Why Disruption may be the wrong way for Digital Transformation [TT 1]

The phrase Digital Transformation has taken the world by storm. To us, as people working in the area of Transformation for the last 2 decades, it is a big positive. However, there is a dark underbelly to this shiny new phenomenon - 70% of Digital Transformation initiatives fail to hit the mark which means $900B out of the approx $1.3T spend is problematic. There are several reasons for this and I would like to cover one of the key reasons - misunderstanding of Disruption. Let me explain.

Misunderstanding Disruption

I request you, the reader, to think of a few Disruptive Innovations in your mind. Most likely you thought of Uber, iPhone, AirBnB, Tesla, Swiggy, Amazon Alexa.. Unfortunately none of those is a Disruptive Innovation. We made the mistake because we use Disruption [& Disruptive] based on its direct meaning in the dictionary.

The phrase Disruptive Innovation was introduced to the world by Professor Clayton Christensen in his landmark book The Innovator’s Dilemma originally published in the year 1997. Christensen’s breakthrough insight is - the principle of serving customers well, which is at the core of all organizations, eventually leads to Performance Oversupply (Christensen coined this phrase also) and consequently to Disruption. Let us look at this through an example to understand better.

Microsoft Office & Performance Oversupply

All of you reading this post most likely use Microsoft Office software or have used it in the past. Now if I ask you, how many features of Microsoft Office do you use on a percentage basis, most of you will say less than 10%. How did Microsoft Office land into this situation where it has orders of magnitude more features than most users need? It is because, to Christensen’s brilliant insight, Microsoft is merely serving its customers well by adding features that customers in various industry segments ask for. But by so doing they have created Performance Oversupply.

This created an opening for an equivalent set of products from Google, which is free to consumers or very inexpensive to small businesses. Google needed to build out only the few important features that most customers needed. Now if you are Microsoft how do you respond? If Microsoft made Office free or as inexpensive as Google, then approx 25B$ annual revenue from Office will evaporate overnight. Needless to say that will be a catastrophe. Hence we can say Microsoft Office has been disrupted by Google’s equivalent apps. This is the force of Disruption - it leaves the incumbent with no legitimate neutralizing response because their business & operating model has been disrupted. 

We uncovered something very interesting through our work and research in transformation - Performance Oversupply happens very rarely and consequently Disruption is equally very rare. Therefore focusing our transformation initiatives on disruption limits the opportunities to nearly zero. What should we be focusing on then?

Performance Undersupply**

Fortunately, our research & work in transformation has uncovered some good news - that the phenomenon of Performance Undersupply, the exact opposite of Performance Oversupply, is pervasive and ubiquitous. We can fairly easily show that Performance Undersupply is present and will always be present in every system or product or service that humans have designed. Performance Undersupply is akin to a law of nature.

The phrase Performance Undersupply immediately brings to mind - missed SLAs, project deadlines, quality issues/defects etc. These are very easy to spot because customers complain about them - tip of the iceberg. Most organizations will take these seriously and fix them because they don’t want to lose the customer’s business. These don’t lead to transformation. Performance Undersupply is a bottom of the iceberg phenomenon and is not easy to spot.

Water Taps & Performance Undersupply

Let us look at an example to understand this better. Water is becoming an increasingly scarce commodity across many parts of the world and hence conserving water is becoming very important. Many of us would have had the experience of brushing teeth or having a shave or chatting with someone unmindful of the open tap leading to several liters/gallons of wasted water. It is extremely unlikely that you have encountered a water tap in any part of the world where it shows the amount of water consumed since you opened the tap till it is closed. Why is it that taps don’t have this important feature? Because the humble water tap was originally designed during the Roman Civilization and the designs have been with us since then with incremental improvements. Even today, most designers of water taps don’t consider conserving water as a customer problem that the design should address, because this problem has not been explicitly stated by customers and hence bottom of the iceberg. I don’t believe any one of us have raised an issue with any water supply/facilities teams to make the taps to show consumption. In other words, a Performance Undersupply, has become an accepted feature of the system. Our research and work shows that it is these types of Performance Undersupply scenarios, that are accepted features, give rise to transformations.

Uber & Performance Undersupply

To reinforce the point, let us look at Uber, a well-understood example. Before Uber, we were all used to, standing in the corner of a street to hail a taxi cab or call a cab company’s phone number. Though it didn’t work that effectively especially during peak times, none of us still complained to the taxi administration or the local government about this issue. This Performance Undersupply has existed for a long time and had become an accepted feature. Uber looked at this Performance Undersupply as a problem and solved it admirably and that is why it is considered a world-changing digital transformation.

Infinite Opportunities

In the age of Digital, customer needs have advanced far ahead of organizations’ ability to address them. This leaves every organization with an almost infinite number of Performance Undersupply scenarios. However, because these are bottom of the iceberg and not easily identified, we need a new set of techniques to find them. I am happy to say that we in Tiny Magiq have developed a set of methods**, and the early results from our work with customers is quite encouraging.

Adapted from an article originally written by Sukumar Rajagopal for the PMI Bangalore Chapter Newsletter May 2019.

** Please note that our firm Tiny Magiq has filed for a trademark for the phrase Performance Undersupply. We have also filed for a patent for the key parts of our digital & behavior transformation method we call HiPoHa ? (HiPoHa is a registered trademark of Tiny Magiq)