Disrupting the Disrupters

Destruction and replacement via technological innovation have been key characteristics of economic development for centuries.

In the context of IT and communications (and many other markets besides) we now commonly hear this referred to as ‘disruption’ or ‘disruptive innovation’.

A disruptive innovation can be seen as a very specific type of change, typically a new technology that is inferior in some ways to current forms, but sufficiently desirable in other ways to drive adoption.

Those of us that have been around the block a few times in the IT market will recall the 8″ floppy disk, offering far more data capacity than smaller disks, but which were ultimately rejected because they were too awkward and costly for rapidly evolving desktop computers.  By the same token, we still put up with frankly often poor service levels and coverage from our mobile phones for the sake of the convenience they offer, with the rise of the Smartphone relegating telephony to a supporting role amongst a cast of a thousand apps.

So how can organisations monitor, react and succeed in a notably disruptive marketplace like communications technology?

Studies that have looked at the scale of a business and its ability to innovate have not detected a significant relationship between these two factors. You would assume that incumbents hold the whip-hand over disrupters – with experienced teams, capital deployed and financial momentum, but recent research by Rebecca Henderson of Harvard Business School indicates that the investment directed to research by established businesses in fast-changing sectors typically yields lower returns than the corresponding investments of newer entrants.

Why?

Certainly the economic situation has meant businesses might not invest in the new without cannibalising the old. The glacial speed with which some Telcos have moved to IP-enabled architectures is proof of that. The necessary adjustment to this mindset is without doubt more challenging for companies that are highly profitable in their established business. These often underinvest in replacement or disruptive technologies out of concern for accelerating the demise of current lines of business. It seems intuitive that some degree of cannibalisation of their own sales and consequent survival would be preferable to ploughing on regardless and losing out entirely to the disrupters, but decision makers may not look beyond short term results in terms of profit or justification of costs. In short, big companies reward their people for meeting existing goals. When technologies evolve in neat step-wise increments this works a treat and favours large scale. When the innovations are truly disruptive, such organisations find themselves at a distinct disadvantage.

Can Strategic Partnering offer solutions?

As I wrote in a recent post, IBM look like a big organisation that might be getting it right – and doing it via an unexpected partnership route.

IBM and Apple’s recent enterprise pact on building and distributing exclusive industry-specific applications built on iOS is an eye-catching example of big players trying to ‘disrupt the disrupters’

Firstly, the touted vertical market apps could secure Apple’s iOS market share in a recovering enterprise sector. Apple’s share vs. Android in the enterprise is the key enabler. IBM breaks into high-growth, data-intensive iOS apps, combining its leading analytics with a high rolling consulting and integrator path to the top floor C-Suite.

In return, Apple recruits an enterprise-proven sales partner without having had to tackle the mega-corporations themselves beyond its PR ensuring the iPhone6 is top of mind for the busy executive.

Apple and IBM claim to be creating 100+ industry-specific apps for the iPhone and iPad and IBM’s established cloud services such as mobile device management (MDM), security and data analytics will be increasingly optimised for iOS.

You can bet that voice, video, messaging, presence and location services will all factor into this alliance, layered with a ‘big data’ applications and services wrap, setting CxO agendas in the enterprise for some time to come, and making it harder to get the required attention at board level.

Whether you are a global telecoms provider, a systems integrator, an enterprise software player or a red hot start-up the bar potentially just got set a little bit higher for everyone involved in selling to the bigger enterprise.

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