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When new technology makes an industry ripe for disruption, a leading wave of innovators simply pursue the possible. As consumers embrace their new choices, the trailing wave of popular demand means incumbents are better served preparing for the future than digging in to protect the old paradigm.
Adapt or die, to borrow an idea from Charles Darwin. But adapting is hard for incumbents, as Clayton Christensen so famously detailed in his book The Innovator’s Dilemma.
Mike Lenox, Tayloe Murphy Professor of Business Administration and Darden’s senior associate dean and chief strategy officer, says disruptive insurgents are imbued with advantages like superior nimbleness. In addition, Lenox says the sheer number of entrepreneurs — those Bill Gates-esque “guys in the garage” — means that countless new solutions are attempting disruption from every direction.
“It only takes one to be wildly successful to disrupt an industry,” Lenox said. “We remember the successes; not the countless failures.”
Among those successes: The breakout Nest Learning Thermostat hit the market and started a consumer frenzy, which prompted long-dominant Honeywell to respond with a patent lawsuit. Uber disrupted the taxi industry by harnessing the power of the crowd through an app that can connect anyone with a car to anyone in need of a ride, which has been met with a slew of lawsuits from taxi drivers and their trade associations. A similar story is unfolding for Airbnb.
Even regulated electric utilities, which enjoyed state-mandated monopolies for decades, are faced with new distributed energy technologies like solar panels — a threat so existential that the Edison Electric Institute wrote a 2013 report warning that the industry faces a “cycle of decline that has been previously witnessed in technology-disrupted sectors (such as telecommunications).” In other words, a death spiral.
With today’s accelerated competitive lifecycle, even disruptors are finding themselves disrupted within a generation. Just look at the mobile phone industry, Lenox says, in which Palm, Blackberry, Nokia and Motorola all fell to the rise of Apple and Samsung smartphones before the smoke had even cleared from the decimation of the wires and poles phone business.
“Disruption isn’t new; it’s been around since the beginning of markets,” Lenox said. “But it feels like disruption is occurring more quickly in technologies around software and in high technology. There’s strong anecdotal evidence when you look at the growth of companies like Uber or Facebook.”
So far, electric utilities have been largely successful pushing back against disruption with a complex and coordinated defense to preserve their industry business model. Lenox calls tactics like those, as well as the efforts of Honeywell and the hotel and taxi industries, “non-market strategies.” For their part, Lenox notes that solar power providers, Uber, Airbnb and many other emerging companies have responded with aggressive non-market strategies of their own.
While those strategies can’t be ignored, they’re not what he focuses on with students or his business clients. Non-market strategies often skirt tricky ethical boundaries and can work against the noble pursuit of serving customers’ best interests.
Instead, Lenox focuses on how established companies can position for ongoing success in a fast-changing business world.
While incumbents face some disadvantages trying to innovate, Lenox stressed that they risk even more by failing to try. “Innovation requires two things,” Lenox said. “Creativity and appropriability — appropriating the gains from an innovation by locking it up with patents and other intellectual property protections.”
Lenox says incumbents are not defenseless when disruption comes knocking at their door, but preparing for disruption requires vision and planning. Lenox encourages his corporate clients to do two things to increase their chances of being in the right position when disruption occurs:
Several business strategies can also protect incumbents from disruption, Lenox says:
The above post is excerpted from a longer piece in the winter 2016 issue of The Darden Report.
Lenox’s expertise is in the domain of technology strategy and policy. He studies the role of innovation in helping a business succeed. In particular, he explores the sourcing of external knowledge by firms and this practice’s impact on a company’s innovation strategy. Lenox has a longstanding interest in the interface between business strategy and public policy as it relates to the natural environment; his work explores firm strategies and nontraditional public policies that have the potential to drive green innovation and entrepreneurship.
In 2013, Lenox co-authored The Strategist’s Toolkit with Darden Professor Jared Harris. His latest book,
Lenox is a prolific author; his most recent book, Strategy in the Digital Age: Mastering Digital Transformation, examines how digital technologies and services enable the creation of innovative products and services, as well as identifying new competitive positions.
B.S., M.S., University of Virginia; Ph.D., Massachusetts Institute of Technology