Disruption Isn't Your Worst Problem, CEOs

Sometimes when you hear a word countless times it loses all meaning. Disruption is one of those words. We hear it so often that we don’t even question it anymore.

But there's a big problem with the mentality of "disruption." It implies that the situation is fleeting. A disruption is an interruption. If we're in the middle of a conversation and the phone rings, that's a disruption. If we're in the middle of a conversation and the phone rings with news of a loved one's death, that's a complete upheaval of everything. If you're eating dinner and you smell smoke, that's a disruption. If, by contrast, your house is in jeopardy of burning down, that's a clear line after which life will be fundamentally different.

Traditional companies should stop thinking of this permanent change in the way humans now and in the future will occupy the planet as a disruption. It's a way of life. Saying "we're being disrupted," is like standing there watching flames engulf your home and saying, "I really wanted to finish eating first" instead of calling for help.

This thought came to me when I was midway through reading the latest IBM CEO study. It dawned on me, after I saw the word disruption a few times, that disruption is really a myth. Since 2003, IBM has been releasing reports from interviews with thousands of CEOs around the world, clustered around a theme. This time, the theme is Redefining Competition. Let's take a look at the findings.

Trailblazers vs. Laggards

The report includes two critical demographics, CEOs at the vanguard and laggards, and makes distinctions between them. This is helpful, because it enables laggards to figure out how to strengthen their positions and gives those at the vanguard a sense or urgency to push into the next frontier or they won’t stay ahead for long.

“CEOs say we are at a watershed moment,” the report begins. “Technological advances are creating massive upheavals, with industries converging and new ecosystems emerging as never before. So how are the trailblazers guiding their organizations through this turmoil? ...We interviewed 5,247 top executives to find out what they think the future will bring and how they’re positioning their organizations to prosper in the “age of disruption.”

It was this initial reference to the “age of disruption,” that gave me pause. I prefer to think of this time as the Imagination Age, a period of transition between the Industrial Era and the Intelligence Era during which leaders need to learn to choose from among nebulous, ever-changing options to chart a path. (I’ve written about the Imagination Age here and here). What corporations and transitional institutions call disruption is really the inevitable result of their own failure to change. Evidence of this is right there in the IBM CEO study.

One of the most notable trends of the past decade, IBM reports, has been the increase in the significance CEOs attribute to technology. Ten years ago, they put it last on the list of the six most important external factors they expected to exert an influence on their enterprises. Now, it consistently "tops the features that light up their radar screens,” the report explains.

I remember being staggered by that finding in that report. In 1990, this would have been marginally acceptable. In 1995, maybe a few of the laggards could have gotten away with this. But ten years ago, they put it last? This raises a serious question: Are companies with this mindset being merely disrupted, or are they being rendered obsolete? These are two different things, and a CEO at the vanguard, in my experience working with CEOs, knows this, fears it, and channels that fear into swift, smart action.

According to the IBM report, CEOs get it now. Technology is a major priority, “and the other members of the C-suite have come around to the same view."

What is Disruption?

Traditional companies and organizations are being disrupted, but only from their own perspective. Many large companies have gotten so inwardly focused that they forget where they should be looking: at their customers. What they call disruptions, their customers call being better served. A company in chaos feels disrupted from every angle. Their former customers, however, are the happy beneficiaries of what feels from their perspective to be progress.

“New competitors, many of them from outside the industry, are entering the picture. What they’re doing will disrupt the market and our customer base.” CEO, Banking and Financial Markets, Canada

It was at this point in the report, reading the comment above, that the spell created by the word finally broke. What this CEO is really saying is “Our customers are leaving us for a better option and I’m upset about it.” To say that competitors are “disrupting” your customer base is wrong thinking about the problem. Competitors are serving your customer base by meeting their needs.

There are many complex reasons for this, including legacy code that is very difficult and expensive to update, being too comfortable with business as usual, and frankly, a risk-averse workforce that isn't rewarded for new ideas, gets punished for failure and therefore places a premium on paychecks over organizational health (have you seen the Gallup poll on engagement levels?). In many cases, though, this happens because companies waited until the world furnished proof that technology should have been their top priority. Even so, technology isn’t the main focus. Imagining what you can do with that technology is what’s important.

The Importance of Ecosystems

The most interesting part of the report, to me, was the focus on ecosystems. At the heart of the Imagination Age system is the notion that building collaborative ecosystems is the most important thing any organization can do. The more these networks are filled with cross-disciplinary thinkers, entrepreneurs, executives, scientists, technologists, artists, mathematicians and true cognitive diversity, the better. You don’t have to build everything in house, and if you know where to look, you can find what you need in order to move forward. Large companies have a significant advantage over their “disruptive” competitors in this sense. They are already global. In many cases, however, global multinationals treat each location as a separate silo, with the belief that the culture is just different in each place and there's not much you can do about it. As an ethnographer who has spent many years traveling around the world studying the physical and digital culture, I agree that culture is deep and entrenched and you absolutely need to understand and respect the local flavor in order to conduct business.

