3 reason why companies fail due to disruption

What could be the possible reason for big companies like Blockbuster, Kodak, or Nokia to go bankrupt?

Many would answer this question by explaining that the reason for their failure was the advent of digital and advanced technology. Wise innovation was supposed to be a great manifestation of these companies. Considering that just a few years ago, these companies could have been compared to the likes of Apple or Alphabet today. Hence, the answer to this cannot be so simple, there is more to it.

Companies tend to underestimate going the extra mile from what they have established. And consequently, they suffer the impact of disruptive innovations which is a phenomenon that Clayton Christensen has rightly named as the innovator’s dilemma.

Birth of a new technology

The number one reason for companies to underestimate technology disruption is time-related. When a new technology emerges and influences the market, companies react to it in a manner that it is an alien and completely new invention of that time, which in most cases is not true.

The timing of new technology can shake off a company’s current status. But, in most cases, it only acts as a game-changer. The parabola of disruption rises very slowly and it takes a long time to reach its peak.

For example, the first digital camera was already in existence since 1975, much before it saw its golden years of success. Another example is the Blockchain, originating in 1996, is now seeing an upward trend.

Most managers and decision-makers end up misjudging the slow and steady emergence of disruptive technology, in turn causing a tremendous amount of future losses. For those far-sighted ones who do see it, are able to take calculated risks and reap good benefits.

Shunning away small markets

The market size always matters for small and big companies. In 99.99% of cases, whenever a disruptive innovation comes to light, it creates a small market for itself. Now, these small markets are more often than not, not very lucrative for big establishments to explore. Though they have their reasons for having to maintain a big sustainable economy, in this process, they fail to see the growth potential of the small markets. These smaller markets eventually grow big and become the focal points for the consumer journey.

By that time, they become too complex for big establishments to enter and sustain.

However, when these small markets become huge and progressive companies cannot even reach their profits, a failure in business planning and restructuring begins to arise.

· Business plans are carried forward in many ways and the most popular strategy is the S.M.A.R.T (Specific, Measurable, Achievable, Relevant and Time-bound).

· Restructuring the company’s mission and vision according to the market trend begins new business enterprises.

· It is important for businesses to do a market study from time to time to stay updated about what is happening in different markets.

The economic well-being

The third reason why managers tend to underestimate any disruptive technology is they have to maintain economic welfare. An introspective manager always maximizes profits and optimizes costs. This is what guides companies to enable them to generate economic well-being.

It stops people from shifting their business goals as they are too comfortable and safe. It also makes it much more difficult for people to actually take a risk on something they don’t know if it will work or not.

A good example of this is, Blockbuster refusing to collaborate with Netflix back in 2000. They were safe and comfortable in a business model that they thought had given them profits for so long, they failed to see the disruption that would take over in the coming years.

Conclusion

As this world goes digital, everything including business plans and marketing strategies cultivates from the traditional in a very creative and relatable operation.

Innovation is a choice. It is becoming a tool for greater motivation. It is not only a solution for all ambitious companies but also an engine to drive them forward.

Finding a good reason to invest in something new will never lead a company to missed opportunities.

Great creators, innovators and entrepeneurs look at the world in ways that are different from how many of us look at things.

That’s why they see opportunities that other people miss.

Look at what is right in front of you, but look in a way that escapes most people.

Enroll to School of Disruption to turn treats into opportunities.

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