What “Big Bang Disruption” Says About Technology Policy

by on February 18, 2013 · 3 comments

In the upcoming issue of Harvard Business Review, my colleague Paul Nunes at Accenture’s Institute for High Performance and I are publishing the first of many articles from an on-going research project on what we are calling “Big Bang Disruption.”

The project is looking at the emerging ecosystem for innovation based on disruptive technologies.  It expands on work we have done separately and now together over the last fifteen years.

Our chief finding is that the nature of innovation has changed dramatically, calling into question much of the conventional wisdom on business strategy and competition, especially in information-intensive industries–which is to say, these days, every industry.

The drivers of this new ecosystem are ever-cheaper, faster, and smaller computing devices, cloud-based virtualization, crowdsourced financing, collaborative development and marketing, and the proliferation of mobile everything.  There will soon be more smartphones sold than there are people in the world.  And before long, each of over one trillion items in commerce will be added to the network.

The result is that new innovations now enter the market cheaper, better, and more customizable than products and services they challenge.  (For example, smartphone-based navigation apps versus standalone GPS devices.)  In the strategy literature, such innovation would be characterized as thoroughly “undiscplined.”  It shouldn’t succeed.  But it does.

So when the disruptor arrives and takes off with a bang, often after a series of low-cost, failed experiments, incumbents have no time for a competitive response.  The old rules for dealing with disruptive technologies, most famously from the work of Harvard’s Clayton Christensen, have become counter-productive.   If incumbents haven’t learned to read the new tea leaves ahead of time, it’s game over.

The HBR article doesn’t go into much depth on the policy implications of this new innovation model, but the book we are now writing will.  The answer should be obvious.

This radical new model for product and service introduction underscores the robustness of market behaviors that quickly and efficiently correct many transient examples of dominance, especially in high-tech markets.

As a general rule (though obviously not one without exceptions), the big bang phenomenon further weakens the case for regulatory intervention.  Market dominance is sustainable for ever-shorter periods of time, with little opportunity for incumbents to exploit it.

Quickly and efficiently, a predictable next wave of technology will likely put a quick and definitive end to any “information empires” that have formed from the last generation of technologies.

Or, at the very least, do so more quickly and more cost-effectively than alternative solutions from regulation.  The law, to paraphrase Mark Twain, will still be putting its shoes on while the big bang disruptor has spread halfway around the world.

Unfortunately, much of the contemporary literature on competition policy from legal academics is woefully ignorant of even the conventional wisdom on strategy, not to mention the engineering realities of disruptive technologies already in the market.  Looking at markets solely through the lens of legal theory is, truly, an academic exercise, one with increasingly limited real-world applications.

Indeed, we can think of many examples where legacy regulation actually makes it harder for the incumbents to adapt as quickly as necessary in order to survive the explosive arrival of a big bang disruptor.  But that is a story for another day.

Much more to come.

Related links:

  1. Creating a ‘Politics of Abundance’ to Match Technology Innovation,” Forbes.com.
  2. Why Best Buy is Going out of Business…Gradually,” Forbes.com.
  3. What Makes an Idea a Meme?“, Forbes.com
  4. The Five Most Disruptive Technologies at CES 2013,” Forbes.com

  • KS ‘Kaz’ Augustin

    Hi Larry:

    Interesting article. I hope I’ll be able to read your and Paul’s articles. Now that you’ve stimulated the brain juices, I have a couple of questions:

    • It’s my personal observation that, when disruptive tech emerges, the knee-jerk reaction of existing laws, in cahoots with the legacy tech firms, is to get more conservative in an effort to shut out the disruptive tech. Are you finding that based on the data (as opposed to my one-eyed seeing of things)? :) How does this contrast with the Twain paraphrase you gave about the law being several steps behind?

    • Secondly and, to my mind, more importantly, you also say that “a predictable next wave of technology will likely put a quick and definitive end to any “information empires” that have formed from the last generation of technologies.” I have two points on that. One, as we’ve seen in the financial industry, entrenched interests with deep pockets can always fight the next wave of technology. Maybe they will not be able to stop it completely (or maybe they will, leading to some leapfrogging tech that takes the role of the original disruptive tech), but they can certainly slow it down.

    Two, as I see it, you’re taking an integrated vertical view of disruptive tech, but what if the existing information empires move quickly to shut out, say, a critical middleware ecosystem? (To use a crude example, a new tech leverages telecommunications in a novel way, but those companies have the licensing locked down?) How can disruptive tech compete in such a climate? Or, by definition, is that NOT considered disruptive enough?

    Just some initial thoughts, but I’ll be looking forward to your book.

    Kaz Augustin

  • larry downes

    Dear Kaz,

    Those are great questions and great points. Thank you for the thoughtful read.

    In response:

    1. Rent-seeking behavior (the economic term for what you describe) is not only epidemic among incumbents in the midst of Big Bang Disruption, it is one of the surest signs we have found that such disruption is really taking place. My use of the Twain quote is in a different context–when regulators/legislators try to intervene to micro-manage transforming markets.

    2. The entrenched interests will always fight to their last retained profit to resist transformation, absolutely. Increasingly, I don’t think many industries are left that can ride out an entire cycle of change. For one thing, the cycles get shorter all the time, which means they are running out of ammunition to resist. It’s true that recorded music held out from one generation of digital content and distribution, but without enough momentum left to resist iTunes and its successors. However it is also true that the efforts at resistance, especially those that rely on legal barriers to entry, can skew the speed and trajectory of the disruptor, often in unpredictable and unintended ways.

    3. It is increasingly difficult, if not impossible, for an incumbent to use licensing of a proprietary technology to cut off some infrastructure component essential to new entrants. (I’d like, however, to entertain recent examples if there are any.) The market experiences such efforts as network failures and simply routes around them, To the extent that such short-circuiting is still possible, however, it suggests that existing IP laws (copyright, patent, and trademark) may be too generous and in need of reform.

  • Pingback: Is The ‘Innovator’s Dilemma’ About To Get Disrupted By ‘Big Bang Disruption’? | PickStuff

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