Nothing is more powerful than an idea whose time has come.1
The 2020 Covid-19 pandemic has disrupted our lives profoundly. The New York Times recently named 2020 as ‘A Year Like No Other’ 2. Disruption will continue to be a significant aspect of life as we move into 2021. Looking ahead to a post Covid-19 pandemic world, it is worth closely examining: What does ‘disruptive innovation’ mean, and how can today’s businesses – disruptors and disrupted – learn to spot potential opportunities and threats?
For a term thrown around frequently, it’s surprising how disruptor is often misunderstood. Prior to 2020, people hearing the word ‘disruption’ probably thought along the lines of Harvard Professor Clayton Christensen’s description in his 1997 best-seller book The Innovator’s Dilemma. Christensen wondered, ‘Why do great businesses often fail to sustain advantage?’ 3. He turned thinking on its head by showing how great companies often become victims of their own success by becoming too good. They focus on improving high-end high-margin products or services and lose sight of lower-end market segments. That creates opportunities for agile new competitor market entrants to introduce new technological innovations. Disruptive innovators tend to start small, expand and transform business. Old leaders often don’t see the new wave of change coming until it is too late. Well-known recent examples of firms that have caused disruptive innovation include AirBnB, Uber, Lyft and Etsy.
Learning from Disruptive Experience
In the 1990s, a tiny firm called Napster showed how a simple disruptive innovation could transform a sophisticated business landscape. Napster launched just before the turn of the millennium as an innovative peer-to-peer (P2P) file-sharing internet software that emphasized sharing digital audio files, typically music, encoded in MP3 file compression format. This world-changing innovation did not emerge from a well-funded enterprise laboratory after years of focused research by industry experts, but was the progeny of an enthusiastic 17-year-old first-year college student, Shawn Fanning, tinkering at what he loved in a humble dorm room.
Napster’s central database tracked digital files on the hard drives of Napster users. This made file sharing and downloading possible. It was easy to use and wildly popular.
Prior to Napster, music sales were physical, like CDs, and they were sold in well-structured supply and value chains where royalties integrated with sales. Each sale earned a few pennies of royalty for the recording industry, accumulating to millions. But Napster’s disruptive peer-to-peer MP3 free-for-all did not accrue royalties. That did not sit well with music recording companies, which were alarmed at the loss of revenue. Legal battles rapidly led to Napster's demise, but the genie was out of the bottle, Napster had disrupted the landscape and permanently transformed how the world produces and consumes music.
What Exactly is the Disruption?
Christensen states that a disruptive innovation ‘transforms a product that historically was so expensive and complicated that only a few people with a lot of money and a lot of skill had access to it. A disruptive innovation makes it so much more affordable and accessible, that a much larger population have access to it.’ 4
An innovator is not necessarily also a disruptor. Innovators make changes and do things in new ways, but such changes can optimize performance in existing markets, without changing the market. Disruptive innovations, on the other hand, are catalytic changes that transform the markets themselves.
Christensen gives graphic examples: ‘The first manifestation of digital technology was a mainframe computer that cost several million dollars to buy and took years to be trained to operate… But then there’s a sequence of innovations, from the mainframe to the mini to a desktop to a laptop and now to a smartphone that has democratized technology to the point that everybody has access to it around the world and we are much better off. It was very hard though for the pioneers of the industry to catch these new waves, most of those were created and dominated by new companies.’ 4
Wellbeing as Powerful Driver of Disruption
‘We are much better off.’ Christensen emphasizes that human wellbeing can be a powerful transformational driver in the calculus of disruptive innovation. Disruption may include software, but it is far more. Napster facilitated music transactions at vastly new scales and transformed the industry from selling albums on physical discs to songs that could be purchased individually and played anywhere. But Napster was more than just some widget delivering commodities. People engaged with Napster as a new cultural ecosystem creating new forms of identity, sharing, social belonging, community and wellbeing.
