption. If, as a business, you can get ahead of disruptions to your own model, you also then have the tools to make connections others won’t see and move into adjacent areas to expand, as a business.
One of the advantages for diversified conglomerates, with companies across industries, is that there is no time to rest on one’s laurels. One is always competing and seeking new ways to compete. As such, disruption can become an effective business model for even established companies i.e., if disruption is defined as spotting gaps, spotting inefficiencies, spotting opportunities to provide services at more competitive prices, and ways in which to directly reach customers and cut out the middleman.
Disruptive innovation, however, should not refer only, and narrowly, to business processes. In the early years of the twentieth century, the modernists followed the poet Ezra Pound’s famous directive to “make it new", seeking to disrupt and upturn artistic and literary convention, to reflect new industrial technologies in new forms of cultural expression. ‘Make it new’ is a cry for revolution, for change — let’s upturn the old way of doing things in favor of a bolder, more decisive, more inclusive approach.
Such change can also come from the establishment. In India, for instance, the government has struck a chord with its evocation of a ‘new’ nation, a new national spirit, and the exhortation to ‘Make in India’. A key aspect of this ‘new India’ is a focus on economic development through the building of long-neglected infrastructure, including digital infrastructure. This is positive disruption as led by the establishment of the day.
For instance, how can we use Artificial Intelligence (AI), not to mention cognitive computing and cognitive analytics, to transform the governance of healthcare, say, or education? A recent Deloitte study broke down AI applications into three areas, key among which are the “insight applications" of AI, the ways in which algorithms, data and machine learning can be used to shape company policy. We have access to more information than we have ever had. The question that must keep us on our toes is how we use that information. The transformation, in a decade or so, of social media from a panacea for global communication to a harbinger of even fake news and manipulation is evidence enough that the effects of disruptive forces can be as negative as, they are positive.
Forward-thinking businesses are asking how social media platforms and communications technology can be used to foster collaboration. For instance, can corporations use their resources and logistical sophistication to aid social enterprise? Can progressive platforms be created that fund and connect entrepreneurs with a social conscience? Rather than think of disruptive innovation only in terms of business theory, we should apply the concept to social upliftment. What, for instance, can be more disruptive, in a positive sense, than visionaries who utilize technology to benefit underserved, isolated populations? That said, the use of the word ‘visionary’ may also be out of step in this age of collaboration. It is not just the individual who is credited with disruptions and innovations but an entire start-up culture of teamwork, knowledge sharing and open-source partnerships.
The great contemporary disruption that Indian businesses are vying with each other to initiate, is the introduction and widespread application of green technologies and energy. Investing in hydrogen fuel cells or solar power generation and distribution and grid capacity, for instance, is a deliberate disruption of our reliance as a nation, on fossil fuels. If it damages the way we do things now, it is in the service of creating a better, greener path ahead — a future in which India can be net energy exporter rather than importer and vulnerable to global price fluctuations and geopolitical crises.
Positive disruption is the harnessing of big data, technological innovations, and new ideas to shock systems into making radical changes, into laying the ground for human progress. What else could be the point? For businesses to more efficiently turn a profit? Surely the latter is too limited an objective. The impact of disruption is felt not by businesses — whether they fall by the wayside or not — but by people. Disruptive innovation is not just about ‘designing’ a custom experience for a new kind of consumer, a digital native pandered to and mesmerized by the almighty algorithm. Disruption should have a positive effect on society, should be a catalyst, a means towards the goal of national development and progress.
If the message of disruption theory is simply ‘out with the old and in with the new’ than it is a banality. What is more exciting and arguably more important is how a business — or let’s think bigger, a whole nation — responds to disruption. We cannot be defensive. Disruption is an invitation to rethink, to reimagine, to reengage, to refresh and create anew. This approach requires openness, agility and considerable courage. Disruption is not about reveling in chaos or in the revolutionary thrill of destroying the establishment; it should be about seeking to progress and improve; it should be a rejection of complacency.
Disruptive innovation has generally been thought of in terms of technology and the survival of businesses. We should start thinking of it in terms of people and progress. Of course, the pandemic and later the so-called ‘Great Resignation’ have been an extraordinary disruption to the way business has always been done. Companies now must find new ways to accommodate the desires of employees to more effectively combine their work lives with their personal aspirations. As hybrid work models become inevitable, and employees spend more time on their own, away from physical interactions with their teams, the office space will have to be reimagined.
We have already been moving towards flatter structures, more flexible hierarchies but I believe even traditional Indian big businesses will have to accelerate this process. The typical Indian workplace already has teams that span several generations. As our population skews younger, I believe we will have to abandon hierarchies. Office spaces will need to be redesigned as spaces for teamwork and collaboration — no more knocking on the boss’s door! Digital natives will, rightly, feel that they have much to say in a knowledge-intensive, innovation-intensive economy and that they need their voices heard quickly and without ceremony.
Advanced and advancing digital technologies, combined with India’s changing dynamics and demographics, means that we live in interesting and profoundly disruptive times. We need to be able to roll with the changes, take advantage of them so that India is a position to reap the economic rewards of both the green revolution and the fourth industrial revolution.
Karan Adani is CEO, Adani Ports & SEZ Ltd