Accenture - Surviving Big Bang Disruption: Four Strategies for Coping With Disruptive Technological Innovations - Feb 2013
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Accenture - Surviving Big-Bang Disruption: Four Strategies for Coping With Disruptive Technological Innovations - Feb 2013

Accenture - Surviving Big-Bang Disruption: Four Strategies for Coping With Disruptive Technological Innovations - Feb 2013

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  • So true: incumbents' operational assets suddently morph into liabilities. The downside was recently described by The Economist in that many middle-level jobs are going to be wiped out.
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Accenture - Surviving Big Bang Disruption: Four Strategies for Coping With Disruptive Technological Innovations - Feb 2013 Accenture - Surviving Big Bang Disruption: Four Strategies for Coping With Disruptive Technological Innovations - Feb 2013 Document Transcript

  • The Big IdeaA new kind of innovatorBig-can wipe out incumbentsin a flash. by Larry Downesand Paul F. NunesBangDisru44 Harvard Business Review March 2013  
  • hbr.orguption
  • The Big Idea Big-Bang Disruption B y now any well-read ex- be everywhere. Once launched, such disruption is ecutive knows the basic hard to fight. playbook for saving a We call these game changers “big-bang disrupt- business from disruptive ers.” They don’t create dilemmas for innovators; innovation. Nearly two they trigger disasters. decades of management In this new era, strategy needs a rethink. We’ve research, beginning with spent the past 15 years studying disruptive technol- Joseph L. Bower and ogies and are now completing a multi-industry sur- Clayton M. Christensen’s vey of those that defy the accepted wisdom. We’ve 1995 HBR article, “Dis- found that big-bang disruptions are unplanned and ruptive Technologies: Catching the Wave,” have unintentional. They do not follow conventional stra- taught businesses to be on the lookout for upstarts tegic paths or normal patterns of market adoption. that offer cheap substitutes to their products, cap- And while there’s not a lot of evidence yet on how ture new, low-end customers, and then gradually incumbents can survive them, we offer some strate- move upmarket to pick off higher-end customers, gic principles that we think can help. too. When these disrupters appear, we’ve learned, it’s time to act quickly—either acquiring them or in- A Difference in Kind cubating a competing business that embraces their The first key to survival is understanding that big- new technology. bang disruptions differ from more-traditional inno- But the strategic model of disruptive innovation vations not just in degree but in kind. Besides being we’ve all become comfortable with has a blind spot. cheaper than established offerings, they’re also more It assumes that disrupters start with a lower-priced, inventive and better integrated with other products inferior alternative that chips away at the least prof- and services. And today many of them exploit con- itable segments, giving an incumbent business time sumers’ growing access to product information and to start a skunkworks and develop its own next-­ ability to contribute to and share it. generation products. In the age of Facebook, Twitter, and Tumblr, That advice hasn’t been much help to navigation- internet fads (or “memes”) can infect the whole product makers like TomTom, Garmin, and Magel- world in a matter of days. Products can, too. An lan. Free navigation apps, now preloaded on every ad-supported version of the game Angry Birds was smartphone, are not only cheaper but better than downloaded over a million times in the first 24 hours the stand-alone devices those companies sell. And it was available on Android devices. (That number thanks to the robust platform provided by the iOS might have been even higher had the enthusiastic re- and Android operating systems, navigation apps are sponse not crashed the developer’s servers.) Seven constantly improving, with new versions distributed months later the game had been downloaded more automatically through the cloud. than 200 million times. The disruption here hasn’t come from competi- Upstart products and services in a slew of in- tors in the same industry or even from companies dustries have likewise grown fast enough to leave with a remotely similar business model. Nor did incumbents gasping. Consider CampusBook­ entals R the new technology enter at the bottom of a mature and Khan Academy in education, Pandora and market and then follow a carefully planned march Spotify in radio and recorded music, Skype and through larger customer segments. Users made the FaceTime in voice and video calling, and Square switch in a matter of weeks. And it wasn’t just the in mobile credit-card processing. These offerings’ least profitable or “underserved” customers who lightning-fast adoption is a function of near-perfect were lured away. Consumers in every segment de- market information. Wherever customers are, mo- fected simultaneously—and in droves. bile devices let them search a wide range of special- That kind of innovation changes the rules. We’re ized data sources—including online sites like Yelp, accustomed to seeing mature products wiped out TripAdvisor, Amazon, and other free databases of by new technologies and to ever-shorter product user-generated reviews—to find the best price and life cycles. But now entire product lines—whole quality and the next new thing. markets—are being created or destroyed overnight. The shock waves from big-bang disruptions Disrupters can come out of nowhere and instantly emanate far beyond information-based goods and46 Harvard Business Review March 2013  
