5.3
Preparing for disruption
To protect themselves, organisations need to constantly scan both the horizon for emerging technologies and their industries and markets for signs of potentially disruptive new entrants.
Horizon scanning
The Organisation for Economic Co-operation and Development (OECD) describes horizon scanning as “a technique for detecting early signs of potentially important developments through a systematic examination of potential threats and opportunities, with emphasis on new technology and its effects on the issue at hand.”
Many organisations take input from third party firms, such as consultancy organisations
More focused horizon scanning can be undertaken by small groups of subject matter expert
Horizon scanning is sometimes carried out by cross-functional teams
Gartner’s 'hype cycle
Market scanning
Organisations use horizon scanning to identify potential impacts, threats and opportunities from emerging technologies
to assess current and potential future markets they operate in.
Porter’s five forces model
threat of new entrants
threat of substitutes
bargaining power of customers
bargaining power of suppliers
competitive rivalry.
Combining horizon and market scanning
the output needs to be combined and input into recommendations for strategic planning, targeted investment and decision making.
Responding to disruption
proactive incumbents analyse and act upon the threat. Activities may include:
analysis of the disrupter’s emerging technology and business model
analysis of the threat, risks and likely impact on the incumbent’s business – this may include development of multiple potential scenarios
assessment of the incumbent’s own capabilities, business model, strengths and weaknesses
evaluation of options to input into the strategic plan – these may include a combination of defence, evolution of the business, attempts to match and/or better the disruption, acquisition of the disrupter or other emerging capability, and for large multi-faceted corporations divesting the incumbent business unit.
Prof Christensen’s urge incumbents to take a dual-pronged approach:
Invest in sustaining incremental innovations in the core business to satisfy and strengthen relationships with existing customers.
Create a new business unit or division focused on the business growth opportunities created by disruptive innovation.
Constantinos and Constantinos, argue that disruptive innovations are not necessarily better than incumbent propositions:
Focus on and invest in the traditional business
Ignore the innovation – it’s not your business
Attack back – disrupt the disruption.
Adopt the innovation by playing both games at once – effectively this is the recommendation made by Prof Christensen and his colleagues.
Embrace the innovation completely and scale it up.
Additional options
Divest
Acquire
Before a new entrant acquires significant market share, the incumbent could attempt to acquire the new entrant before it becomes too big to stop
Before or after a new entrant acquires significant market share, divest the incumbent business unit.