Distruptive Technologies at Port 80: Charthouse: Past

Let's look at the Internet from the viewpoint of a technological determinist who is working on the assumption that the organization is as rational as a machine.

Some technological changes are incremental. Shellac 78 rpm recordings are replaced by plastic 33 rpm recordings.

Some technological changes are disruptive. The Impact Theory (a type of "punctuated equilibrium") says that a meteor brought on a nuclear winter that destroyed the dinosaurs. A similar theory of technological impact would point out that the automobile destroyed whole industries, such as blacksmithing. Crime rates plummeted for such capital offenses as horse-thieving.

Is the Internet an incremental or disruptive technology? Are we on a gradual slope or are we moving from one plateau to another via a cliff? (In either case, saving for another time whether it's an uphill or downhill slope/cliff.) Corporate America today has an army of consultants and academics paid to reassure the boss that it's incremental, that he's not a dinosaur waddling to the tar pits after the meteor landed. By tweaking this or that traditional management model, treating the Internet as a component or a tool, they can figure out how to make "this Internet thing" increase shareholder value, preferably in the next quarter or two.

Then look at history. The printing press was a disruptive technology. By the 1530's, the Pope needed an army of consultants and academics paid to reassure him that the Church could handle Luther's passing out the Bible in German and Copernicus' explaining that the Earth didn't really stand still while the sun revolved around it. (See Joshua 10:12-14.) When the Church's Inquisition got Galileo to renounce Copernicus in 1633, that Pope figured, well, we've taken care of those heretical ideas. Nevertheless, Isaac Newton was born ten years later.

Of all the organizations in existence in Europe in 1530, fewer than a hundred have survived. The Catholic Church, the Lutheran Church, the parliaments of Iceland and the Isle of Man, and 62 universities. Disruptive, indeed.

Thus, the list of restraining forces above starts to get even longer. Some organizations (not all, by any means) are organized the way they are in order to resist change. In terms of the Internet, if you find yourself working for the equivalent of the Church in the 1500's, what should you do?

Should you lead change from within or bail out to a more enlightened organization?

While the Pope was fighting science, markets were opening all over the world. Today, the Pope's ideas are more popular (in numbers and percentage of people understanding them) than are the ideas of Luther, Copernicus, Galileo, Newton, Darwin, and Einstein put together. Maybe you don't need to learn more about the Internet, after all.

Horse-drawn carriages seem romantic today, but the industry virtually disappeared within a decade after the introduction of the Model T in 1908. Radio didn't die when television came along, but our grandparents would hardly recognize how we use it today. When a technology comes along that seems to change everything, the ultimate implications are not always readily apparent.

The innovator’s educator looks at why great companies fail and why theory trumps data.

Our niche in the transportation industry was secure for decades. But in the '90's, we got a wake-up call.

It became clear that information technology would deconstruct supply chains and industries. Our customers' traditional business models were threatened, and had to be re-thought and rebuilt for the digital economy.

UPS used to be trucking company with technology ... but is now a technology company with trucks.

disruptive innovation - "the world's premier new management and investment conference" (audio files)

The world's most famous business-school professor is fed up with CEOs who claim that the world changes too fast for their companies to have a long-term strategy. If you want to make a difference as a leader, you've got to make time for strategy.

Breaking the rules may be the most difficult decision CEOs can make. But if they don't, it's over.

Quotes

The most significant challenge facing our universities is to ensure that teaching continues to unleash the creative intellectual energy that drives our system forward.

Knowledge applied to tasks we already know how to do is productivity.

Knowledge applied to tasks that are new and different is innovation.

Business leaders usually visualize a market economy in the context of how capitalism administers existing structures, whereas the wiser approach is to understand how it creates and destroys them.

The interaction of technological innovation with the competitive marketplace is the fundamental driving force in capitalist industrial progress.

A normal healthy economy was not one in equilibrium, but one that was constantly being disrupted by technological innovation.

Creative Destruction

What every manager needs to know about creative destruction. An interview with McKinsey's Richard Foster.

Creative Destruction: Why Companies That Are Built to Last Underperform the Market—and How to Successfully Transform Them | excerpt from Chapter 1
by Richard Foster and Sarah Kaplan
The McKinsey Quarterly, 2001

The first Standard and Poor’s index of 90 major US companies was created in the 1920s. The companies on that original list stayed there for an average of 65 years. By 1998, the average anticipated tenure of a company on the expanded S&P 500 was 10 years. If history is a guide, over the next quarter century no more than a third of today’s major corporations will survive in an economically important way. ...

The corporate equivalent of El Dorado—the golden company that continually outperforms the markets—has never existed. Managing for survival, even among the best and most revered corporations, doesn’t guarantee long-term performance for shareholders.

In fact, the opposite is true.

He's America's hottest economic thinker. His ideas have the ear of Alan Greenspan, the minds of businesspeople, and a unique power to explain today's topsy-turvy economy. And he died half a century ago.

He is Joseph A. Schumpeter, the prophet of "creative destruction" who is now mounting a stiff challenge for the title of Top Dead Economist. "We will look back and say, without a doubt, that John Maynard Keynes was the economic god of the first half of the 20th century," predicts Paul Saffo, director of the Institute for the Future. "But without a doubt, Schumpeter was the economic avatar of the second half, and we just didn't realize it."

Creative destruction is the dynamic entrepreneurial spirit present in capitalist societies whereby the pursuit of profit provides the incentive for both individuals and companies to innovate, experiment, and create. It is the process by which outdated products and production methods employed by inefficient companies are destroyed, i.e., replaced, by cutting-edge products designed by newer, more efficient companies with their innovative production techniques.

The Public's Dilemma

Should our government take a position when creative destruction happens because of a disruptive technology? Should the government favor the incumbents? Should the government encourage the disruption and destruction? If not, our country may fall further behind because innovators will seek fertile environments.

The Innovator's Dilemma

Most business (non-start-up) failures are rational. That is, everyone made the correct decision. Therefore, the business failed.

Clayton M. Christensen, The Thought Leader Interview
by Lawrence M. Fisher
strategy+business - Fourth Quarter, 2001 (free registration required)

The innovator’s educator looks at why great companies fail and why theory trumps data.

The Innovator's Battle Plan
from Seeing What’s Next
by Clayton M. Christensen, Scott D. Anthony, Erik A. Roth
Harvard Business School's Working Knowledge, September 6, 2004

Great firms can be undone by disruptors who analyze and exploit an incumbent’s strengths and motivations. ...

Asymmetries allow disruptive attackers to enter a market, grow without incumbent interference, and mitigate the incumbent's response when it is finally motivated to counterattack. The result of asymmetric battles often is the seemingly sudden end of a great firm. From the incumbent's perspective, every action it takes is rational. But the outcome is devastating. Disruption is the strategy that creates and capitalizes on asymmetries of motivation and skills.

transnational corporate capitalism

Corporations not only advertise products, they promote lifestyles rooted in consumption, patterned largely after the United States.... [They] look forward to a post-national age in which [Western] social, economic and political values are transformed into universal values... a world economy in which all national economies beat to the rhythm of transnational corporate capitalism.... The Western way is the good way; national culture is inferior.

new media products