But in my work at Science House working with many companies to visualize their current cultural dynamics and desired future state (see how your company stacks up against Amazon here), I can say with equal conviction that the professional culture a company creates is the single most important aspect of a healthy ecosystem. Companies are accustomed to this process being a static one, with the notion that local twists are simply kinks that need to be tolerated on the path to shareholder value. This is wrong. Your global ecosystem is filled with smart people who can add value in ways that most companies haven’t even begun to tap.

“Operating within an open web of interdependent entities enables each enterprise to extend its reach and range far beyond what it could achieve as a solo entity,” the IBM CEO report states. “Collectively, the participants can create value in ways that were previously impossible. They can also get much more intelligence on customers and markets.”

Two-thirds of IBM’s respondents “plan to reassess their strategic direction and explore the potential for novel, non-traditional forms of growth. They’re actively pursuing opportunities to play a new or different role in the ecosystems they inhabit.”

We have seen a surge in clients seeking this service atAfter a leadership team maps their current and desired future state, and sees it visualized in front of them, that’s always the next question: How do we get there?

Being Agile, Not Just Doing Agile

One of the most pressing issues facing traditional companies is the relationship between business and IT. This has been our biggest focus area at Science House for the last couple of years, and we’ve learned a lot. Last year, I gave a keynote at a GE IT Leadership Summit at which CEO Jeff Immelt gave the opening comments. Up until recently, he said, IT hasn’t had a seat at the table. Now, IT is in the driver’s seat.

The rest of the event was filled with refreshingly vivid, clear stories about how IT and business collaborate to drive the business forward. Typically, at such events, when IT is given the opportunity to talk about what they’re doing, they do it in IT-speak, which tends to alienate business partners. At the GE event, the message was clear (the company is also doing a great job sharing the information about its digital offerings with customers), and set the tone for a deeply collaborative approach to creating value in an ultra-modern way.

“At one time, it made sense to hold off on launching a new offering until it was perfect, but consumers are increasingly tolerant of live fine-tuning to enhance products and services that are already on the market,” the IBM report shares.

Traditional companies are often averse to experimentation. They say they want it, but they aren’t generally set up for it.

Traditional companies are inclined to systematize everything, including processes that are inherently experimental at the onset. A great example of this is the proliferation of design thinking. Some companies got it right, but many didn't. Why?

“Design consultancies that promoted Design Thinking were, in effect, hoping that a process trick would produce significant cultural and organizational change,” IDEO's Tim Brown told Fast Company. “From the beginning, the process of Design Thinking was a scaffolding for the real deliverable: creativity. But in order to appeal to the business culture of process, it was denuded of the mess, the conflict, failure, emotions, and looping circularity that is part and parcel of the creative process. In a few companies, CEOs and managers accepted that mess along with the process and real innovation took place. In most others, it did not. As practitioners of design thinking in consultancies now acknowledge, the success rate for the process was low, very low.”

As Science House went deeper into the relationship between business and IT, we came to recognize that agile isn’t just a software methodology. It’s a cultural framework that enables companies to move forward quickly while respecting the value of the various cultures, mindsets and skills within the ecosystem. Our Agile Marketing framework, made up of simple methodologies that can be put to immediate use, took off like a shot. Agile HR is taking off now. We haven’t had any Agile Legal clients yet, but we are very curious to see how it goes when we do.

There's a big difference between being agile, and doing agile.

Accelerating Innovation

“The CEOs of the most successful enterprises also have different organizational philosophies,” IBM reports. “They place a higher premium on agility and experimentation, because they know these are prerequisites for disruptive innovation.”

Yes, yes, a thousand times, yes.

Science House founder James Jorasch is an inventor named on more than 700 patents, including those at the core of Priceline. He worked to bring many of those ideas to market. When he works with our clients on establishing innovation practices, the process sounds very unglamorous, in contrast to the notion of disruptors who wake up each morning thinking about how they can topple the establishment. The truth is, those disruptors are thinking about creating value for customers.

The fact that innovation is disruptive to traditional companies is an extrinsic result of value creation, not the intrinsic purpose. The purpose is to create value for customers. This will inevitably disrupt other business models.  Every solution will create new problems that will need to be solved.

As James likes to say, for every problem solved, ten new ones arise. Companies are either going to solve those problems at the pace demanded by reality, or be rendered obsolete by their inability to solve problems fast enough. Every solution will create new problems to be solved.

“CEOs know they need to prepare for a future in which disruption is pervasive,” IBM reports, “a future in which technological advances occur at breakneck speed, traditional industry classifications no longer exist and ecosystems revolutionize entire markets.”

It’s not that disruption is pervasive, it’s that progress is fast. You’re either solving problems and getting those solutions to your customers in time, or you’re not. Increasingly, there’s little room in between. The good news is, there are ways to start a practice of innovation and ecosystem development within your organization in tangible ways.

If you’re interested in discussing ways we can help your organization develop ecosystem thinking, practice innovation or visualize and achieve your desired future state, feel free to let me know.

(Disclosure: I have been a participant in brainstorming past IBM CEO reports prior to publication. IBM is a Science House client, but Science House was not involved in the current study in any way and IBM had no influence whatsoever on this post. GE is also a Science House client, but similarly had no influence on this post).

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