Forewarned is forearmed: Assessing the disruptive potential of emerging technologies

Future insight has never been needed more

The 2002 Spielberg sci-fi film Minority Report presented a world in which ‘foreknowledge’ provided by psychics called ‘precogs’ is used to detect crime before it happens, allowing Tom Cruise’s ‘pre-crime’ team to swoop in and prevent a future felony. Critics may have given the film mixed reviews but many an executive may have been wondering how they recruit their own precogs for the foresight they could offer to their own business – shedding light on future opportunities and disruptive events.

Insight into the future has never been needed more. The pace of changing is quickening. R&D cycles and time to market for new technologies are reducing, giving businesses less time to detect and respond to disruptive events. Firms can’t wait and see if new technologies will impact their business model, add to, or detract from their competitive advantage. Instead they must proactively seek out the future technologies that have the potential to impact their value streams.

Progressive businesses already invest time and resources scanning for and evaluating new technologies, and researching the implications for their business models. Others sink millions investigating new technology or buying tech start-ups in an attempt to keep ahead in an increasingly competitive and ruthless business environment.

A business’s ability to detect new technologies and then quickly make an informed decision to respond or invest can be the difference between exponential growth or bankruptcy.

The challenge facing exec teams

Anecdotal evidence from discussions with executives demonstrates that the quickening pace of change is making the management of technology strategies more difficult. Three key challenges are faced:

1. Identifying: Not a day goes by without the business press welcoming a new tech start-up into the world, anticipating a new business model or celebrating the latest ‘must have’ tech. But with so many, often interrelated technologies it can be difficult to identify which are worthy of attention. To complicate matters further, seemingly unrelated technologies have the potential to cross-over between industries. Consider, for example, Uber which has spread across the developed world like a wildfire, spurring others to replicate the business model to create “the Uber of” many different industries. Uber’s ‘match making’ business model - allocating resources to demand – has shown to have disruptive potential far wider than the private car hire industry but business leaders must first have the vision to recognise this.
2. Assessing: Identifying a technology is one thing, assessing its potential quite another. Understanding which emerging technologies to take seriously and which present an opportunity or are likely to disrupt competitive advantage are the questions faced across all industries. The investment decision can be fraught with danger. Do you invest in R&D in-house and hope your competitors don’t beat you to market or do you acquire the technology at embryonic stage on the promise of future income and hope you backed the right one? 

1. Acting: The next challenge is in devising appropriate strategies to defend against or capitalise on emerging technology in an uncertain environment. Scenario planning is a time consuming activity, often seen as a luxury where very few of the responses will ever be actioned. 

To address these challenges and more, executives need a systematic approach to identifying and assessing technologies at both a firm and industry level. The approach must identify the factors that influence disruptiveness and be capable of assessing, scoring and ranking new technologies to narrow the search and help identify strategies.

However, traditional approaches appear inadequate, being neither comprehensive nor robust. Previous studies consider the factors of disruption but mostly apply these retrospectively to comment on historical disruptions, very few attempt to predict the future. There appears not to be a comprehensive diagnostic model that uses a robust scoring system to evaluate emerging technologies

Introducing the Disruptive Radar

The Disruptive Radar is a new diagnostic model which investigates the interaction of technology, market and human psychology impacting disruptiveness. The model is built on academic research into the common characteristics (factors) of disruptive technology, combining the findings of many papers since Clayton Christianson first wrote his thesis on disruptive technology in 1995. These factors have been distilled down to a core set which we believe should be the focus of attention.

The key contribution of the model is the consideration of human psychology. The reactions of public, consumers, competitors, managers and employees in pursuit of their own agenda have been largely overlooked until now. For example, changes in buying behaviour and adoption of new technology, fear of new technology or industry resistance owing to vested interests in alternatives all impact the proliferation and disruptive potential of new technology.

The Disruptive Radar model recognises that in addition to factors enabling disruption, there are opposing factors that inhibit it. Ultimately, the disruptive potential of a technology is the net result of the interplay between these enabling and inhibiting factors.

Enablers

Inhibitors

These factors can be modelled in a radar diagram for technologies at firm or industry level. For instance, the radar below investigates the potential for digital currency to disrupt the retail banking sector.

It is immediately possible to see that although some enablers (on the right) score highly, such as scalability, the inhibitors (on the left) are stronger forces. The key obstacles to digital currencies disrupting banking are public distrust in the technology, vested interests of retail banks in the status quo and legislative barriers to entry. The combined result of the enabling and inhibiting forces is a Net Disruptiveness Score (NDS) of -9 (out of a possible 35) for the disruptiveness of digital currency on the retail-banking sector.

In reality this is an overly simplistic example designed to illustrate the approach. A more interesting and insightful application of the radar is to zone in on niche sub-markets to see if the results are the same. If the Net Disruptiveness Score is positive in one or more niche markets the question arises as to whether these niches can influence the greater market. One thing that history has shown us is that Silicon Valley disrupters are very good at going after niches, including those deemed of limited value by incumbent firms. These niches initially act as a proving ground, and later, as a spring board for attacking the main market.     

The Disruptive Radar can be used to enable management to model different future scenarios and investigate the potential impact, allowing the plotting of disruptive potential over time as the technology advances and market conditions change.

Application of the model

It is our intention to equip executives with the tools to enable them to act appropriately to the threat of disruption and devise response strategies that protect or enhance competitive advantage, as well as help start-ups and VC funds to identify where best to invest resources.

We also seek to help executives tackle ‘what if?’ scenario-based questions such as the impact on disruptiveness if one or more of the factors were to change in the future. For example, what would happen to the adoption and disruptiveness of cryptocurrencies if they were to be recognised as an official currency on the foreign exchange markets?

Our vision is to recognise common patterns for disruptive technology and help explain how different combinations of factors result in different outcomes, for example, why some technologies may be immediately disruptive on a global scale yet others are limited to particular product or geographical markets.

To find out more about the model and how to apply it please get in touch.

About the Authors

Nick Rawlings is a Strategy & Innovation Director in the UK insurance industry.

Rachel Lewis heads-up Multi- Currency Payment Operations for a global bank in the USA.

Nick and Rachel have MBAs with distinction from Allied Manchester Business School in the UK and co-authored this paper based on academic research and interviews conducted in the Financial Services industry on both sides of the Atlantic.