We all have heard it. Beware the disruptive technology that will change the way things happen in this world. But, having developed more than my share of new innovations, I can guarantee you that the world does NOT beat down the doors of those with better mousetraps.
Let’s consider this. Apple, Tandy, and Osborne. Each of these companies started a whole new enterprise. The personal computer. Tandy and its TRS-80 (lovingly known as the Trash 80)- even the company that owned it, Radio Shack, is gone. The Osborne- the computer that accompanied my world travels for some 4 years- was supplanted by the promise (yes, just the promise) of a personal computer from IBM. And, it was IBM that dragged Microsoft into respectability.
(Yes, I know that Microsoft worked really hard to get the upper hand- which considering who is in the software business now- it did. But, M$ would never be in our sights if Gary Kildall of CP/M fame with his Digital Research enterprise had won the heart – or wanted to win the heart- of IBM back then.)
Let us not forget that Apple- the world’s biggest or second biggest valued company- was an also-ran for years. And, it wasn’t really the computer that made it what it is. It was their iPod and iPhone that drove the value of their company. Their computers are gaining market share, but still are not anywhere the leading market driver.
That’s the way it is with most of our new ventures. Unless it is a completely fringe idea which becomes mainstream (the iPod comes to mind), smaller firms have their products co-opted or their firms purchased. Even today, those fringe firms that have become megabusinesses are purchasing the new ideas. (Check out who Microsoft, Google, Facebook have been buying lately.)
It’s why the firms populating the Fortune 500 don’t really change over the years. Sure, if we were to go back 100 years- long before there was a Fortune 500, we would see the New York Central or the Pennsylvania Railroad among the top firms of their day. But, it’s not their firms that folded- it was really their entire business segment.
Consider more modern times. Where’s People Express? Texas Air? (Yes, they exist In the historical sense- because they are incorporated in United Airlines.) Of those upstarts from the 60s and 70’s, it’s only Southwest that we still see flying. Delta has acquired Northwest (which in its turn had acquired North Central, Southern, and Hughes Airwest). American (which really is USAir with a new name) which is the successor to America West, Piedmont, PSA, among others.
And, I admit Chrysler is gone (unless you really believe there really is a “Fiat Chrysler” and not Fiat). But, Chrysler as a firm was on the ropes for years- and it was no disruptive technology that offed the brand. Because Chrysler was among the leading firms that developed the new innovations in the automotive industry.
Don’t get me wrong- technological developments are critical game-changers. They just don’t ‘off’ as many companies as we all tend to believe they do. With one caveat. America is losing the R&D race. Our companies and our government are avoiding their responsibility to develop new ideas. So, we are seeing foreign interests take the lead, even buying American firms (like Fiat did with Chrysler).
And, that may be the reason why the insight proffered by Clayton Christensen (‘disruptive innovation”) in the 1990’s is no longer quite valid. Those were the days of the internet- which did change the way the world communicated- and advertised. Admittedly, the print industry (newspapers and magazines) are still feeling those effects, the taxi business (which is nowhere as large a business segment), and probably the big-box stores, but not much else.
That’s why the Fortune 500 census hasn’t been changing much over the past decade or so.
And, the biggest US companies are becoming more powerful. (Too powerful in my less-than-humble opinion.) When I was just four years old, the Fortune 500 was responsible for 35% of the GDP. By the time I was 40, that percentage had climbed to almost 60% (58.5 is the real number), while now it is just shy of 72%. That’s also why the newly minted innovative company has a tough time breaking into the big leagues- disruptive technology notwithstanding.
(Do you want to see another revolution, disruptive technology that changes the landscape of business as we know it? Let’s allow stem cell R&D. Within no time, we’ll have artificial organs and tissue replacements for those with incurable diseases. That will change 1/6 of our GDP almost overnight. It also lets you see that it is really politics that determines the ability of disruptive technology to change our world.)
The primary reason companies disappear off the Fortune 500 list nowadays? Takeovers. (This is research from the Kauffman Foundation written by Dane Stangler and Sam Arbesman.) Two decades ago, about 1/5 of the firms that disappeared off the list were due to mergers. Now? About 2/3 of those that vanish are the results of mergers. Is that technological change? Or, the effect of the hollowing out of our business by leveraged buyout firms? (Chrysler, USAir, American, Continental. Northwest come to mind. And, those are just the firms I already mentioned in this blog.)
Therein lies the truly big problem for our economy. Because these large firms- the firms that populate the Fortune 500- don’t increase employment, don’t raise wages (unless you are the CEO of the firm). It’s the smaller, new enterprises that yield the dynamic growth in wages and employment.
Nodding my head at “it is really politics that determines the ability of disruptive technology to change our world.” Sad, but true. In so many areas.
Cathy Miller recently posted..What Lasting Impression Does Your Business Communication Leave?
Ah, you also found the key to the true issue.
Disruptive technology to me is kind of like serendipity…. We may recognize that something is revolutionary, but it takes a series of trained- or receptive- minds to let it become the primary change agent.
I am honored by your visit and comment, Cathy. Thanks!
Disruptive Technology- real or imagined? http://t.co/IosAy0Xkxq via @RAAckerman Now if we can figure how to get politics out of the way ☺
Interesting Roy!
I think the post tends to focus on whether *companies* get changed that much by technology, rather than society.
The mobile phone, the internet, have changed the way we live our lives beyond belief.
The latest one, in my view, is 3d printing, and the impact that is having on healthcare, and will continue to develop down that road.
Cheers, Gordon
The Great Gordino recently posted..Was Roger Wrong About Wimbledon’s White?
Interesting point, Gordon!
However, 3D printing has been around (now) for a while. It has promised to change things- and has not yet done so. And, that is more related to exactly to the point of the article- politics affects whether change occurs. And, 3D printing will render (il)legal copying of items- that puts most businesses at risk- which is slowing down its adoption.
The internet was invented 2 decades before it became ubiquitous. And, it expanded quickly since there were no laws against it. (NOT so in many foreign lands, where the phones and communication were -= and often still are- under government control.)
The mobile phone is similar- until the phone company monopoly was eviscerated, the fact that technology existed had no effect.
Thanks for the comment- and the visit.
Yes, fair point about politics being in control.
The car and pharmaceutical industries are ones which have held back progress to suit their own ends. I do think politics dictates more the *speed* of implementation, rather than indefinitely holding it back – interesting!
The Great Gordino recently posted..Was Roger Wrong About Wimbledon’s White?
I wish we were both wrong, Gordon!!!!
And, it’s our job to try to find a way to make it so.
Thanks for the GREAT conversation.