All managements face the same potential threat: disruption. Some radical development may some day change their business so severely that great setbacks follow. It happened to transatlantic liners when jetliners took off, to integrated steel producers when mini-mills opened, to Detroit when small cars and then the Japanese appeared, to US department stores when discounters muscled in - and it's starting to happen to somebody somewhere right now.
The threat is most dramatic when technology takes a great leap forward. You face what Clayton M. Christensen calls The Innovator's Dilemma, the title of a book which has a particularly telling example from the IT industry. Makers of 14-inch disc drives innovated vigorously to supply customer needs in mainframe computers. Those needs were not at first served by the upstart 8-inch drives, which could only win markets in the relatively insignificant mini-computer sector. So nobody cared.
They should have done. Eventually every 14-inch maker went out of business. Much the same phenomenon occurred the next time smaller disc drives became available, and the next. The dilemma is whether you meet such threats head on and at once, or wait and see. The latter course almost invariably ends in waiting too long, until the new competition is out of sight. The former strategy, on the other hand, makes no sense. Your customers don't want the new technology, and you can't make it pay.
Failure to resolve this dilemma explains why hydraulic excavators, pioneered by J.C.Bamford in Britain, over time usurped a market originally dominated by cable-activated machines. Some of the old leaders tried to cover the new threat when it became obvious. But you face grave problems in trying to ride two horses at once. The major technology (which dominates the organisation) fatally cramps the style of the innovators, who have rings run round them by counterparts in wholly new, dedicated firms.
The best way out of the dilemma, as Christensen shows, is to have wholly new, dedicated firms within the firm. Examples abound in IT. If people come along with new ideas, or a major development like the Internet appears, industry practice is to establish a wholly new unit, often sited away from established centres, and to give the management team carte blanche to make the project suceed. Some famous triumphs have followed - including catch-ups after being left dangerously behind by technological disruption.
But IT managements have matured in a high-speed world in which, for example, PC life-cycles have shrunk to a matter of months. They know the rapidity with which disruptive technologies appear, win markets and swell to major scale. It's become routine to invest in promising new disruptors, just in case. Managers and technologists have also learnt to work across disciplines and corporate borders (internal and external) to force innovations into marketable shape and on to market success.
These principles are highly transferrable. Managers in every industry need to honour the basics. First, bar no holds: forget about cannibalisation - eating into your own old products is better by far than seeing them devoured by competitors. Second, make the independence of autonomous operations real: give them all the resources they genuinely need, and enough rope to hang the competition. Third, focus sharply on new competitors, and stay with them every inch of the way.
You may go up some blind alleys. Not all threats materialise. Hovercraft didn't have significant impact on existing forms of transportation, nor rotary car engines on the old technology. But never bet on such helpful outcomes: digital watches crucified clockwork. The Boy Scout motto applies. Be prepared.
