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“Disruptive technology” is an oft-misused term

Disruptive technology

Written a little bit before about disruption, and also change management — and some of these ideas about disruptive technology might occur at the intersection of those ideas.

When we hear the term “disruptive technology” or try to think about it, we usually roll it up in technology. Theory goes like this:

  • Technology is moving faster than ever.
  • Incumbent, dominant companies are slow-moving.
  • Startups are quick and nimble.
  • The startups create or develop some disruptive technology.
  • Now the incumbent company will die a slow, or maybe rapid, death.

That narrative has been the dominant one around disruptive technology for the past decade. But it might be a little bit misguided.

Disruptive technology: Kodak and Instagram 

Conventional “disruption” narrative would be that Instagram “disrupted” photography and digital photo sharing. Seems logical enough. But if you read this article from Stanford called “Why You Don’t Understand Disruption,” here’s the real deal:

I’m describing a project launched in 1996 — that’s right, 1996 — by a group at Kodak’s Brazil headquarters in São Paulo. (Yes, Kodak: everybody’s favorite example of a company that failed by being too slow to innovate.) Kodak’s country head in Brazil, Jarbas Mendes, and his team were trying to find innovative ways to help customers share their digital photographs. The team understood that the internet, brand new at the time, could enable such sharing. So they designed a system where one could upload photographs to a server in the cloud (though nobody yet used the term “cloud”) and send a code to another person, who could then view the photographs.

So Kodak, in 1996, had the chance to become Instagram. If that had happened, Instagram probably never would have needed to happen. So wait, how did this all occur?

It’s less about tech and more about organizational blind spots

Big companies have a lot of resources. They can flip those resources to different spots and innovate pretty quickly if they want. So while “the slow-moving incumbent” is the normal narrative, it’s not right.

(Think about it like this: you ever worked in a big company? How often are people pivoting to new revenue streams? Sometimes it happens twice a day or more. Companies are fine moving quickly on a new money thing.)

So what’s the problem, then?




 

The problem comes down to decision-making, which is very flawed at most companies. (You can argue that a lot of “decision-makers” in orgs don’t even really make decisions.) Per research from Bain, companies that get to $5B in sales tend to have 9-14 levels of management.

That stat — “9-14 levels of management” — is the real issue with disruptive technology. Kodak was a major company in 1996. They got to the tech part somewhat easily, because they had resources. But when Instagram got to the tech part, they could just go act on it. When Kodak got to the tech part, 9-14 levels of people need to weigh in, make themselves feel relevant, ask for revisions to seem “managerial,” and the like.

This is why organizational design issues matter, even if they’re not on a balance sheet

… because when they slow down your decision-making channels, they prevent you from making more money. Which, as we know, was/is the goal.

But this is the most innovative time in history, right?

To some extent, sure. But for most people, no. In terms of hiring patterns around managerial levels, it’s actually the most bureaucratic time in North American history. Bureaucracy persists for one reason: it’s easy to make a good salary without really having to do very much. We all secretly love that, even if the term “bureaucracy” has a negative connotation.

But that’s really what is getting in the way of discussions about disruptive technology. The technology is moving fast, sure — but that’s not the reason companies are being disrupted. The big companies have access to that tech, and people to work on it, just like the upstarts. But the big companies fail because of how they structure and organize people around perceived relevance, not around actual work productivity.

What else might you add on our fascination with “disruptive technology?”

Ted Bauer

3 Comments

  1. Indeed disruption meant a headache to the company, but excessive focus on what the company did was part of their own downfall.
    Kodak did excellent with their photographic film, paper and inks. They wanted all the revenue out from that.
    And at the time it wasn’t that wrong. Internet was not available for everyone, it was expensive and reduced to colleges, universities and private corporations and of course, the government. Not to add that PCs were very expensive.
    Nevertheless, a parallel business product track would help them to keep them in the market.

    I enjoy your posts, thanks for writing!

    • Fair enough, though I think by diving too deep into the example cited, we run the risk of missing Ted’s overall point. Orgs sometimes back away from potential breakthroughs (breakthroughs that would oftentimes require very little capital/process restructuring) out of fear/complacency.

      I have seen and worked at organizations that are very guilty of this. Ted’s observation that “bureaucracy persists for one reason: it’s easy to make a good salary without really having to do very much” is especially prescient in one particular example that comes to mind.

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