Navigating the Disruption: Insights from a Decade-Old Warning
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Chapter 1: The Insights of a Harvard Economist
A decade ago, I attended a Marketing Technology (or “martech”) event at the prestigious New York Times auditorium, where a renowned economist from Harvard delivered the keynote address. His brief yet impactful comments have lingered in my mind ever since, and I've sought the original sources without much luck. The core of his message could be summarized like this (please forgive my less-than-perfect paraphrasing):
Picture yourself as the most powerful nation in the world, capable of manufacturing and distributing any product anywhere at an unmatched speed and quality. It’s the late 1800s, and you are Great Britain. Your confidence is so high that you proudly label yourself as “Great!” This self-assuredness stems from your unprecedented industrialization, fueled by steam power in your factories, textiles, and transportation. Other nations shrink in your shadow.
As you approach the new century, a new force—electricity—begins to emerge. However, feeling invincible, you dismiss it as a passing trend, certain that steam power will prevail! Meanwhile, the USA, not burdened by a heavy investment in steam technology, embraces electricity in its manufacturing processes. For a period, any company that included “electric” in its name saw skyrocketing market valuations.
This compelling narrative illustrates how technological disruptions can unfold over extended periods—not solely due to the inherent advantages of the new technology, but rather because of the right conditions and timing for its adoption. This perspective sharply contrasted with the prevailing view in business circles, which largely centered around Clayton Christensen's concept of “disruptive innovation.” Christensen posited that disruptive innovations emerge when a new, better, and cheaper approach arrives just as the limitations of the existing methods become apparent.
The key takeaway here is that even when you lead the pack, unforeseen competition can swiftly knock you off course.
Section 1.1: The Hard Disk Example
A classic illustration of disruptive innovation can be found in the 1990s hard disk industry. Numerous companies were engaged in a fierce battle to produce faster and more compact 5.25” hard drives, while a wave of smaller 3.5” drives was silently gaining traction. The established players dismissed these smaller drives as insignificant distractions. However, they were the ones distracted, failing to realize that these compact drives would pave the way for the laptop and mobile computing revolution. Their heavy investment in larger drives rendered them unable to pivot quickly enough, leading to their disruption.
This experience reinforces the lesson that market leaders must remain vigilant against unexpected competition.
Subsection 1.1.1: A Long-Term Perspective
As I sat at the front of the auditorium, absorbed in the insights from this Harvard luminary, I was struck by the long-term perspective he offered. It took many decades before the transformative effects of electricity began to manifest on a large scale. Since that day, I've attempted to locate the original story or data supporting his claims. Recently, I discovered the paper "Dynamo and the Computer: The Productivity Paradox" by Stanford economist Paul David, published in 1990. There it was! Additionally, I found a noteworthy paper by the late Herbert Simon, titled "Steam Engine And The Computer: What Makes Technology Different."
Technologies with broad, general applications often require considerable time to achieve widespread societal disruption.
Chapter 2: The Nature of Inventions
Both David and Simon elucidate how inventions like steam power and computing are general innovations, unlike specific inventions that serve a singular purpose. General inventions—such as steam power, electricity, and computing—provide versatile applications across various fields. In contrast, narrower innovations, like a commercial bakery's electric mixer or a coin-operated parking meter, tend to see quicker adoption.
This highlights the challenge of achieving “product market fit” for specific startups versus the more complex journey of finding “society market fit” for revolutionary ideas that can influence nearly every aspect of life.
It's challenging to maintain a position of greatness indefinitely.
As you ponder the threat of disruption, it’s crucial to monitor both the competition directly in front of you and the emerging trends that could upend your position. Furthermore, consider the broader shifts occurring within society, which often take decades to reach their tipping points. While Steve Jobs famously advocated for a “relentless focus” in achieving significant goals, it’s equally important to dedicate time to stepping back and examining historical patterns that may re-emerge.
Stay tuned for my upcoming CX Report, titled "Safety Eats The World," which I will present at SXSW in March. If you're interested in the topic of How To Speak Machine, there's a book on that as well. Keep an eye out! — JM
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