g-f(1)22 Uncertainty and disruption are two sides of the same coin

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Uncertainty and disruption are two sides of the same coin; they can’t be separated. And yet much of the established thinking around managing disruption focuses on incumbents grappling with the threat of market incursions and identifying opportunities to develop their own, and on new entrants managing the opportunities around disruption. 

• There is significant uncertainty regarding the rate of progress within a new disruptive value proposition.  
• The launch of Netflix’s DVD-by-mail service at the turn of the century represents a classic example. Netflix was able to disrupt video rental incumbents such as Blockbuster. 
• Video streaming services took off rapidly around the globe in a matter of years.

Genioux knowledge fact condensed as an image.

                                                                        

Condensed knowledge

• There is significant uncertainty regarding the rate of progress within a new disruptive value proposition. 
• Some innovations can reach mainstream status in a matter of years, whereas others may take decades. And others, despite their disruptive potential, may never reach fruition. 
• The launch of Netflix’s DVD-by-mail service at the turn of the century represents a classic example. The service was initially targeted at movie enthusiasts who were early DVD adopters. These were consumers who agreed that the trade-off of selecting films through online search was worth the wait (often several days) for the movies to arrive in red envelopes in the mail. At the time, this value proposition was not attractive compared with the mainstream video rental market. However, as Netflix improved its offer — via an unlimited subscription service, an online recommendation engine, a more efficient distribution network, and newer and original content — the company was able to disrupt video rental incumbents such as Blockbuster.
• Video streaming services took off rapidly around the globe in a matter of years. In contrast, it has taken online degree programs more than a decade to establish a strong foothold in the education sector. And gene therapy, touted as a major advance in personalized medicine for several decades, has yet to take off.
• Decision makers should bear in mind that there is substantial uncertainty around whether a disruptive value proposition will materialize in the first place. Why is this important? Because an explicit consideration of uncertainty can help decision makers recognize the risks that surround the execution of the disruptive strategy. It can help them set more realistic market-growth expectations and evaluate strategic contingencies that can be experimented with and validated.
• In our ongoing research, we have found three key sources of uncertainty — around technology, ecosystems, and business models — that are pivotal to understanding the process of disruption. Three key sources of uncertainty surrounding the question of whether the disruptive value proposition will reach fruition in a given market.

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[genioux fact extracted from MIT SMR]

Authors of genioux fact

Fernando Machuca

References

Innovation’s Uncertainty Factor, Rahul Kapoor and Thomas Klueter, July 28, 2020, MIT Sloan Management Review, MAGAZINE FALL 2020 ISSUE.

ABOUT THE AUTHORS

Rahul Kapoor is a professor of management at the Wharton School at the University of Pennsylvania in Philadelphia. Thomas Klueter is an associate professor of entrepreneurship at IESE Business School at the University of Navarra in Barcelona.