For many in the business realm, particularly with an interest in or requirement to participate in strategy, digital disruption has become a repeatably prevalent if not pervasive pursuit. Why? Because information technology, born in the middle of the last century, took on new meaning at the end of the first decade of the 21st century as it started to be termed ‘digital’, and at a pace previously unseen and unfathomable, which together have catapulted us into Industry 4.0 and a new era of strategic reality.
We know this of course, but I often find in my travels and teaching that we are sometimes at a loss to understand the more precise drivers and manifestations of why and how this has come to pass. So in this article, we break things down and present both the ingredients of the digital age, and critically, understand the pace that has propelled the disruption that has ensued from their utilisation and adoption.
The Lineage of Disruption
It’s origin is tied to the broader concept of “Disruptive Innovation,” a term coined by Clayton M. Christensen in the mid-1990s. Christensen’s work focused on how smaller companies with fewer resources could successfully challenge established incumbent businesses. He explained how these smaller entities often entered the market with new technologies or business models (how businesses actually charge and create profit) to steal market dominance, while incumbents were slow to adapt, or defend against such threat with counter-innovation, and eventually fall away to the side.
As the virtual digital technologies of Industry 4.0, including the internet, mobile devices, analytics, platforms, and cloud computing became more prevalent and extended from Industry 3.0’s ‘computing’, they began to cause significant disruptions in various industries, from retail and media to transportation and finance. I call this collective of technologies IMPACT, given that’s exactly what they have manifested in – in capital letters! This digital version of disruption however was more than just technological – it altered consumer behaviours, opportunity for innovation, underpinning business models, and even entire markets never mind creating brand new ones. Thus, the term “digital disruption” came to describe this specific kind of transformative change driven by digital technology.
The term gained popularity in the early 21st century as digital innovations became increasingly influential in reshaping industries, prompting business leaders and strategists to focus on the challenges and opportunities these changes presented. But why does the term resonate and come to describe our incredulity with the forces of these new digital technologies? That I would suggest mainly relates to not the what, nor the why, but the ‘how fast?’
The Exponential Growth Curve
Our linearly trained minds are simply not conditioned to deal with exponential development. And understanding the pace of exponential versus linear growth is central to demystifying this ‘digital disruption’ we speak of. Both our historical schooling, and our look-back experiences in life (pre-computer science), have framed for us that change is gradual. Our experiences have been historically evolutionary with seismic shifts in world order happening for sure, but over millennia or centuries pre-Industry 3.0. Homo Sapiens are circa 300,000 years old, and up until the 3,000 years ago we very slowly transitioned from being hunters to gatherers, gradually harnessing wood, stone, mud, minerals and metals to ply our trades, build our homes and depict our world.
Things started to change gear through Industry 1.0 when we adopted steam, and later in Industry 2.0 with electrification being the general purpose technologies that paved the way for new eras of growth and prosperity. However since Industry 3.0, the pace of change has entered a new era. Since the latter 1900’s technology prowess, availability and ultimately adoption, has grown exponentially and has paved the way for the disruption decades we have just witnessed and are in the midst of living through.
We all know the Netflix v Blockbusters, Apple v Nokia and Kodak stories and many more prevail – incumbent organisations get pushed aside in what seems like instantaneous dismissal by newcomers who see a gap in solving unmet needs, utilising clever combinations of the IMPACT ingredients. Or these pioneers create whole new markets and the means to derive massive value, tooled up with digital technologies that didn’t take millennia to hone but merely a fraction of that time, accompanied with a bold vision for solving big problems, and war chests supplied by financial venturists.
To make this tangible, let’s compare linear versus exponential change, and to do this we will do what pretty much all of us do, and were schooled to do – count money. Let’s get started with a simple sum – if I count €1 coins in a linear sequence I get to, well yes €10 – no prizes there (1,2,3,4 …10). Now if I count €1 coins in an exponential sequence, which is where every subsequent count is double the preceding one, I get to … €512 (1,2,4,8 … 512). Seems like a big hop alright, and of course I’m probably starting to like the idea of creating money exponentially v’s linearly!
But let’s go another 10 counts, and now I’m comparing €20 to €524,228 – that’s over half a million in the difference!!! Go again by 10, and I am now comparing €30 to €536,870,912 – now we’re talking more than half a billion in my chosen currency in difference. And it keeps going, but not how you might think – €40 counts now compared to € 549,755,813,888, and we’ve passed the half-trillion mark, or roughly the GDP of my own little country Ireland. It starts to get both scary and cognitively stretching now, and that’s because it’s not normally how we ‘do the math’ is it? No fault or qualms is associated with this statement, it’s just a reflection of where we have come from, and how we have been conditioned to think about building up value, or counting progress.
The Rub
The base general purpose technology of Industry 4.0, the internet, has been with us for over 40 years, so let’s think of that timescale. And then let us for illustration adopt the general principles of Moore’s and Metcalf’s Laws, which is that the power of the computing doubles every 18 months, while the cost corollary decreases, and that the value of interconnected networks grows exponentially for each user by the number of users to the internet. We might then as a result of applying this exponential growth curve across that timescale accept that the power, application and adoption of the internet has grown to factors exceeding millions and perhaps into trillions.
Using the internet as a proxy for all the manifestations of the associated technologies powered by the internet, and therefore change in commerce and society, explains why we use the ‘D’ words disruption and digital to articulate how exponentially progressing technologies are redrawing the boundaries in the internet age. And that’s why we need to think of strategy in the context of keeping pace with exponentialism, and recondition how we might look forward.
Garvan Callan is a Board-level and c-suite transformation adviser, speaker, lecturer, Non-executive Director and author who works across sectors and regions to bring strategy in to execution, the power of digital culture and innovation to the fore, and help leaders and their businesses prepare for tomorrow, today. He is the author of Digital Business Strategy: How to Design, Build, and Future-Proof a Business in the Digital Age.
