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Disruption, 'Dematurity' and Cooperative Commercialization

Posted By Prucia Buscell, Thursday, August 14, 2014
Updated: Sunday, August 17, 2014

Disruption in an industry often comes from the gradually accumulated effects of many interacting forces rather than a sudden change, business analyst John Sviokla writes, and what happens to industries impacted by this multifaceted dynamic is a phenomenon he calls "dematurity."

"You can think of dematurity as a crescendo of mini disruptions that add up to great effect," Sviokla writes in Strategy+Business. "It will hit most industries sooner or later; it has struck sectors as varied as soft ware development, entertainment and defense contracting. It's happening right now in the U.S. in healthcare and electric power generation." And results can be surprising.

The term, coined in the early 1990s by former Harvard Business School professors William Abernathy and Kim Clark, describes what happens when many small companies rapidly adopt multiple innovations that can rejuvenate practices in an old industry. Sviokla explains the professors were thinking of the U.S. auto industry, which was profoundly challenged by Japanese competition, the quality movement and lean management. But instead of collapsing, the big three Detroit automakers adopted the tools and techniques of their competition and aimed for better quality and customer satisfaction.

Sometimes disruption actually helps market leaders. Wharton Management Professor David Hsu, MIT Professor Matthew Marx, and University of Toronto Professor Joshua Gans studied the speech recognition industry and found start-ups that introduce disruptive technologies with long term potential are more likely to end up licensing their innovations to established businesses, or agreeing to be acquired, than they are to become rivals. They say that's because start-ups are eager to prove the value of their innovation, and once they do, they often form alliances with the established businesses or merge with them. These authors call that a cooperative commercialization strategy that sometimes has the effect of preserving the status quo. Read their paper here.

Sviokla says while dematurity can make industries young again, it can also threaten individual industries if leaders haven't seen it coming in time to prepare. He cites five "often overlooked but genuinely prescient" signals of change:

New customer habits: Mobile phones used only for voice communication in the 1990s didn't dramatically change people's habits. When people began to use phones for text messages, reading magazines and books, listening to music, and playing games, habits changed. They began taking pictures, shopping online and using multiple apps so business and pricing models changed in a large group of industries that once operated independently. The same thing happened in IT when access to services by high speed cloud connections began to replace web based software.

New Production Technologies: A recent survey showed more than two thirds of 100 manufacturers report some use of 3D printing, a burgeoning technology that will have major impact in many industries in the manufacture of goods, supply chains, product development, and transportation.

New Lateral Competition: The emergence of healthcare outlets in bog box stores and retail clinics is creating competition for primary care providers and hospital emergency rooms, which will have to adapt. Old and new businesses in healthcare are trying to keep people out of doctors' offices with services to promote exercise, control weight, manage disease and offer advice.

New Regulations: When regulations appear to pave the way for self-driving cars, major dematurity can be expected in public mass transit and private transportation-related industries.

New Means of Distribution: Digital infrastructure has already dematured media and entertainment. Regulations allowing expanded commercial use of unarmed aerial vehicles-drones-would have major impact in fields such as law enforcement, insurance, and delivery of emergency supplies to remote areas. Amazon plans to use drones to deliver merchandize, and some analysts predict drones are the transportation of the future.

Sviokla is co-author of The Billionaire Effect: What Extreme Producers Can Teach Us about Breakthrough Value. He is a principal and advisory innovation leader with PwC. Read his Strategy +Business article here and the David Hsu article here.

Tags:  buscell  business  complexity matters 

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