  • hbr.org Idea in Brief Disruptive technological New digital platforms such as These “big-bang” disruptions To survive them, incumbents innovations have tradition- the smartphone, however, are are often unplanned and unin- need to develop new tools ally started out cheap and enabling innovations that offer tentional. They do not follow to detect radical change in simple, gradually improving in customers both a better expe- conventional strategic paths the offing, new strategies to quality until they challenged rience and a much lower price, or normal patterns of market slow down disrupters, new incumbents. right out of the gate. (Think of adoption. ways to leverage existing as- free mobile apps’ superiority to sets in other markets, and a dedicated GPS devices.) more diversified approach to investment. Traditional Technology Adoption Big-Bang vs. Big-Bang Disruption Market Segments Big-bang disruptions don’t follow the usual pat- Trial Vast Users Majority tern of customer adoption famously described by Everett Rogers. According to his model (shown in gray), new products sequentially gain popularity with five market segments. The big-bang model (shown in red) is taller and much more com- pressed: In it, new products are perfected with a few trial users and then are embraced quickly by the vast majority of the market. Innovators Early Early Late Laggards (2.5%) Adopters Majority Majority (16%) (13.5%) (34%) (34%) Rogers’s Market Segments services. Food and cars, for example, can’t be re- cally better value proposition. Big-bang disrupters placed by smartphone apps. But restaurants now may not even see you as competition. They don’t depend on online reservations, customer-generated share your approach to solving customer needs. And reviews, coupons delivered through mobile devices, they’re not sizing up your product line and figuring and location-based services to drive business. In au- out ways to offer slightly better price or performance tomobiles, information technology powers sophisti- with hopes of gaining a short-term advantage. Usu-Photography: Getty Images cated dashboard systems and, in the not-too-distant ally, they’re just tossing something shiny in the di- future, may control self-driving cars. rection of your customers, hoping to attract them to But perhaps the biggest challenge to incumbents a business that’s completely different from yours. is that big-bang innovations come out of left field, When digital image technology first infiltrated combining existing technologies that don’t even consumer photography, for example, its develop- seem related to your offerings to achieve a dramati- ers weren’t aiming to destroy the film industry. But March 2013 Harvard Business Review 47
  • The Big Idea Big-Bang Disruption they did. When President Clinton declassified high- quality GPS data, in 2000, it wasn’t because map publishers were clamoring to create better naviga- tion aids. Someone else—in electronics—saw that possibility. Or recall how Jeff Bezos decided to enter the book business. E-commerce, he realized, was the natural solution for a fragmented market with an enormous number of SKUs; a small, shippable product; and a stable supply chain characterized by many sellers served by a few dominant middlemen. He settled on books not because he had any expertise in publish- ing but because books were a coldly rational choice. When cost is low and expectations are modest, en- They fit the tool he wanted to apply. trepreneurs can just launch their ideas and see what Competitors like that can blindside you. They do happens. not simply create the need for faster strategy formu- Like Twitter, these innovations are often built lation and execution, and more-effective operations. out of readily available components that cost little or They create a need for entirely new innovation, strat- are free. So-called over-the-top internet services, in- egy, and go-to-market approaches. cluding Netflix, Hulu, and Skype, use existing home internet connections and nonproprietary audio and Three Devastating Features video compression protocols to challenge the bun- Once big-bang disrupters enter the market, it’s up, dled channel selections and voice services of cable up, and away. They deliver surprise after surprise, and phone companies. These new tools allow con- thanks to three defining characteristics: unencum- sumers to pick and choose the content and features bered development, unconstrained growth, and un- they want, thwarting the strategic plans of the very disciplined strategy. companies that provide the infrastructure. In the Unencumbered development. Right now, at future the most successful innovators may be those Silicon Valley companies large and small, engineers who simply happen upon the right combination of and product developers