A Blog by Jonathan Low

 

Apr 14, 2014

Managing for Disruption

The decline in the size of corporate planning staffs is often blamed on technology. There was a time when smart, eager go-getters with a purposeful air and a spring in their step were forever analyzing and assessing and projecting. There are still people who do that but there are fewer of them and technology is usually the presumptive cause.

Technology may be a factor, but not for the obvious reason most frequently cited, which is that devices have replaced humans. Everyone nods solemnly when they hear this and then shakes their heads at the wonder of it all, while hoping the lecture will end soon so next coffee break can begin. 

But the real reason for this change is more interesting and far more threatening: corporate strategic planning and marketing staffs have been supplanted because what they did or do is no longer meaningful. The confusion about sources and uses of technology is symptomatic of a much broader disconnect about change and its contemporary avatar, disruption.

Change is something that happens to you. Use of the word disruption implies that you - the individual and the organization - still have some influence, some leverage, some impact. That by employing the notion of disruption, you have demonstrated that you have gotten ahead of the curve. Some people use the word control, though the very idea that we humans control anything anymore when it comes to institutional matters is so poignant as to be heartbreaking, if it werent such manifest evidence of cluelessness. 

The challenge is that things are happening too fast, as the following article explains. Using brave words like disruption can be like our bipodal ancestors on the African savannah shaking rattles at the threatening sky. It may make us feel good, but it probably doesnt accomplish much.

Our world is defined by change and disruption but we too rarely make an effort to address the underlying organizational issues that can help us offset if not forestall the uncertain future. Enterprises arise and disappear, brands vanish, reputations shatter. But new ones emerge. We can learn from all of these events and apply that knowledge. But to do so we must accept that though we have a lot of the required information, it is the ability to interpret it and the courage to act on it effectively that we most often lack. JL

Greg Satell comments in Digital Tonto:

At its core, disruption is an informational problem more than anything else.
Tradition embraces stability.  Time honored principles get that way because they have strong track records of success.  The tried and true, extrapolated into the future, often looks like a sure thing, while deviating from historical norms can look downright foolish.
Yet the funny thing about the future is that there’s no guarantee that it will look like the past.  Contexts change and when they do, old rules no longer apply.  Following them blindly does not honor the past, but diminishes it by confusing fealty with wisdom.
Since 1960, the average lifespan of a company on the S&P 500 has fallen from more than 60 years to less than 20.  The power of technology will increase as much in the next 18 months as it has in the last 30 years.  Clearly, technology cycles have begun to outpace planning cycles.  We need to learn to manage not for stability, but for disruption.

How Data Lies

In the old days, it paid to be data driven.  You researched the market, developed insights and planned a strategy.  It wasn’t enough to have an innovative idea, you had to show the numbers.
Unfortunately, the numbers were always wrong.  Sometimes, they were off by a little, sometimes by a lot, but they were always wrong.  They were backward looking and based on small samples.  Even if they were prepared responsibly—often they were not—and statistically significant to 95% confidence, there was still ample room for error.
The new age of disruption requires a big data mindset, where we’re not trying to be right, but to become less wrong over time by collecting and analyzing real world information in real time and adjusting accordingly.  Strategy also needs to take a more Bayesian approach, where “plan and execute” is replaced by execute, evaluate and revise.
Another promising approach is using big data to build simulations in an approach called agent based modeling.  This differs from previous methods that optimized for one variable or another by taking into account the interactions among a variety of factors, which are then reconciled with real world data as it comes in.  Accuracy is often as high as 90%.
Failing in the world of bits is far cheaper than failing in the world of atoms, so simulations allow us to test any number of “what if” scenarios before we invest in any particular approach.

Co-Opting Disruption Through Open Innovation

Big organizations generally don’t do disruption well.  They tend towards stability because that’s what people want from them—good quality products and reliable service.  You can count on established firms to give you what you want, when you want it, ship on time and be around tomorrow if a problem arises.
However, that creates a problem because as Rita Gunther McGrath writes in her new book, The End of Competitive Advantage, “Stability, not change, is the state that is most dangerous in highly competitive environments,” because it “allows for inertia and power to build up along the lines of an existing business model.”
One solution to this problem is open innovation.  Businesses as varied as Microsoft, Nike and The New York Times have created accelerator programs to encourage young firms to build ecosystems around their products.  There are also platforms such as Innocentive that help match problems within an organization to those without who can solve them.
We need to stop treating intellectual capital as if was just another asset class to be leveraged and start thinking of brands as open API’s that serve as platforms for collaboration.

Disrupting The Disruptors

One overlooked aspect of disruption is that disruptors themselves are not immune.  As Moisés Naím writes in his book The End of Power, “Power is easier to get, but harder to use or keep.”
Ten years ago Al Qaeda seemed like an unstoppable force.  Yet, as political scientist Thomas Rid points out, there are now cracks in the jihad and not just because of western military actions, but also because rifts have broken out between global elements, local elements and factions who seek to profit off of criminal activity.
In a similar vein, the mobile Internet certainly disrupted Microsoft.  Its share of the operating system market has fallen from 97% in 2000 to less than 20% today.  The company’s answer has been to improve its mobile offering, but even more importantly to invest heavily in the cloud technology that will represent the next phase.
So rather than trying to follow faster, it’s sometimes better to think about where the choke points are going to be and get there first.

It’s Not The Nodes, But The Network

When a company’s human resource director would like to get a message out to the organization, she often asks the CEO to send out an e-mail because, after all, nobody has more authority than a CEO.  Top executives are considered “opinion leaders” and “influentials.”
However, sometimes a smarter strategy is just to tell a smoker.  Smokers tend to have a high degree of network centrality because when they go out for a puff, they socialize with a cross section of the entire organization.  No other group of people can spread information as fast.
By following the same thinking, we can improve our organizational agility by networking the enterprise.  Open office plans, training and best practice programs that bring people together from diverse parts of the company and encouraging people to work a varied geographical and functional positions all contribute to better informational connectivity.
At its core, disruption is an informational problem more than anything else.  The answer to it isn’t trying to dig in to protect individual nodes, but to create a network that is at once more cohesive and expansive.

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