Customers, not technology or intruders are the true disruptors
When CEOs of established companies are asked, “What really changes the rules of the game in your industry or business?” they almost always answer: “Technology X disrupts our business” or “Startup business Y disrupts our business.” But when the diagnosis is wrong, the choice of medicine and treatment plan is also wrong.
What managers forget is that the most common and clearest pattern of major change is that they are driven by customers. It is the customers who are behind the decisions to use or reject new technology, new products, or services. We call it adoption. It is also true that customers have the money the companies so desperately want and on which they are so dependent. When the business, product, or service is not selected, you are opted out. The result is a loss of future sales.
But what is happening? What we do know is that while technologies and competitors come and go in line with Schumpeter’s process of creative destruction, customer needs will usually be long lasting. Let me take higher education as an example – an industry that I know well and which many predict is overdue for major changes.
The need for education has not changed in several hundred years. The most significant differences are that it is global, accessible to more people – has become more democratic – and that more women than boys are studying. In addition, Edutech has enabled teaching to be offered by other than universities and colleges (MOOC) and that it can take place at a distance (online teaching)! That it takes time before the implications of this sink in with many Deans, is neither strange nor unnatural.
Educational institutions, like all established companies, have a cultural heritage. The difference is that higher education has a cultural heritage and a business model that has changed little since the world’s first university, Oxford University, was founded in 1096.
We call it “legacy” and it touches on ways to employ or promote faculty, how teaching and exams are carried out, and not least rituals at the beginning and end of the academic year. This creates predictability and inner peace. But the outside world has not stood still, and a gap has occurred in that the job that the students want to get done, can be done in a new way. NHH colleague Inger Stensaker calls this capacity for change. Managers, Deans, and organizations that have it, will manage the change process better and faster.
Common to all industries that have been overthrown by technology X or intruder Y is that it did not have to happen. Why did not bookstores, retailers, hotels, or taxi companies develop a similar solution as Amazon, Airbnb, and Uber? Why did the new solutions have to come from the outside?
In addition to cultural heritage or legacy, which drives down the ability to change quickly, another explanation is what Harvard professor Ted Levitt called narrow-mindedness (myopia). The result is that CEOs forget to keep up with other industries and technologies other than the dominant ones, the ones they know and use. But the worst thing is that they forget to investigate whether the job customers want to get done can be done in a better, cheaper, faster, or more entertaining way. We call it innovation.
What is the moral?
When large companies decide to truly understand what job customers want to get done when they engage a business, product, or service to do the job, executives end up responding more effectively to digital disruption. In this case, the choice of technology and solution is based on customer-added values.
Today, everyone is talking about digitization, AI / ML, IoT, and 5G. Collectively and individually, they represent powerful technologies with great potential. Some call them “the perfect storm.” The question managers need to ask themselves is: How can we use these technologies to create value for customers by enabling them to do the job they want done even better? The most attractive business will be chosen.
Rephrasing a quote by Jim Spohrer, I propose the following prediction: small and large businesses will not be replaced by AI, IoT, or 5G, but those that do not include them in their market offering or business model will be replaced by those who do.