An interview with Louis Geeringh (topic: disruption in business)
Disruption in business is a key driver of sustainable growth – for a company who capitalises on the disruptive opportunity, or for a new market entrant who causes disruption. But often we read about the “fear of disruption”…
What exactly is the fear of disruption?
The question is an oxymoron, or a Janus word because it is two diametrically opposed meanings of the same concept (a Janus word is named after the Roman god Janus, who had two faces that looked in opposite directions – one looking to the future and the other to the past).
If companies feared disruption, they would actually do something about it – like prepare not to be disrupted. My experience is that very few companies actually fear disruption, because they believe their core business (or what they have defined as core business), will last forever and that they will have ample time to move with the times.
I remember advising a major physical retailer of CDs, DVDs and games in the US on this. The CEO and board just could not comprehend that digital downloads would obliviate the need for people to walk around in malls, browse in their isles and then buy their product. This story has an interesting twist in the tail which I can share on the day.
If companies really feared disruption, we would not have seen the accelerated demise of Fortune 500 companies. 88% of the 1955 list has disappeared. Company longevity has decreased from 33 years in 1964 to a forecasted 12 years in 2027. It is an accelerating downward trend.
Why do companies have a fear of disruption in business and how does this relate to corporate innovation?
Companies fear that they will be disrupted or shown up in the market by competitors. The dichotomy is that disruption in business rarely comes from direct competitors; it comes from left field – the black swans – that do three things:
- Completely change customer expectations – think Lexus when they entered the US market.
- Change the competitive landscape – think Canon copiers and how they side-swiped Zerox with on-demand printing.
- Change industry economics as a whole – think Apple, which disrupted so many industries, from telecoms, to music distribution to watches.
What impact does disruption have on companies’ ability to achieve sustainable growth?
If companies feared disruption they would actually do something about it, like prepare not to be disrupted. My experience is that very few companies actually fear disruption because they believe their core business (or what they have defined as core business), will last forever; that they will have ample time to move with the times. If companies really feared disruption we would not have seen the accelerated demise of Fortune 500 companies. 88 percent of the 1995 list have disappeared; company longevity has decreased from 33 years in 1964 to a forecasted 12 years in 2017. It is an accelerating downward trend.
If a company has a healthy respect that they need to evolve, adapt and capitalise on new opportunities, then the only way to do this in my experience is to have a dedicated team of people whose day job it is to find the opportunities, develop plans and execute them within a very clearly defined governance construct that is separate from the company’s current business operations.
In which industries is the fear of disruption most visible?
Some businesses naturally have a longer half-life. Half-life is the term that defines if a business does not innovate, how long it will take for half its revenue to disappear. Some capital-intensive industries have a long half-life, such as mining. For others like those in consumer electronics, the half-life is 12 months or less.
The shorter the half-life in an industry, the greater the fear of disruption. The only rider to that is the question of which industry a company is in, is no longer that clear. The reason is that disruption frequently takes place at the intersection of two industries, like telecoms and banking, with the emergence of mobile money as an example.
Is the fear of disruption in business a positive attribute or not?
Fear of disruption is a positive trait, the way I look at it. Those who fear disruption are those who spend time properly understanding future trends, designing a response and creating a new future. With 1) understanding, you can 2) design and 3) create the future…