Notorious Decadence

A few days ago, I was in a meeting and the topic turned to market disruption. Thoughts formed in my mind from years of successes and failures, big and small, so I started writing them down on a whiteboard. As my colleagues listened, they said that people beyond that room might like to hear what I had to say.

So now I’m a blogger. Here goes.

While disruption seems to have become a popular business term, too often it is talked about in theory and combined with a phrase–technology innovation. But the fact is, those of us in the business world who have to deal with the reality of disruption understand very well that true disruption is hard to achieve. It requires “leaps of faith” difficult to take and actually demands strong backbone, determination and stamina to make money from it.

In my experience, there are three key elements in the path to disrupt a mature, well-established market–meaningful technology breakthrough, significant supply-chain management improvement and valuable business-model innovation. The more elements you bring to the table, the bigger the disruption and the easier it will be to make money from it.

However, before any of the above will have any meaning whatsoever, you need to find out the most important part of the recipe–that is, the existence of “opportunity,” or what I call Notorious Decadence.

We all know that there is at least one dark side to success. One tends first to get comfortable, then complacent and finally sloppy. What starts as a vision whose only objective is satisfying customer needs becomes an entity by itself and, if successful, an integral part of your way of life as a company or an industry. The more successful you become, the more interdependence gets created with the rest of the company. You develop strong self-defense antibodies, and the continuous evolution and improvement of the original vision begins to conflict with maintaining the status quo.

Thousands of examples abound, both with companies as with individuals and nations. It is not that you don’t realize that it is going on, it’s that the only real solution conflicts severely with the very core of your present, comfortable existence. To make it more complicated, there are many constituencies who will be judging you in the process.

Notorious Decadence is hard to swallow, and it’s an opportunity for the nonincumbent challenger.

Once the opportunity exists, you still need to find:

1. Meaningful Technology Breakthrough

For example, on a big scale, until Johannes Gutenberg disrupted the fundamentals of printing by inventing movable type, manuscripts were produced on woodblocks or handwritten by monks. By taking movable pieces, oil-based ink and a wooden printing press, much like a wine press, and combining them into a practical system, Gutenberg’s disruption revolutionized the well-established world of bookmaking.

On another scale, Kodak’s introduction of a low-cost, permanent inkjet head that works efficiently with pigment-based inks represents a meaningful technology breakthrough, as it provides the print quality and permanence that inkjet users have been seeking for the last 15 years.

2. Significant Supply-Chain Management Improvement

A second path to disruption is through efficient supply-chain management. Taking advantage of a better supply chain may not sound as sexy as a technology breakthrough, but it can be just as effective.

Throughout much of history, vertical integration and packed warehouses in multiple locations gave businesses a feeling of safety, security and predictability. I don’t have to tell you how much of a liability that infrastructure can be today and how hard it is to disassemble internal processes so you can take advantage of someone else’s assets, expertise and capital without losing control of your overall business process and end-to-end quality. Dell Computer is an example of a company that took a fresh look at supply-chain innovation to disrupt a market. Today, smart companies take advantage of existing supply chains created by the first entrants into an industry.

As it turns out, it’s not so bad coming late to the party after all. The ability to freely design Kodak’s new inkjet-head architecture in order to take advantage of the new sophisticated semiconductor industry technology–using off-the-shelf tools that did not exist 10 years ago instead of those that are custom-made–is a huge supply-chain advantage with significant implications on working capital needs, capacity-planning efficiency and process scalability.

3. Valuable Business Model Innovation

Either of these approaches is enough to cause disruption. Yet an even bigger disruption occurs when you introduce a value proposition created to satisfy long-awaited customer needs.

I wrote a paper on innovation years ago that included 10 must-do concepts that lead to valuable innovation. The first one was:

Start with the customer and work back
Envision the future through the eyes of your customer and don’t be afraid of what you see. Then, apply technology to satisfy customer needs and dreams.
That’s innovation.

The cost of ink has been the biggest dissatisfaction of inkjet customers for the last 15 years. In fact, in terms of customer dreams, this has been a true nightmare for many. Finding a path to satisfy that need is a bigger disruption by itself in the eyes of our customers than any technology breakthrough or supply-chain improvement. After all, as somebody said many years ago, the customer is always right.

4. The Main Ingredient

Still more powerful disruption occurs when all three conditions converge at the same time–meaningful technology breakthrough, significant supply-chain management improvement and valuable business-model innovation.

But the most important ingredient of all is Notorious Decadence. When that condition is present, and an industry environment beckons you forward, the opportunity to achieve real market disruption must be seized.

Stay tuned.