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Using Industry Disruption to Your Advantage

Using Industry Disruption to AdvantageHarvard Business School professor Clayton Christensen calls it "disruptive innovation": a product or service so groundbreaking that it changes the competitive landscape, pushes former industry powerhouses toward extinction, and anoints a new, small group of usually young companies to leadership positions.

Think of what peer-to-peer networking and iTunes are doing to the recording industry, and you get a flavor for how quickly and fundamentally the scenery can change. The IBM PC and Apple's Macintosh disrupted minicomputer giants such as DEC in the same way. Sears was disrupted by Wal-Mart, Kodak by cheap digital cameras.

The good news: If your company can spot a disruptive trend and take advantage of it, you can hit the "reset" button on entire industries.

In a recent article in Harvard Business School's Working Knowledge, professor Lynda Applegate discusses how established companies can spot these fundamental ground shifts and take advantage.

Disruptors come in all shapes and sizes, says Applegate, and include new technologies (flash memory); new business models (Internet search advertising); and industry consolidation (airlines) or fragmentation (entertainment).

Companies that view these forces as threats are closer to being swept away than those who see cash in chaos. Says Applegate: "Successful serial entrepreneurs are able to recognize patterns before an opportunity takes shape. They search for ideas at the intersection of markets, industries, and emerging technologies. They look for disruptors that will "unfreeze" a stable industry and the companies that compete within them. They look for business models that worked well in one market and can be adapted and applied in another. They recognize that they must listen to customers but must sometimes educate the marketplace to new approaches."

Check out the article for Applegate's worksheets on how to identify disruptive trends and evaluate new ideas.

What do you think is the next disruptive innovation in the market, and what big names will topple as a result? My prediction: the established health care industry in the U.S. is about to get disrupted by presidential politics, unsustainable cost escalation, improving technology, competing business models (health clinics in shopping malls), offshore surgery alternatives, and fed up customers.

(Tornado disruption image by Skewgee, CC 2.0)

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