Comments
In their latest book, Beyond Disruption: Innovate and Achieve Growth without Displacing Industries, Companies, or Jobs, the authors Chan Kim and Renee Mauborgne, extend their research beyond their earlier work, Blue Ocean Strategy published in 2004 and Blue Ocean Shift published in 2015.
In their earlier works, the authors coined terms that include ‘red ocean’ that depicts matured markets with hyper-competition, severe price pressures and the inability of firms to sustain an inimitable competitive advantage. They also illustrated ‘blue oceans’ that were uncontested markets, where innovative firms enter as first-movers, identifying and ‘viably’ solving customer problems that were not seen by the competitors.
The authors’ philosophy in both the earlier books prescribed companies to constantly look out for those ‘blue oceans’ and enter the same, ahead of the competition, thereby minimising their exposure to their existing ‘core’ businesses, that will anyway over time turn into ‘red oceans’! By such timely entry into blue oceans, as an organisational routine, companies are expected to grow, sustaining their competitive advantage over time!
Complex concepts
Well, the whole concept of ‘red’ and ‘blue’ oceans was well ‘packaged’ and attractive and appealing to practitioners, driving a complex theoretical concept. More so, these may not be considered as totally disruptive ideas from a theoretical perspective in strategy literature.
These concepts have been extensively researched over eight decades by researchers like Joseph Schumpeter, who ignited the philosophy of ‘creative destruction’ that was popularisedback in 1942, and extended as the ‘core’ of strategy and resource-based views (RBV) by researchers such as Briger Wenerfelt, Jay Barney, Gary Hamel, CK Prahalad, and, finally, by David Teece, through his concept of ‘dynamic capabilities’.
These ideas prescribe that managers running companies should constantly explore unarticulated and unmet customer needs and customer pain-points, and in parallel, re-orchestrate the company’s capabilities to deliver solutions to such ‘pain points’ at a price-point that delights the customers, thereby, creating a new market by itself, which was neither visualised by the competition, nor by the customers themselves! Who are referred to as customers, encompasses not only their existing customers, but also potential ‘non-consumers’ who’s ‘pain-points’ can be addressed by extending the firm’s existing capabilities.
The Schumpeterian ‘economic concept’ of ‘creative destruction’ talks about the industrial mutation and emergence of newer products delivering higher value to customers at a lower price, newer and more efficient methods of production, newer business models and creation of newer markets, constantly destroying and disrupting older products, traditional production methods, and, thereby, making existing models irrelevant, and more importantly, making existing organisational capabilities redundant and obsolete!
Creative destruction
The concept of Schumpeterian creative destruction is such a powerful concept that he argues, in any industry, new technologies, more efficient production processes and newer ways of delivering solutions to the customers will continuously emerge, which will make existing products and services obsolete.
Kim and Mauborgne in this book counter-intuitively argue that traditional economic growth created through ‘new models’ and ‘newer markets’ originating ‘within the industry boundaries’ out of such creative destruction process, comes with enormous social costs of displacement as older business models are destroyed, capital investments and employee skill sets are made redundant.
They raise a concern that the world has seen so many disruptions to older models, leaving many organisations broken, tired, and anxious. Strategists often prescribe that ‘either you disrupt your industry, or get disrupted’! The authors argue that such a stand considers growth as a ‘zero-sum game’ and is not necessarily the only solution!
In essence, the authors in this book put forth the idea that it is possible for companies to reimagine growth, which can be achieved without disruption; i.e., through a process where creating ‘new markets’ outside the existing industry boundaries, and, thereby, eliminate the social cost of displacement. It is possible to achieve ‘economic good’ by not necessarily compromising the ‘social good’, counter-intuitive to the concept of ‘creative destruction’, i.e., ‘creative’ but with no ‘destruction’! Sounds an oxymoron, and yes, it is! Is it realistically possible to achieve such a balance?
The authors argue for creating ‘non-disruptive’ creation that allows us to innovate and grow without disruption and social pain. It encompasses laying a path for creation of new industries (without impacting existing industries), new jobs and profitable growth without closing down existing companies, hurting communities and job losses. The focus is on ‘non-disruptive’ creation of a new pie, without destroying existing companies, jobs and industries; the authors in this book explain such possibilities through anecdotal evidence.
Customer centricity
The authors refer to sanitary napkins as a non-disruptive creation of a new industry, that neither existed earlier, nor disrupted any existing industry to carve a place for itself; it is born out of firms that have solved a customer problem, which the customer themselves were unable to articulate, but through innovation and customer centricity. The authors also quote examples of the micro-finance industry developed by Muhammad Yunus and the establishment of Grameen Bank in Bangladesh in 1983.
They also quote examples where companies like M:NI, Music: Not Impossible, made rock-concert experience possible for the deaf, through vibrations synchronized through wearable devises with signals directly reaching the brain, circumventing the ears. It is argued that such innovation and creativity did not destroy any established industry or displace any established players, but created a new industry, in itself! Having explored the idea of non-destructive creation in the book, the authors set-out how companies can unlock such opportunities through systematic building blocks.
Well, it is important for companies to continually explore non-consumer pain-points and how the companies can solve such problems re-orchestrating their existing capabilities and create uncharted markets, which would be non-disruptive; no question.
However, in every existing industry, players will relentlessly be exploring newer ways of doing things in order to offer superior goods and services at a lower cost; this cannot be curtailed! This is central to the theme of Schumpeterian creative destruction. This will for sure displace non-creative companies in those industries and result in job losses and will hurt communities! The authors do not provide a convincing response to such scenarios!
(The reviewer is Distinguished Professor, Strategy and Accounting, Great Lakes Institute of management, Chennai)
Check out the book on Amazon here
Comments
COMMENT NOW
