5 Levels of Disruption

In a number of recent talks and working sessions with clients we've been dancing with the issue of "disruption."  As others regularly note, both the term and notion of disruption is pretty hot and hype these past few years, and we ourselves have often referenced the work of Clayton Christian in addition to other work on technological disruption and innovation.  Partly because the term is defined differently by different writers, and partly because clients have different scales and scopes to their businesses, we do sometimes need to be both more explicit as well as more structured in our thinking (and discussions) with clients about where, how, and why change might potentially "disrupt" their business.

Figure 1: a typology of disruptions

It is in this light that we will sometimes use the following framework (figure 1) with folks to help clarify and explore both potential disruption as well as lower, more typical types of changes. Note that we normally use this in discussing disruptions to a client's business and not to broader changes in the environment or society.

At the top of the inverted triangle we have what, frankly, futurists live for: large scale techno-economic paradigm shifts that ripple through society and redefine how we do things.  These are of course rare, though they have tended to occur once every 50 or 60 years for the last 250 years. While usually not top-of-mind for your typical business decision-maker, when these occur, they affect everyone.  [If we had to make a statement about the next big shift, which is likely building steam as we write, then we would expect it to be the Age of Microbes and Machines]

Next down from those society-wide disruptions we tend to look at disruptions that drive an organization to stop and reconsider its basic reason for being.  These are understandably rare, but they do happen, and in our experience they tend to be related to an impending and dramatic change in things like core regulations that would change the structure of a market.  Again, they don't happen very often, but the question itself, "Do we need to revisit the organization's basic purpose?" is often useful just for setting the bar, as it were.

Disruptions to the business model would be one down from mission.  Here things tend to get more interesting, partly because of the amount of genuine change occurring in the world, and partly as a consequence of the notion, prevalent today, that "business models" are constantly changing.  Here again we have tended not to see a genuine need to fundamentally reconfigure a business model that often, but the question legitimately surfaces more often than higher order change.  Here of course we encounter a variety of discussions concerning technological disruption, regulatory change, unexpected competition, etc..  And certainly at this level both the source of disruptions and their impacts blur across into the next level...

...which is where we talk about potential disruption to strategy.  Planning is, frankly speaking, more art than science, and any discussion about strategy or strategic plans necessarily pivots on basic definitions.  These definitions will in no small part determine whether or not an organization traces a disruption to business model or strategy.  For our own work, and in the absence of an entrenched and differing definition within the organization, we tend to work with strategy as an abstraction, starting with a core definition of strategy as:

A concept or theory for how, in a given context and employing a given set of resources and competencies, you expect to achieve your goals.

It has been our experience that many small and some medium sized firms do not actually operate on what we would identify as formal strategies, though most are certainly focused on some set of achievements or some general direction, and many have enormous lists of initiatives and projects. Regardless of whether or not they do, however, there is a lot more action at this level when it comes to exploring potential disruptions.  And as alluded above, at this level we see a lot of conversations about technological disruption, new competition, and things like regulation and business environment.

Finally, we have the most typical changes, those that force new directions in products or services. The sources of "disruption" at this level can be broad, and because product/service portfolios can be organized in a variety of ways and oriented towards a variety of different markets, organizations will often identify a number of drivers that are fairly local or simply localized but that still require serious responses through product/service innovation.

And while there may be nothing terribly innovative about this framework (the framing is quite intuitive, after all), we do find that it can greatly help un-muddle certain strategic conversations.  This can particularly be the case when a client is facing a context of high complexity, in which they have multiple concerns across multiple domains or scales.  Separating out the different pressures, and exploring how they might be interacting across levels, can be a very useful exercise amidst a broader conversation.

As with just about all of our work and frameworks, this one is an evolution-in-process (in fact, we've been discussing whether or not to flip the pyramid to reflect the number or breadth of the sources of potential disruptions, vs the way it is now, which emphasizes the scope of impact of the specific source of disruption under review...).

Your Futures Context is Always Longer than Your Planning Horizon

Leaders frequently ask us why they should do foresight work (or strategy, for that matter) if, as "everyone" says, company planning horizons have shrunk to just 1 - 3 years.  Why, they ask, should people spend time looking beyond 3 years?

The answer is: context.  In order to develop either a strategy or a set of activities (or both) for the next year or next 3 years an organization has to account for the context in which it will be operating.  And that context is necessarily broader and longer than the work scoped out in any plan.  That context always includes what might be lurking further down the road and what might approach from the "sides."

If an organization is working on a 1-year plan, then the context for that plan is closer to 3 years.  If it is working on a 3-year plan, then the context is more like 5 - 7 years.  And in each case the range or breadth of issues that reasonably falls within the context for the plan increases as the horizon increases.

Why should we look at things this way?

1. Things Take Time: Looking farther out is important even in an age when so much seems to change so quickly, if for no other reason than most things that will become important to your business still take time to develop.  Whether it is a new technology, an emerging public policy idea, or the growing dissatisfaction of consumers, most things do not simply emerge spontaneously out of thin air, and their development can often be identified early and tracked.  Do not mistake media (blogosphere) hype or triggering events with the longer cycles of maturation.
2. Accounting for Uncertainty: The farther out we look the greater the range of potential issues that will impact your business and, perhaps more important for the current issue, the greater the uncertainty in precisely when something will "pop."  Thus, the longer the time frame for our planned activities, the more "deviation" from our projections we need to consider.  So, if we forecast that something will be mainstream in say, 5 years, then we have to consider that it might actually happen in 4 or take as long as 7 (or more).
3. Good Strategic Thinking: It is not simply what you are going to do or focus on within the next 1 or 3 years that is important, but also how does that position you for what comes next?  Even when your plan is to address things that are critical over a short time horizon, those decisions will position your company for the next set of things that will be developing towards maturity over your 1 or 3 year planning horizon.  Making those near term decisions (typically the "urgent") with an eye to the next set of things (likely the "important") is fundamentally part of good strategic thinking. 

What is a good rule of thumb for identifying your planning horizons?

• If your plan covers the next year, then your horizon should be the next 3 years
• If your plan covers the next 3 years, then your horizon should be 7 years
• If you plan covers the next 5 years, then your horizon should be the next 10