A common theme across our client activity in many market sectors we operate in is disruption. This can take the form of new and emergent competition, technology advancements, regulatory change and changing customer expectations; often our clients are facing a combination of these factors at the same time.

“History doesn’t repeat itself, but it often rhymes.” said Mark Twain. Market disruption has been a consistent ‘rhyme’ throughout recent history then. Think of the development of canals in the 1790s, railways in the 1840s, steel 1880s, mass production in the 1920s, computing in the 1970s and the internet in the 1990s; characterised by the rapidly unfolding 4th Industrial Revolution. Steve Denning in Forbes.

So, if disruption is a natural cycle, what are the characteristics of this current phase of market disruption? How is it different to those that have gone before? And, perhaps most importantly, how do organisations navigate their options and choices to survive, thrive and take advantage of the opportunities presented?

Technically, ‘market disruption’ is defined as “a situation where markets cease to function in a regular manner, typically characterised by rapid and large market declines”. This may well be the result of disruptive factors overtime; however, it may be more appropriate and relevant to consider disruption in markets whilst being mindful about the degree and nature of the disruption: not all market developments or innovation is truly disruptive.

Professor Clayton Christensen developed the concept of “disruptive innovation”: a theory about who wins competitive battles when innovations are introduced to a market.

In the theory, Christensen states that “disruption describes a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses. Specifically, as incumbents focus on improving their products and services for their most demanding (and usually most profitable) customers, they exceed the needs of some segments and ignore the needs of others.

Entrants that prove disruptive begin by successfully targeting those overlooked segments, gaining a foothold by delivering more-suitable functionality—frequently at a lower price.

Incumbents, chasing higher profitability in more-demanding segments, tend not to respond vigorously. Entrants then move upmarket, delivering the performance that incumbents’ mainstream customers require, while preserving the advantages that drove their early success. When mainstream customers start adopting the entrants’ offerings in volume, disruption has occurred”.

So, here’s a brief insight into the theory and for those interested, Christensen has updated his original work with HBR here in 2015 which is also worth a read.

It’s difficult to shake a feeling that the current wave, part of which can be referred to as ‘everything-tech’, as my colleague Stefan Haase recently put it, is different. If nothing else other than in the sheer breadth and scope of technology, digital and data-led innovation and application in established and traditional markets, as well as developing new markets. And although we should be wary of assuming that this generation’s version is special, there are differences to be considered.

The current wave of disruption is arguably amplified due to disruptive factors playing out across many market sectors at the same time. This has been fuelled by several factors including: regulation for consumer protection following the financial crisis; the adoption and growth of digital and mobile technology and rapidly changing consumer behaviours and expectations.

Looking at it this way, it’s the proliferation of these new technologies that is facilitating disruption on a wider scale and allowing new technologies to impact the way industries have been operating for the last century. Just look at what is going on in FinTech, InsurTech or RetailTech. New forms of technology have significantly lowered some of the barriers to entry creating new market space and commercial opportunities for focused new entrants; although many are now finding they need to collaborate and distribute their ‘innovation’ via the established market players to achieve scale. Designers of innovative new products and services now have access to entire markets enabled and encouraged by initiatives such as Open Banking and PSD2, making it easier to access the marketplace.

Should we then be preparing to accept widespread market disruption as the new norm? Is the ‘new normal’ the ‘never normal’?

In the 1990s, the internet brought with it a remarkable change in the amount of data and knowledge available to individuals around the world. There are a growing number of people (millennials if you like) who have now been born and grown up with the internet and data and we could therefore be seeing a natural maturing of the technology. These changes might not only be down to the technology itself but also simply because there are more people possessing the necessary knowledge to make use of it in innovative ways.

Perhaps the big difference this time is that there is just much more competition than ever before, much of it very agile and nimble, and this could be why we’re seeing such a rise in market disruption, whether by a technical definition of ‘disruptive innovation’ or not.

This perhaps points to a useful takeaway. Understanding value and customer needs is still critically important. We’re not dealing with technological innovation as such and it may not necessarily be helpful to think of it in that way. Technological innovation often gets treated as something that comes from some smart person, other than ourselves. But if we instead view our current market state as coming from increased innovation across the board we can better see how important it is to continue to work on the strategic fundamentals to gain a competitive edge.

Whether a new market entrant seeking to disrupt, or benefit from disruption, an established organisation trying to understand and respond to disruptio, new competitive fronts and changing customer expectations, understating how the organisation creates and delivers value is critical.

Richard Coates – Managing Director – Whitecap Consulting