Handling disruptive technologies

What should you do when a disruptive new technology appears in your market? It is a common scenario, yet even the most successful firms can be seized with panic when it happens.

When digital cameras appeared, Kodak ignored the new market. As a result Kodak went into Chapter 11 last year. High street retailers were pathetically slow in dealing with online rivals, such as Natalie Massenet’s NET-A-PORTER and Nick Robertson’s Asos.com. Book stores, such as Barnes & Noble and Waterstones, were hammered by Amazon’s Kindle. HMV was skewered by iTunes and Spotify. Sat nav makers Garmin and TomTom are now looking nervously as smartphones gobble up their market, and foreign exchange brokers are watching online P2P exchanges, such as TransferWise.

Every industry is vulnerable. So what should you do when a truly disruptive force enters your space?

“First of all, sack anyone who says ‘If it ain’t broke, don’t fix it’,” says Alastair Herbert, managing director of brand analytics firm Linguabrand. Denial it not an option.

The leaders at the helm will need to show gumption to carry on and steer the large ship in a different direction

Inertia solved, you’ll now need a strategy. Andrew Poppleton, managing director of technology at Accenture UK & Ireland, says diversifying to a new market can be an attractive option: “Fujifilm, for example, has survived the transformation to digital photography by transitioning to other products and services that draw on subsidiary technologies, ranging from nanotechnology to the manufacture of flat-panel TVs,” he says. “A move into cosmetics, for example, was made possible by repurposing chemical processes developed to keep photos from fading.”

A more subtle version of this is the “pivot”. Dheeraj Pandey, chief executive of virtual computing provider Nutanix, says: “When Intel was disrupted on economies of scale by Japanese memory manufacturers, it was forced to move to a new business of microprocessors. The leaders at the helm, typically the founders who have the most loyalty to the business, will need to show gumption to carry on and steer the large ship in a different direction. Pivot could also mean moving to emerging value-conscious markets where price still appeals to consumers. Nokia and BlackBerry are trying to do that now.”

You could imitate. “Good enough economics” means under-cutting the disruptor on price, with a similar product. Samsung did this against the iPhone and then climbed up the quality ladder. Now Huawei is doing what Samsung did.

Last resort? Buy them. Facebook spent $1 billion on Instagram, which had never produced a dollar of revenue, to head-off its photo-sharing model.

You can’t always be the number-one innovator in your sector. But as grizzled survivors, such as IBM and Microsoft prove again and again, it is possible to thrive no matter how turbulent your sector is.