Digital Disruptions Proceed at Their Own Pace
The digital camera was invented in 1975, but it wasn’t until 2012 that Kodak officially went bankrupt. The Apple I was introduced in 1976, but it wasn’t until 1998 that Compaq’s acquisition of Digital Equipment Corporation (DEC) signaled the end of the minicomputer era. The MP3 file format was agreed to in 1993, but it wasn’t until 2006 that Tower Records closed its doors. Time-sharing computers were developed in the late 1950s, but didn’t become the dominant form of computing until the rise of Amazon Web Services (AWS), launched in 2006.
The speed of disruption varies widely, but it is rarely sudden.
We are often told that technology change now happens much faster than in the past, but this isn’t really true. The time it takes for a new technology to be adopted by 50 percent of U.S. households has long been used as the basis for objective comparisons. Using this metric, it is generally agreed that both radio (eight years) and black-and-white television (nine years) reached the 50 percent threshold much faster than personal computers (17) or mobile phones (15). Half of U.S. households have had Internet access since roughly 2002, so depending upon when you consider the Internet to have been developed (a case can be made for the 1970s, 1980s or 1990s), you can get almost any number you like.
What about the extraordinarily rapid growth of Facebook, Twitter, Netflix, Uber, Airbnb et al.? Economists rightly put these Internet-based services in a separate category. They are more akin to TV shows, movies, songs or software application programs, which have often achieved widespread acceptance similarly fast (or faster) in the past. For example, in the late 1940s, the Milton Berle Show went from zero to roughly 80 percent of the available U.S. TV audience in just a few years.
One of the reasons incumbent firms usually struggle to respond to new technology business models is that the pace of disruption is both slow and unpredictable.
As first suggested by Clayton Christensen, disruptive changes typically go through three distinct phases. First they are seen as “toys,” with many real deficiencies; then they become a “threat” that somehow needs to be countered; finally they are acknowledged as the “obvious solution.”
But since the toy phase can last for many years, only firms that are deeply committed or have fortuitous timing tend to succeed with the new model. Most established companies decide to wait until the threat phase is clear, but by then of course it is typically too late.
Thus, historically, the long but unpredictable length of the toy phase has presented the most difficult strategic challenge, and this remains true today. The list of potential disruptions that are still in the toy phase is long and growing — Bitcoin, massive open online courses (MOOCs), the quantified self, 3D printing, wearable technologies, Google glass, self-driving cars, home robotics, drone-based deliveries, personalized medicine and more. The venture capital community will continue to fund new firms seeking to get past the toy phase, while most incumbents will continue to watch from the sidelines. This makes future Kodaks, DECs and Tower Records all but inevitable.