are getting together late at other people’s technologies. night in what are popularly known as “hackathons.” As disruptive technologies become cheaper to Their goal is to see what kind of new products can manufacture and deploy, innovators can experiment be cobbled together in a few days. You know, for fun. with new applications at little risk to investors, aban- The innovators are not even trying to disrupt your doning prototypes that do not quickly prove popu- business. You’re just collateral damage. lar. Generally these experiments take place directly Twitter, for example, began its commercial life in the market, using open platforms built on the humbly at the 2007 South by Southwest confer- internet, cloud computing, and fast-cycling mobile ence, following its invention at a hackathon the devices. New businesses can be launched without year before. Its developers wanted to test sending their own foundation. If the application catches on standard text messages to multiple users simultane- with users, computer processing, business software, ously, an experiment that required almost no new data storage, and communications capacity can all be technology. Today the company boasts more than leased or purchased in real time. In the bizarro world 200 million active users and half a billion tweets a of big-bang disrupters, it is perfectly rational to churn day. Twitter has destabilized everything from the out dozens of new products and see which ones take news and information ecosystem to unpopular na- hold. Like venture capital investments, most will fail tional governments. outright. But just one success can pay off big. Twitter’s sudden success with minimal invest- Unconstrained growth. Big-bang disruptions ment underscores an important dimension of big- collapse the product life cycle we know: Everett bang innovations: They are often born of rapid-fire, Rogers’s classic bell curve of five distinct customer low-cost experiments on fast-maturing, ubiquitous segments—innovators, early adopters, early major- technology platforms. They don’t need budget ap- ity, late majority, and laggards. Now there are only proval and aren’t vetted before development begins. two segments: trial users, who often participate in48 Harvard Business Review March 2013  
  • hbr.orgThe innovators who create productsat “hackathons” aren’t even trying todisrupt your business. You’re just thecollateral damage. product development, and everyone else. The adop- and services. All those failed experiments seem like tion curve has become something closer to a straight evidence that the emerging technologies just aren’t line that heads up and then falls rapidly when satu- ready. In reality, in today’s hyperinformed world, ration is reached or a new disruption appears. (See each epic failure feeds consumer expectations for“Traditional Technology Adoption vs. Big-Bang the potential of something dramatically better. Disruption.”) Consider such captivating but ultimately unsuc- This change obviates the need for the carefully cessful launches as Magnavox Odyssey (home gam- timed shifts in marketing strategy that Geoffrey ing), Apple’s Newton (tablet computing), Napster Moore described in Crossing the Chasm (1991). Moore (digital music), Betamax (home video recording), focused on making the big leap from targeting early and the first-generation electric cars. When declin- adopters to marketing to the early majority. (The ing technology costs finally make the right solution gap between the two groups is what he dubbed the feasible, the appetite of consumers has been thor-“chasm.”) But big-bang disruptions can be marketed oughly whetted. It’s then too late for incumbents to to every segment simultaneously, right from the jump in. Waiting for the market to take off and hop- start. When the iPad arrived, it wasn’t just for peo- ing to be a fast follower is now a recipe for irrelevance. ple who couldn’t afford a laptop. Every millionaire Seemingly random experiments and crash-and- wanted one, too. burn flops may actually be your best warning of an The new product cycle can be simplified into urgent need for a change in strategy, or “strategic three basic stages: development, deployment, and pivot.” It’s like a battlefield, where near misses sig- replacement. It is much faster, approximating the nal not that your enemies are confused or incapable speed at which computing power doubles, which, as of hitting you but that they are zeroing in on your Intel cofounder Gordon Moore famously predicted position—walking their fire onto the target, shell by in 1965, happens every two years. We’re now dou- shell—before unloading a full barrage on your exact bling an enormous amount of power, which greatly location. accelerates the rate of disruption, too. Gordon The combination of false signals and a natural Moore’s law, not Geoffrey’s, now sets the pace. resistance to change creates a lethal trap. When The adoption of disruptive innovations is no lon- the wildly popular file-sharing service Napster was ger defined by crossing a marketing chasm. Instead, stopped dead in its tracks by litigation, in 2001, for the innovators collectively get it wrong, wrong, example, recording industry executives breathed wrong—and then unbelievably right. That makes it a deep sigh of relief, comfortable that they could even harder for businesses wed to today’s products now ease into digital distribution on their own March 2013 Harvard Business Review 49
