11 Sources of Disruption – Is Your Business Monitoring These Threats and Opportunities

Think you are aware of the forces that might disrupt your business? Your lens may be far too narrow.

Disruption

Disruption that can affect your business will come from one of two broad horizons:

1.) Predicted Disruption, typically familiar threats

2.) Unpredicted Disruption, disrupting unknown forces. Just because its unpredicted does not mean its unpredictable.

The long-term strategic plan for your business must cover both disruptive horizons if you are to avoid unplanned events leading to you having to made rapid decisions under duress. For example, what will be the impacts of:

•   New competitors,
•   New products,
•   New technology,
•   Indirect products and services that compete for customers resources,
•   Regulatory changes,
•   Climate change

Plus many more.

Failure to plan for change outside those known variables is how even the biggest and most respected companies get disrupted out of the market.

A simple tool can be used to apply the future forces theory to aid in developing strategic thinking. It lists 11 sources of macro change that are typically outside a leader’s control. Most change is initiated as the result of disruption in one or more of these 11 sources. Allocate attention to all 11, and look for areas of convergence, variations, and contradictions. Emerging patterns are especially important because they signal transformation of some kind. As a leader, you must connect the dots back to your industry and business and place teams to take incremental actions.

This tool shows the 11 sources of macro change that are typically outside a leader’s control. Since technology is intertwined with everyday life, it is shown as intersecting with all the other sources.

The 11 Macro Sources of Disruption

Sources of macro change encompass the following:

1. Wealth distribution: the distribution of income across a population’s households, the concentration of assets in various communities, the ability for individuals to move up from their existing financial circumstances, and the gap between the top and bottom brackets within an economy.

2. Education: access to and quality of primary, secondary, and postsecondary education; workforce training; trade apprenticeships; certification programs; the ways in which people are learning and the tools they are using; what people are interested in studying.

3. Infrastructure: physical, organizational, and digital structures needed for society to operate (bridges, power grids, roads, Wi-Fi towers, closed-circuit security cameras); the ways in which the infrastructure of one city, state, or country might affect another’s.

4. Government: local, state, national, and international governing bodies, their planning cycles, their elections, and the regulatory decisions they make.

5. Geopolitics: the relationships between the leaders, militaries, and governments of different countries; the risk faced by investors, companies, and elected leaders in response to regulatory, economic, or military actions.

6. Economy: shifts in standard macroeconomic and microeconomic factors.

7. Public health: changes occurring in the health and behaviour of a community’s population in response to lifestyles, popular culture, disease, government regulation, warfare or conflict, and religious beliefs.

8. Demographics: observing how birth and death rates, income, population density, human migration, disease, and other dynamics are leading to shifts in communities.

9. Environment: changes to the natural world or specific geographic areas, including extreme weather events, climate fluctuations, rising sea levels, drought, high or low temperatures, and more. Agricultural production is included in this category.

10. Media and telecommunications: all the ways in which we send and receive information and learn about the world, including social networks, news organizations, digital platforms, video streaming services, gaming and e-sports systems, 5G, and the boundless other ways in which we connect with each other.

11. Technology: not as an isolated source of macro change, but as the connective tissue linking business, government, and society. Look for emerging tech developments as well as tech signals within the other sources of change.

This may seem an unduly broad list of signals to track to prepare for the future, but history has proven, ignoring these potential sources of change leaves organisations vulnerable to disruption. An example of what comes to pass when companies ignore these signals happened in 2004, when there were several emerging weak signals that pointed to a drastic shift in how people communicated. Two senior leadership teams had access to the same information. One looked for external factors actively, while the other simply used trends within its industry to make incremental improvements to its existing suite of products. Those decisions would result in the end of one of the world’s most loved and respected companies and the rise of an unlikely competitor that no one saw coming. The signals included the following developments:

•        New software made it easy for anyone to rip content from CDs and DVDs.
•        Peer-to-peer file sharing websites, like BitTorrent, isoHunt, The Pirate Bay, and LimeWire, that were first used by hackers had become popular with ordinary people who were sharing music and movies widely.
•        Demand for digital content was growing fast; sales of physical media were starting to decline.
•        Game developers were experimenting with haptic technology that responded to pressure and touch. In a combat game, for instance, when a player got hit by enemy fire, they’d feel the controller buzz. Developers were also building haptics into early touch screens: Players could simply touch an icon to advance, move back, turn, or stop.
•        In Korea and Japan, consumer gadgets were being built with dual functions: There were digital cameras with MP3 players; mobile phones had retractable metal antennas to receive broadcast TV signals.