Great Disruptions from Small External Innovations
The most transformative factor of 2020 was not a human or technological innovator like Napster but the chance arrival on the human stage of a microscopic virus. Christensen explored this factor of disruption: chance. 5
The Covid-19 virus is understood to have originated as part of the natural history of bats, where it has a common benign existence, and spilled over to humans, where it has uncommonly debilitating health impacts. Such spillover diseases are termed ‘zoonotic,’ where an infectious disease caused by a pathogen (an infectious agent, such as a bacterium, virus, parasite or prion) jumps from a non-human animal (usually vertebrate) to a human. Such diseases are more common than one might think 6. Scientists estimate that more than six out of every 10 known infectious diseases in people can be spread from animals, and three out of every four new or emerging infectious diseases in people come from animals.
In other words, the Covid-19 pandemic is disruptive, yet the origins are banal, common and not innovative. For some people it is exciting to envision future world-impacting value-generating innovations. That can have value. But this disruption was neither the product of business minds, innovative geniuses nor teenagers. The source was simple. Non-innovative things – like changes in air, water, Covid-19 viruses – can and will be major sources of disruption. Anything that impacts wellness and wellbeing is a key factor in disruption.
Covid-19 Disruptive Impact is not a ‘Black Swan’
Prior to the 17th century, people had only seen white swans, so the expression ‘all swans are white’ became a common way to highlight something as ‘undeniably true.’ Conversely, the term ‘black swan’ was a lively metaphor to denote something that did not exist, a pejorative label for ‘delusion.’ Imagine the surprise in 1697 when the first European explorers sailed into Western Australia and saw – to their shock – black swans (Cygnus atratus). They realized that for the past two millennia they had not only been factually blind to reality but making incorrect logical arguments. Great philosophers, including John Stuart Mill, Bertrand Russell, Karl Popper and David Hume, among others, analyzed this profound ‘black swan’ error and used it to highlight lessons about human experience, logic, science and knowledge.
Polymath Nassim Nicholas Taleb, in exploring non-predictable high-impact events, labelled these events ‘Black Swans’ in his eponymous book on the topic 7. Taleb says that for an event to be a Black Swan, ‘nothing in the past can convincingly point to its possibility.’ Remarkably, Taleb states in a March 2020 article that the Covid-19 pandemic was very predictable:
“…Some people claim that the pandemic is a “Black Swan,” hence something unexpected so not planning for it is excusable. The book they commonly cite is The Black Swan (by one of us). Had they read that book, they would have known that such a global pandemic is explicitly presented there as a White Swan: something that would eventually take place with great certainty.” 8
Taleb goes on to note that not only are pandemics to be expected, it’s possible to be at least somewhat prepared for the disruptions they cause. Singapore, he continues, has had a pandemic response plan at the ready for ten years.
The Covid-19 pandemic was not a Black Swan – it was a wake-up call. We had imperfect knowledge, limited resources, multiple options to plan and act. None of that was ideal, yet this is typical of disruptive environments. There is always risk. Hard choices must be made. We can still actively mitigate and manage for different outcomes.
We will face ongoing new disruptions even as we move into a post-Covid-19 pandemic world. Technology is making increasingly rapid strides, and vast increases in Big Data from the Internet of Things and analysis by Artificial Intelligence will dramatically change how we interact with our world.
Disruption is Relative
Christensen notes, ‘it is important to remember that disruption is a relative term. What is disruptive to one company might have a sustaining impact on another.’ 9
While much of the world struggled to cope with negative impacts of the Covid-19 pandemic, some flourished. Amazon CEO Jeff Bezos warned investors that they might prepare for a loss in 2020 Q2 as the company planned to spend $4 billion – all of its expected Q2 operating profit – on Covid-19-related expenses and projected a potential loss of $1.5 billion that quarter. But when it came time for Amazon to share quarterly results, they were the opposite: despite the pandemic, Amazon doubled its net profit year over year. This suggests that profit could have more than doubled if not for the pandemic expenses. 10
In September 2020, Apple announced that it had ‘…notched up another milestone by overtaking the combined market value of the entire FTSE 100 index of the UK’s biggest publicly listed companies... its share price rising an astonishing 75%, and last month it became the first US company to reach a US$2 trillion market value’ 11. It boggles the mind to comprehend such explosive growth in one year, let alone during a global health crisis. How does a firm that makes products without any game-changing innovations double market valuation from $1 trillion to $2 trillion? It would be challenging to parse the full complexity of factors during Covid-19 in 2020 that lead to such disruption, but it does prove Christensen’s point: disruption is a relative term. Disruption involves luck. What is disruptive to one company may have sustaining impact to another.