  • The Big Idea Big-Bang Disruption Down the DrainThe decline and fall of After decades of prohibition in many U.S. The game was strangely addictive and a cities, pinball machines came roaring back in perfect metaphor for what was to come. Thepinball provides an early the 1970s. Electronic components replaced invasion was on.example of big-bang mechanical ones, expanding the opportuni- At first, by drawing even more kids todisruption. In a few short ties for innovative design. A new distribution arcades, Space Invaders, Pac-Man, andyears, a thriving industry channel—the stand-alone arcade—emerged their ilk actually helped the pinball business. to satisfy a growing baby-boomer market for Pinball machine sales hit an all-time highwas razed—in much the entertainment. The quarters were overflow- in 1993. It was in the next year, though, thatsame way that at least ing. Yet the industry was nearly dead by the big-bang disruption arrived. In 1994, Sony30 other industries are mid-1990s. How did that happen? released PlayStation, a home game consolebeing wiped out today. Early arcade video games, such as the that offered superior play at an unbeatable primitive Pong, contained the seeds of price. Arcade pinball machines could cost up pinball’s destruction. But because they to $7,500. The PlayStation, which supported were simple and offered no real substitute hundreds of games, sold for $299. Sony for pinball, both pinball manufacturers and quickly sold millions of units. Pinball sales pinball wizards dismissed them. With the re- imploded as arcades were shuttered in rapid lease of Space Invaders in 1978, momentum succession. Within a few years all but one shifted. In that game a succession of crudely manufacturer had shut down forever. animated aliens marched relentlessly down “The real backbreaker came when home the screen to the sound of an electronic video finally hit the marketplace,” says Tom drumbeat, gaining speed as each row shifted. Nieman, former head of licensing for Bally’s. time­ able. Yet earlier that same year, Apple had t cost (“operational excellence”), constant innova- launched iTunes, eventually leveraging it to secure tion (“product leadership”), or customized offer- market dominance over music’s ongoing reinven- ings (“customer intimacy”). Failing to choose, said tion. The legal defeat of Napster said nothing about the authors, meant “ending up in a muddle.” Mi- the irresistible qualities for consumers of anywhere- chael Porter offered similar starting points in what anytime music. he called his three generic strategies for achieving Or consider electronic book readers. When Ama- competitive advantage and warned against pursu- zon introduced the Kindle, in 2007, the company had ing more than one. learned from a decade of doomed efforts by players Big-bang disrupters, however, are thoroughly un- such as Sony and SoftBook. The first-generation disciplined. They start life with better performance Kindle finally provided the storage, battery life, and at a lower price and greater customization. They display technology that consumers needed. Just as compete with mainstream products on all three important, Amazon offered a dedicated wireless net- value disciplines right from the start. work that seamlessly checked books in and out of a How can better also be less costly? The faster, virtual personal library. cheaper, and smaller computing power predicted Amazon’s real innovation was waiting just until by Moore’s law is still the key driver, but it’s now de- the right combination of technologies was ready for ployable on a global scale and delivered through the mainstream use and then leveraging its powerful cloud to inexpensive mobile devices. Consider the brand and customer network to launch Kindle with three major costs in a product or service: the parts easy access to a huge catalog of books on day one. and manufacturing, the embedded technologies Since 2007, e-books have risen from trivial sales to and intellectual property, and a prorated share of account for nearly 20% of all book revenue. Along development costs. By continually and dramatically the way, they have thoroughly scrambled every link lowering all three at once, today’s technology makes in the publishing supply chain. it possible to sell new products and services more Undisciplined strategy. Big-bang disrupters cheaply than the inferior alternatives they displace. contradict everything you know about competi- Customers are so accustomed to this effect that tive strategy. According to Michael Treacy and Fred they are coming to expect every product or service Wiersema’s classic The Discipline of Market Leaders to get cheaper and better with each passing day. In- (1995), businesses should align strategic goals along cumbents must now innovate continuously just to one—and only one—of three value disciplines: low keep prices and revenue from dropping.50 Harvard Business Review March 2013  
