How ‘disruption’ has become a feature of our times

If there was one word that summed up the hopes and fears of business over the past 12 months, it was probably “disruption”.

Established companies that survived the financial crisis only to face an army of disrupters must now feel a little like Jason and his companions in the 1963 movie Jason and the Argonauts. Having slain the serpent-like Hydra and borne off the Golden Fleece, they are confronted by terrifying skeleton warriors, who spring from the ground fully armed.

Uber, whose founder Travis Kalanick is Person of the Year in the latest Boldness in Business Awards, epitomises this new generation of disruptive warriors. The ride-hailing service is fast moving and aggressive, and is a challenge not only for incumbent taxi and car services but also the authorities that oversee them.

To be “Ubered” has become a catchphrase well beyond the domain of transportation. Such is Kalanick’s ambition for a technology-based service that can ease delivery — of people, goods, even fast food — that it threatens some of the other shortlisted candidates for the Boldness awards, such as carmakers Tesla and BMW. In February, Uber underlined its determination to challenge one of the heavyweight disrupters, Google, by announcing a partnership with Pittsburgh’s Carnegie Mellon University to fund a new centre to research driverless car technology.

It is hardly surprising then, that Uber is mentioned barely 20 pages into Bold, a new book by Peter Diamandis — the entrepreneur described by the FT as the “self-appointed high priest of digital disruption” — and Steven Kotler.

Diamandis and Kotler lay out a six-phase “chain reaction” of “exponential” disruption. Inevitably, the fall-guy for their thesis is Kodak, the photography company whose decline into bankruptcy protection in 2012 made it a byword for failure to see off disruptive forces. Digitalisation, in their framework, is followed by deception (a period when exponential growth of a disruptive technology goes unnoticed), disruption itself, demonetisation (in the Kodak example, the point at which people stopped buying analogue film), dematerialisation (from analogue, to digital camera, to smartphone) and democratisation (when the phone becomes affordable to everyone). Today, the authors warn, “linear organisations” such as Kodak “are at dire risk from the Six Ds, but exponential entrepreneurs have never had it so good”.

But while there are plenty of exponential entrepreneurs on this year’s Boldness awards shortlist, novelty alone is not enough to succeed. As the FT’s recent series on the disrupters of 2014 illustrated, start-ups do not have it all their way. The list of companies that are unsettling the technology, retail, transport, banks, property, media and telecoms industries included plenty of recent arrivals, from ecommerce group Alibaba to Xiaomi, the Chinese smartphone maker. But the series also featured companies with deeper roots, including Aldi, the discount supermarket chain, which started expanding after the second world war; Embraer, the Brazilian aircraft maker whose KC-390 military transport plane aims to unseat Lockheed’s C-130; and even Ford, which is making its bestselling F-150 pick-up in an aluminium-bodied version that will be much more fuel-efficient (take that, Uber).

Plenty of incumbents, if they dig deep, will find they already possess the weapons with which to fight new battles. The most distressing aspect of Kodak’s decline was that it happened in spite of its long history of imaging expertise — it had the opportunity to take a bold step in the 1970s and 1980s and back the digital camera technology that it had itself developed.

Handelsbanken, which won the Boldness in Business corporate responsibility award this year, is a good example of how established companies can draw on their hidden strengths. The Swedish bank’s chief executive told the FT in 2013 that he had studied 5,000 years of credit risk, while the bank draws on minutes of board meetings from the past 140 years to inform its attitude to customer loans and business cycles. At the same time, together with other Swedish banks, Handelsbanken is forward-looking enough to have backed a mobile payment service, Swish, that is a rival to the likes of Klarna, a finalist for this year’s technology award.

Ever since Clayton Christensen wrote The Innovator’s Dilemma in 1997, it has been accepted as fact that companies will fail if they do not disrupt themselves first. But in 2014, even this supposition came under fire, when Jill Lepore, a Harvard historian, took issue with Christensen — and with the circus of disruption conferences and consultants that his book has spawned. She described disruptive innovation in an article for The New Yorker as “a competitive strategy for an age seized by terror”. A number of other academics rallied behind Lepore, pointing out, as she did, that not all the disrupters Christensen had lauded survived, and not all the disrupted incumbents disappeared.

But the real lesson of this spat was that there are dangers in sticking too religiously to any single template for innovation, however tempting.

A bold entrepreneurial strategy does not always have to be based on a vision of exponential growth — whatever Diamandis, who created the first XPrize contest a decade ago to encourage privately funded space travel, may believe. At the same time, a bold incumbent does not always have to destroy its core business to ensure survival.

In fact, unless you are an Uber, with its breakthrough traffic-tracking technology and its financial war chest, generally it is better for entrepreneurs not to “aim slingshots at Goliaths”, as academics Amar Bhide and Pankaj Ghemawat commented last year, in an article for Quartz about the Christensen controversy. As for existing market leaders, they wrote, “while complacency corrodes any enterprise, incumbents cannot afford to be spooked by every will-o’-the-wisp”.

The boldest companies, whether new or long established, are the ones with a forward-looking policy of constant innovation and creativity, instead of always glancing over their shoulders. This approach may not be as neat as an academic formula, but it is the best way to keep a step ahead of rivals’ advancing armies.