One of the senior leadership teams connected those signals with its existing work and foresaw a world in which all our existing devices converged into just one mobile phone that had enough power to record videos, play games, check email, manage calendars, show interactive maps with directions, and much more. That team had no cherished beliefs about the existing form factor of our mobile phones and was willing to accept alternative ideas for how a computer-phone could work. That team worked at Apple, and in 2007, a product that had combined all those weak signals into its strategy went on sale: the first iPhone. By the end of the decade, a company that once was mostly known for its sleek desktop computers had forced the entire mobile device market to bend to its vision of the future.

By contrast, these very same weak signals never caught the attention of Research in Motion (RIM), which at the time made the world’s most popular phone, the BlackBerry. It was the first device that allowed us to stay truly connected to the office. Perhaps most important, it had a full, physical keyboard. All other phones at that point simply had numbered buttons; to type letters required hitting a few buttons to access one of the three letters assigned to each number. Before the BlackBerry, a simple three-line text message could take several minutes to type.

Because of the BlackBerry’s enormous popularity, RIM had become one of the largest and most valuable companies in the world, valued at $26 billion. It controlled an estimated 70% of the mobile market share and counted 7 million BlackBerry users. With its great run of success, the organisation’s culture did not allow for alternative versions of the future, and internally, there was an aversion to contradicting cherished beliefs. Managers who did connect those weak signals to the BlackBerry did not have credibility outside their departments. As a result, all the disruptive external forces Apple was actively tracking never broke through to the senior leadership team of RIM. RIM continued innovating narrowly, selling a smaller BlackBerry Pearl with a tiny, pearl-shaped mouse embedded in the keyboard and releasing BlackBerries in new colours. It was, in hindsight, the defensive strategy that Clayton Christensen explained in his Theory of Disruptive Innovation. Threatened by a disruption, incumbents retreat to the strategy of what Christensen called sustaining innovations — new bells and whistles that allow the incumbent to keep its customer base and, more important, its profit margin. But such innovations virtually ignore the disruptions breaking into the incumbent’s market.

Once the iPhone launched, Apple kept listening for signals while RIM never recalibrated its strategy. Rather than quickly adapting its beloved product for a new generation of mobile users, RIM continued tweaking and incrementally improving its existing BlackBerries and its operating system. That first iPhone was in many ways a red herring. As is so often true with successful disrupters, the first product to break through is often low quality and barely “good enough” for consumers. That is what enables incumbents to justify ignoring them. But the ascent to quality is rapid. Apple swiftly made improvements to the phone and the operating system. Soon it became clear that the iPhone was never intended to compete against the BlackBerry. Apple had an entirely different vision for the future of smartphones — it saw the trend in single devices for all of life, not just business — and it would leapfrog RIM as a result.

The ways in which RIM and Apple planned their futures are what sealed their fates, and what happened to RIM is a warning that applies to every organization. Senior leaders can choose to lean into uncertainty and methodically track disruptive forces early, or they can choose to innovate narrowly and reinforce established practices and beliefs.

Many companies around the world use the future forces theory to help them make sense of deep uncertainty and break free from the tyranny of narrow innovation. Some use it at the start of a strategic project, while others use it as a guiding principle throughout their work streams, processes, and planning. The key is to make a connection between each source of change and the company and to ask questions like Who is funding new developments and experimentation in this source of change? Which populations will be directly or indirectly affected by shifts in this area? Could any changes in this source lead to future regulatory actions? How might a shift in this area lead to shifts in other sectors? Who would benefit if an advancement in this source of change winds up causing harm?

It might go against the established culture of your organisation, but embracing uncertainty is the best way to confront external forces outside your control. Seeking out weak signals by intentionally looking through the lenses of macro change is the best possible way to make sure your organisation stays ahead of the next wave of disruption. Better yet, it is how your team could find itself on the edge of that wave, leading your entire industry into the future.

My thanks to Amy Webb, the founder of the Future Today Institute and professor of strategic foresight at the New York University Stern School of Business, who is the source for much of the content.