  • hbr.org Pinball sales reached an all-time high How PlayStation in 1993 but began to fall drastically Killed Pinball after PlayStation’s release, in 1994.“Now kids weren’t collecting in one spot and having that social interaction. It Pinball units sold PlayStation units sold (Hundreds of thousands) (millions) really spelled the end of the pinball era.” 1.5 30 All the elements of big-bang disruption are here in prototype. Disruption hap- pened rapidly, with no warning signs that home consoles were even competing with arcade machines. Sony was suddenly beating pinball on every strategic dimen- 1.0 20 sion—price, innovation, and customer intimacy. And its impact wasn’t felt just at the low end of the market but through- out the supply chain. Of the major pinball manufacturers, .5 10 only Stern is now left, producing games for a new nostalgic home market. Wil- liams pivoted to video slot machines, while Bally’s completely escaped, trans- forming itself and entering entirely dif- ferent businesses, including casinos and 0 0 fitness. For the rest, it was game over. 1989 1992 1995 1998 2001 2004 Under these conditions you can’t win simply by Google Maps Navigation competes with stand-becoming more disciplined with your current strat- alone GPS devices on all three value disciplines: It isegy. Pulling back to focus on your best customers or clearly the cost leader. It is constantly being updatedon delivering higher quality or a lower price will buy and rereleased, making it the leading innovator asyou only a little time, if any. More rigorous strategic well. And by offering seamless integration with mo-focus just blinds you to the next wave of disruption bile phone contact lists, the web, e-mail, and appscoming at you from the side. such as Yelp, it likewise wins on the dimension of Consider again portable navigation tools. Map- customer intimacy. No surprise, then, that aftermaking was a mature industry dominated by a few years of steady growth, the GPS device industry iscompanies and the not-for-profit automobile clubs. in a tailspin. Garmin lost 70% of its market capital-Competition came first from free internet sites for ization in the two years after navigation apps wereroute directions, such as MapQuest and Yahoo Maps. introduced; TomTom nearly 85%.Then came stand-alone and in-dash devices that useGPS satellite data to generate real-time routes and Surviving Big-Bang Disruptionturn-by-turn spoken directions. The big-bang dis- Big-bang disrupters are rewriting the rules of indus-ruption, however, turned out to be the smartphone, try after industry—and the new rules hold only untila device never intended to compete with traditional the next wave of disruption comes along. There’snavigation aids. The Google Maps Navigation app, for almost no time to adapt. Bold strategies are the onlyexample, offers virtually all the features of high-end way to cope.GPS devices, and it costs nothing—it’s just another A decade and a half ago in The Innovator’s Di-add-on for the free Android operating system. It has lemma, Clayton Christensen warned incumbentsbeen installed on millions of smartphones and re- to recognize new entrants’ picking off low-end cus-mains in perpetual “beta” release. tomers as an early indicator of industry transforma-There’s almost no time to adapt tobig-bang disruptions. Bold strategiesare the only way to cope. March 2013 Harvard Business Review 51
  • The Big Idea Big-Bang Disruption hbr.org Upending the Conventional Wisdom Big-bang disruptions contradict the traditional thinking on strategy, marketing, and innovation. The classic “rules” of business don’t apply to them.tion—and as a signal to begin experimenting with Conventional Big-Bangemerging technologies while there was still time. Wisdom WISDOMSurviving disruption, his research showed, often Focus on only one Compete on all threerequired a separate organization to incubate a com- strategic “discipline” disciplines at once.petitive response. If you did everything right and the or “generic strategy”—low Strategicstars aligned, you could then move the new prod- cost, product innovation, Discipline or customer intimacy.uct into the market using your company’s existinginfrastructure and advantages of scale, making upquickly for lost time. First target a small Market to all segments None of that was easy, but it was at least possible. group of early adopters of users immediately. BeToday, given the potential for “sudden death” from and later enter the New-Product ready to scale up—anda big bang, you may have no time to develop an incu- mainstream market. Marketing exit—swiftly.bated alternative. And the scale of your current business won’t helpyou launch a response quickly enough to compete. Seek innovation in Seek innovation throughBig-bang disruptions usually feature not a vertically lower-cost, feature-poor rapid-fire, low-costintegrated supply chain but a virtually integrated technologies that meet Innovation experimentation onone: They are manufactured and deployed via the in- the needs of underserved Method popular platforms. customer segments.frastructure of the cloud. In the face of such nimbleyet perversely well-resourced competition, your op-erational assets suddenly morph into liabilities. So how do you stay out of the path of the incom-ing comet? Here are four strategies that incumbents gance and stubbornness. Consider such difficult per-have used to survive and even thrive