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TECH TALK: Disruptions: 10X Change

July 11th, 2005 · No Comments

Disruptions are technological shifts which provide opportunity for newcomers to take on incumbents and perhaps usurp power. It happens all the time. Todays king is not guaranteed to be tomorrows emperor we have seen this in history and politics, and we see it in business also. While at times, corporations themselves hasten their downfall by questionable decisions (in retrospect), at other times entrepreneurial start-ups with some luck rapidly make their way to the top. There is no magic formula for success. But understanding disruptions and key trends can help avoid mistakes that can accelerate failure.

Disruptions are about change 10X change. Here is what Andy Grove has to say about change (Fortune, July 2003):

As a technologist with an interest in business strategy, I have long been intrigued by what happens to industries when a new technology changes the rules of the game, usually by providing an order of magnitude 10X improvement in cost-effectiveness. The history of technology-based industries communications, computing, and health sciences is marked by such transformations.

Whether rooted in technology or not, 10X changes wreak havoc, forcing all the players to adapt. Often the only way they can do so is by transforming their own business models in fundamental ways. Most of the firms that dominated the old order usually disappear, replaced by new players operating in new relationships under new rules.

Classical competition theory doesn’t address situations like this. In fact, it implicitly assumes that the environment in which a company operates is basically a given and limits itself to suggesting ways in which a company can better its lot in this environment. In contrast, 10X changes are usually initiated by one firm whose strategic action changes the environment for all the others. But at the same time, that firm’s strategic action changes its own environment. And the interaction between the firm’s strategic action and the changing environment can yield dramatic outcomes.

I’d like to borrow a concept from physics to describe the difference between two types of strategic actions. If the effect of a company’s strategic action changes only its own competitive position but not the environment, the action is linear. In contrast, a nonlinear strategic action sets off changes in the environment that the company as well as its competitors then have to cope with.

Nonlinear strategic actions would seem to have immense appeal for the ambitious strategist. Not only can they improve the position of the company within the environment, but they hold the promise of shaping the environment so that it is favorable to the company’s new strategy. They are the Holy Grail of strategic actions.

Many gurus like Clay Christensen have discussed the theory of disruptions and how to handle them. While it is good to study disruptions, they can also be tremendous opportunities for entrepreneurs. The times we are living in today are filled with disruptions brought on by forces that interplay with each other, creating multiplier effects.

In this series, I will highlight some of the disruptions that we are seeing in the world of technology brought on by concurrent developments across multiple areas. Like in my past articles, my bias will be towards emerging markets like India.

Tomorrow: Access Devices, Networks, Connectivity

Tags: Tech Talk

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