It is challenging to imagine firms surpassing the meteoric rise in 2020 of Amazon or Apple, but if Christensen is to be believed, disruptive innovation will continue to bring new players into the market. A firm does not need to be an innovator or disruptor itself in order to find ways to benefit from these transformation trends.
What Could be Potential Disruptions in a Post-Pandemic World?
We are still in the midst of the Covid-19 pandemic, but vaccines appear on the near horizon, ready to mollify it. At some point, Covid-19 will be an on-going reality, but it will no longer impose such an overwhelming shadow on all of business and life.
The long-term health impacts of Covid-19 are still far from understood, so it is too early to expand on potential long-term effects. But we can already see many large-scale business impacts relating to Covid-19’s effect on people working in corporate systems and organizations.The workplace is rapidly being redefined. Covid-19-based necessities of social distancing, lockdown, quarantine and isolation drove many people worldwide to rapid uptake, adoption, acceptance, understanding and proficiency working remotely. This in turn has stimulated creativity, experimentation, innovation and new forms of social connection, such as live performances of multiple participants over multiple locations. Video telecommunication services such as Zoom have become commonplace 12.
This has further focused heightened attention on related aspects of living in isolation, health, healthy habits, fitness, security, privacy and more. Remote working and video technologies will be increasingly important going forward. In contrast to pre-Covid-19-pandemic ways of working, this vast array of changes will accelerate additional new innovations and disruptions.
Covid-19 is impacting almost all traditional supply chains where we work and do nearly everything: work, shop, feed ourselves, entertain ourselves, seek recreation, travel. As one example, witness disruption in restaurants: ‘Ghost kitchens are popping up all over the U.S. as food delivery soars and dining at restaurants plummets amid the pandemic. These businesses, which can host food preparation for multiple restaurants at a single location, are attracting interest from investors and restaurateurs.’ 13 Similar rapidly-emerging examples of disruption can be found in supply chains in all sectors.
Train the Troops to Identify Disruptive Ideas
We are not blind nor ignorant regarding disruptions; we can think and act pro-actively. But what is an appropriate allocation of resources to funnel toward disruption preparedness? Even modest investments of resources can have valuable returns.Christensen advised, ‘The fourth component of a well-functioning disruptive growth engine is the training of the troops, particularly sales, marketing and engineering employees, because they are best positioned to encounter interesting growth ideas and to scout for small acquisitions with disruptive potential.’
‘Capturing ideas for new-growth businesses from people in direct contact with markets and technologies can be far more productive,’ he said, ‘than relying on analyst-laden corporate strategy or business development departments – as long as the troops have the intuition to do the first-level screening and shaping themselves.’. 9
2020 has been a learning moment. It is eminently worth listening to this reminder of the value to invest in people. Active reflection on disruption can help us evolve more confidently into wellness and wellbeing. We can pro-actively optimize skill sets to recognize potential disruptive innovations and improve how we communicate about disruption’s unavoidable realities and tremendous opportunities.
Theodore Gering studied evolutionary biology at Harvard under Stephen Jay Gould and draws on that basis to develop digital innovations in inter-sectoral cooperation, cross-platform and cross-border cooperation. Partners include Microsoft, IBM, the World Bank, USAID, UN organizations, Public Private Partnerships and not-for-profit. He lives and works in Amsterdam, The Netherlands.
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