in the face of sonalities as Steve Jobs and other technology lumi-big-bang disruption: naries like Bill Gates, Alan Kay, and Mark Zuckerberg. See it coming. Learning to recognize the warn- A prime example is Yukiyasu Togo, who pusheding signs is key to survival. But since the early Toyota to launch Lexus after recognizing funda-market-­ ased experiments usually fail, the familiar b mental shifts in income and spending patterns insignals sent by low-end customers jumping ship may the American car market. Despite his vision and hisnever arrive. You need new tools to recognize sooner essential role in Toyota’s ongoing operations, Togothan your competitors do that radical change is on could not get the company to invest in a luxurythe way, and that means interpreting the real mean- brand without threatening to resign. The insights ofing behind seemingly random experiments. a truth teller may not come in easily digested forms. Filter out the noise generated by unencumbered You need to learn not only whom to listen to anddevelopment by finding internal or external seers when, but also how.who can predict the future with insight and clarity. In Slow the disruptive innovation long enoughevery industry there are a handful of these visionar- to better it. The best survival strategy may simplyies, whose talents are based on equal parts genius and be to ensure that disrupters can’t make money fromcomplete immersion in the industry’s inner workings. their inventions until you’re ready to acquire them or We call such seers “truth tellers,” after the char- you can win with a product of your own. You can’tacters on soap operas that advance the plot by re- stop a big-bang disruption once its unconstrainedvealing big secrets. Your truth tellers may be easy to growth has taken off, but you can make it harder foridentify, if not to accept. They may be employees far its developers to cash in. Many big-bang disruptersbelow the ranks of senior management, working on build market share and network effects by offeringthe front lines of competition and change. They may their early products free. You can delay their profit-not be your employees at all. Longtime customers, ability by lowering prices, locking in customers withventure capitalists, industry analysts, and science long-term contracts, or forming strategic alliancesfiction writers may all be truth tellers. with advertisers and other companies critical to your If finding a truth teller is hard, learning when to rivals’ plans.listen is even harder. Truth tellers are often eccentric, Meanwhile, look for opportunities to lever-and their lucidity can easily be mistaken for arro- age your surviving assets elsewhere. When pinball52 Harvard Business Review March 2013  
  • The Big Idea Big-Bang Disruption hbr.org machines were disrupted by video games, the in- M&A strategies. Once customers shift to the new dustry’s biggest player, Williams Electronics (now technology, it’s too late for a graceful exit—at best, WMS), licensed early home games and turned them it’s time for a fire sale. In the end Borders Group into arcade machines. Then it exited the business al- wasn’t acquired; it was liquidated, as were many together by moving sideways into high-tech slot ma- other brick-and-mortar retailers that could not com- chines, where it now thrives. The company learned pete with the lower cost and better service of online what it needed to know about the new technology alternatives. Industry leaders that fall behind may and then applied it to a new business where there find their market worth is little more than the value were fewer innovators to compete with. of their patent portfolio and cash on hand, as bank- Get closer to the exits, and be ready for a rupt photo giant Kodak recently discovered. fast escape. It’s up to senior management to con- Try a new kind of diversification. Diversifica- front the reality that even long-successful strategies tion has always been a hedge against risk in cyclical may be suddenly upended, requiring a radical re- industries. As industry change becomes less cyclical creation of the business. To compete with undisci- and more volatile, having a diverse set of businesses plined competitors, you have to prepare for immedi- is vital. Fujifilm, a perennial also-ran in the film ate evacuation of current markets and be ready to get business, has survived the transformation to digital rid of once-valuable assets. photography by transitioning to other products and Incumbents are often trapped by their balance services that draw on subsidiary technologies, rang- sheets. Traditional accounting still has little to say ing from nanotechnology to the manufacture of flat- about the value of expertise, brands, patents, and panel TVs. A move into cosmetics, for example, was In the fight against this kind of disruption, intangibles are your most valuable assets—and perhaps the only ones you’ll want to take with you. other intangibles. But in a fight against a big-bang made possible by repurposing chemical processes disruption, they are the most valuable of your exist- developed to keep photos from fading. TomTom has ing assets—perhaps the only ones you’ll want to take begun to ease its reliance on its automotive naviga- with you. Knowing you have them, and