Disruptive Innovation is Never a Surprise
Yes but, or How dinosaurs die
by Jeffrey Phillips
It’s pretty clear that disruption of major industries can happen, but I’ll stipulate that it rarely happens “out of the blue”. In fact, many larger organizations have been disrupted out in the open, in plain sight. GM and Ford watched Toyota and Honda enter the markets, and in some cases acceded the “low end” market to them. Major steel manufacturers watched Nucor and other mini-mill firms enter at the low end of the steel market and happily left much of that market to Nucor, only to watch Nucor climb the capability ladder and eat their lunch.
These slow conversions of the market are based on what I call the “yes but” argument. Large firms look a new product or service which carves off a small portion of their business and say to themselves “Yes, but they won’t take our core customers” or “Yes, but they can’t grow from there” or “Yes, but our brands are stronger”. It’s as if they assume the disrupter plans only to carve off some small portion of their business and then remain static. The larger firms are willing to give up some of their markets and anticipate that the disrupters will settle into a comfortable slow growth model just like the dinosaurs that rule the market. The dinosaurs never seem to understand the amount and nature of change that is happening in their own markets.
I was thinking about this when considering Square, the new product offering from the founders of Twitter. Square allows anyone to process a credit card on their cell phone, allowing individuals and very small businesses the ability to take cash, checks or credit cards at their businesses. The banks and firms that provide merchant services sniffed and said “Yes, but they are just riding on our networks” or “Yes, but that’s only for small businesses”. Instead of partnering with or simply buying Square, they acknowledged it and ignored it. Now I see that Verizon has partnered with ChargeAnywhere, a similar offering to Square. Verizon has clearly decided it wants a part of the transaction flow between small businesses and its customers. Rather than simply process the transaction – that is, act like a “dumb pipe”, Verizon through its partner will gain value from the transactions, and increasingly can replace card readers in small businesses. Take another example. Paypal is on track to exceed $2B in transactions in 2011. Is Paypal “large” yet? I’m sure a few years ago the banks were arguing “Yes, but it’s just an interesting fad”.
What in your business are your people saying “Yes but” about? What small disrupters are taking your customers away “out in the open”? I’m sure the dinosaurs ignored small mammals, and if we could go back and listen to their conversations we’d hear the dinosaurs telling themselves, “Yes, but they are so small” or “Yes, but they can barely defend themselves”. If your team is saying “Yes but” about a small competitor or even a firm that they’ll argue “doesn’t really compete with you”, pay attention.
Jeffrey Phillips is a senior leader at OVO Innovation. OVO works with large distributed organizations to build innovation teams, processes and capabilities. Jeffrey is the author of “Make us more Innovative”, and innovateonpurpose.blogspot.com.
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