This is a phrase I have heard in many leadership discussions over the past year. In some quarters, it was in fact incredibly tough for many leadership teams and one can but only reach out and appreciate the tremendous strain that their organisations have had to endure – from keeping their people safe, to resuming operations amidst supply chains under strain, to new waves of uncertainly reaching their shores. It can get rather exhausting.
However, let us not celebrate the enduring of tough times…not yet, at least. This is because the one thing worse than enduring is misinterpreting. You see, a tough environment triggers our defence mechanisms – we often defend the current core business, diverting more resources back to the core and shore up our lines of defence in the hope that they would stand up to future developments. Much like a body feeling injured, blood is rushed to essential organs, decision-making spans shorten and all we want to do is endure…well, a really tough environment.
But what if we are misreading the signals? What if what we see as an onslaught on the current – to be defended, is in fact the signs of disruption, the onset of a new economic model and the transfer of power from incumbents to the newcomers? The more we defend, justify the current industry order, shore up our reserves, the less orthodox is their response. While we defend, they take up new positions, test new ‘weapons’ (aka routes to market) and learn of the gaps in our defences.
Seeing a tough environment for what is true disruption in the making can have far reaching consequences. As the late Clay Christensen pointed out as far back as 1995, different types of innovation require different strategic approaches.
Let’s set some definitions first. Disruption is a process and an outcome. We acknowledge it when the challenge of incumbents by smaller firms with fewer resources is ultimately successful. However, the process of disruption is less well understood. While good fortune may play a role, at its core, disruption is fuelled by a changing in technology, often far away from the industry in question and shifts in the underlying economics of an industry sector, a geography or knowledge domain. Smaller and more nimble players begin by successfully targeting often overlooked segments, gaining a foothold by delivering more-suitable functionality, frequently at a lower price., and over time they move up the value curve. Disruption can also take a different path, as newcomers gain a foothold by creating a market where none existed. They turn non-consumers into consumers. Lastly, disruption could result from value innovation, as firms find ways to upset the value/cost equation which customers have been made to accept as reality in the sector. Either way, the response from incumbents is often muted at first, then increasingly defensive. Incumbents can read the signals of disruption as point to an increasingly tough environment.
From many studies, we know that innovation occurs at the edges of a system, and so defending what is being disrupted, however well intentioned, can be devoid of new and creative actions. The signals which triggered innovation in the first place are drowned by the noise of a defensive response and what began as an irritation for most incumbents suddenly appears rather close to home.
This turn of events, which is playing out in one industry after another, is also avoidable. Instead of celebrating the enduring of a tough year, celebrate the novel ways in which our defences held. Instead of measuring how many resources are invested in shoring-up the current core, let’s rather look at the metrics of innovation and ask – how can we do better? And rather than responding to what is currently posing as a threat, what if we ask – how would we play if we were not at the centre of the ecosystem? What would we discover about ourselves, as we regain our agility, our youth and learn with the same vigour as these smaller, more disruptive players seem to exhibit?
Disruption, however unpredictable, uncomfortable, even unwelcome it may be, is a teacher. It shows us the way to regain our youth and creative abilities. Let’s not celebrate toughness but rediscover our innovative core.
Have a good weekend everyone!