their true tion systems business by signing a deal last June worth, can make all the difference to your survival. with Apple to provide mobile mapping services. For all other kinds of assets, a big-bang disruption How do you launch your own innovations? Make can set off a rapid decline in value, making it impor- sure future strategies are built on a platform that tant not only to shed those technologies but to do so can easily be extended and experimented with, and before they become worthless. Take a page from the quickly scaled both up and down. The profitable semiconductor industry, where fabricators are now life of a big-bang disrupter may be short, and you’ll hedging investments in new capacity by contract- need to be ready with the next one before some- ing to sell plants at a future time and price, often be- one beats you to it. Think again of Amazon, which fore they’re even built. Or consider the recently an- isn’t so much a set of businesses as it is a technol- nounced acquisition of the venerable New York Stock ogy platform that allows the company to repurpose Exchange by the upstart IntercontinentalExchange. its intangible assets—its expertise in e-business, its With the rapid transformation of financial trading remarkable efficiency in forming collaborative part- from physical to electronic, the residual value of the nerships with thousands of other businesses, and NYSE would appear to be largely in its brand. its leadership in software virtualization—as market Facing the imminent arrival of a big-bang dis- conditions change. Amazon now sells not just books rupter, companies must ruthlessly reassess their but everything and leases its core technologies to54 Harvard Business Review March 2013  
  • The Big Idea Big-Bang Disruption hbr.org In many mature industries, we’ve seen early failed experiments that could signal big bangs in the making. third-party resellers. It even offers its expertise in including faster charging and more-dependable bat- online retailing and cloud computing to unrelated teries, consumers seem to be waiting for the industry businesses that outsource their hardware and soft- to get it just right. That’s a big bang in the making. ware needs to Amazon. Likewise, payment processing is poised to mi- grate from credit cards to smartphones, and it may Your Business Is not be today’s dominant players that launch the win- Already Being Disrupted ning app. Given the rapid success of payment inno- You can’t see big-bang disruption coming. You can’t vations like Kenya’s M-Pesa in the developing world, stop it. You can’t overcome it. Old-style disruption the right solution in developed markets is likely to posed the innovator’s dilemma. Big-bang disruption hit big and fast when it finally coalesces. is the innovator’s disaster. And it will be keeping ex- Even in industries where regulations limit com- ecutives in every industry in a cold sweat for a long petition, there is growing pressure from big-bang time to come. disrupters homing in on large-scale inefficiencies. The impact of big-bang disrupters is certainly Education is being privatized and moving online, ex- amplified for technology- and information-intensive posing just how little our public institutions have in- businesses, but most industries are at risk. In auto- vested in technology that visibly advances their core mobiles, for example, manufacturers are aware of teaching mission. Hospitals are reluctant to embrace the threat posed by the electric car, having seen ver- telemedicine, even though it offers the potential to sions of it since the late 1800s. But so far there has provide quality, affordable health care regardless of been no steadily growing market of early adopters, location. Highly regulated taxi and limousine mar- despite a wide range of offerings today from both kets are being invaded by new car services such as start-ups and global incumbents. As purely electric Uber, which allows customers to order and pay with vehicles continue to improve their core technologies, a smartphone and track dispatched rides using mo- bile location services. These and other mature industry segments—in- cluding many professional services, manufacturing, distribution, and retailing—are already experiencing their early failed experiments. Today’s experiments may not be scalable, but an undisciplined disruption could lurk within them all. Their big bangs may not be far off. The good news is that big-bang disruptions hold immense potential for those who can quickly learn the new rules of unencumbered development, un- constrained growth, and undisciplined strategy. Your current business may be replaced by something more dynamic and unstable but also more profit- able. And the change will come not over time but suddenly. In other words, not with a whimper—but with a bang.   HBR Reprint R1303B Cartoon: bob Eckstein Larry Downes is a fellow with the Accenture Institute for High Performance. His most recent book is The Laws of Disruption (Basic Books, 2009). Paul F. Nunes is the global managing director of research at the Accenture “Well, what did TripAdvisor say about this place?” Institute for High Performance and the coauthor of Jumping the S-Curve (Harvard Business Review Press, 2011).56 Harvard Business Review March 2013