- ► WHY WE CANNOT GET OUT OF THE CURRENT MARKET CRISIS?
- ► WHY WE CANNOT WORK ON CAUSES OF PROBLEMS?
- ► WHAT IS THE ESSENCE OF THIS INCOMPREHENSION OF THE ACTUAL REALITY?
- ► SOME CAUSES OF THE FAILURE TO CHANGE
- THE CHANGE: SOME CHARACTERISTIC
We live in a time of profound social, market and government changes, which are the cause of a profound crisis (social chaos, economic crisis, etc.).
An economic crisis of the Market and Public Administration that has lasted for years, for which nobody is able to indicate a way out.
<see The lack of a real Innovation>
► WHY WE CANNOT GET OUT OF THE CURRENT MARKET CRISIS?
The current phase of evolution of the Market shows a paradoxical situation: for the Protagonists of the Market (and of the Government) things go wrong. But
WHEN SUCH PROTAGONISTS
TRY TO IMPROVE THE SITUATION
THINGS ARE ALWAYS WORSE.
Why does this happen?
□ The inability to grasp the essence of the problem
The fundamental fact is that
DO NOT INTERVENE ON CAUSES OF PROBLEMS
Current interventions – like all interventions that do not intervene on the causes of the problem – consist of palliatives, which if them allow us to survive for some time, in reality them only make things worse. Since then the problems recur so that they are even more difficult to solve.
► WHY WE CANNOT WORK ON CAUSES OF PROBLEMS?
□ Obsolete cultural tools are used
The problem is that today
we are not able to identify the causes of the current crisis.
That is the basic question is that
substantially
a question of Culture and mindset.
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This is a problem that has always plagued man in history: when epochal changes occur, the protagonists of the previous phase (the incumbents), stuck in their mindset, “traditional” culture,
EVALUATE A NEW REALITY
WITH OBSOLETE CULTURAL INSTRUMENTS.
<see There is no “Culture of Disruptive innovation”, but an Aptitude for innovation >
□ Based on an obsolete culture we move into conflict with reality (with Demand)
Obviously since the established Players
operate on the basis of
AN INCORRECT COMPREHENSION OF REALITY (OBSOLETE),
THEY ACT IN AN INCORRECT MODE.
That is, they act in a way that is not functional to the reality in which they intervene.
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Because of this fatal misunderstandings arise: one thinks of going in one direction, instead one goes in the opposite direction. Today, in fact, most Companies think of developing disruptive innovation, while actually developing an innovation linked to the previous Market.
<see My Articles on Misunderstandings about innovation>
It should be noted that the strategies that adopt key points of Disrtuptive innovation, but do not change their Business model in a disruptive way, actually develop strategies that in the medium-long term prove to be bankrupt.
<see Why does innovation fail today? >
<see Guidelines [2] What is and what is not Disruptive innovation>
► WHAT IS THE ESSENCE OF THIS INCOMPREHENSION OF THE ACTUAL REALITY?
□ Incumbents don’t know what they are doing
The problem is that the Incumbents (Market and Government) behave in this way because they “don’t know” what is happening (they don’t understand what really happens).
That is, basically,
THE INCUMBENTS
“DON’T KNOW WHAT THEY ARE DOING”
Their crisis derives precisely from the fact that, moving in this dimension of unawareness, they do not understand the consequences of what they do.
<see Be careful: most successful companies are not real innovators (disruptive innovators) >
□ the inability of Managers to grasp the essence of the problem
Unawareness means in the first place inability to see the picture of the crisis of the Company in its entirety; in its nuances.
That is, the lack of a functional Culture (mindset) leads Incumbents to think that the problem is in specific aspects of the Company’s strategies (or work organization) <see Disruptive Business Consulting [1] – How disruptive Business Consulting changes >
And in this way the real problem is not grasped: the need to change, at the root, the Paradigm of the business.
<see How can companies change themselves? >
□ The need to go beyond a particularistic view of problems
A feature of the disruptive phase of disruption of the market is to develop the Value in the interaction with an Ecosystem (other products, non-consuming practices, etc.).
Hence the need to act with a whole picture in order to develop a real Disruptive innovation.
<see The need to see the whole picture: integration of products into an eco-system>
■ THE POWERLESSNESS OF THE CEO IS GENERATED FROM UNAWARENESS
The Managers therefore lack awareness of the gravity of their position: they think that the old recipe can still work to solve their problems.
<see The misunderstanding on Innovation by Manager, Consultants and Pundits >
So basically they put themselves in the condition of trying to survive waiting for better times (it is difficult to think that they really believe in their “projects” for the future, like the Electric Car, for which nobody has plans for the element determined: a network of energy distributors).
That is the unawareness, the inability to correctly frame the problem, puts the Executive level in a condition of passivity of the events (in a condition of impotence with respect to the problems of their Company).
□ By acting to stop specific problems, the Incumbents only further worsen their situation.
The problem is that being the Incumbents (the Managers) unaware of what they are, they oppose a “resistance” to the changes that causes the problems to emerge later in a more difficult way to solve.
This mode of action of the “resistant” creates a vicious spiral that leads not only to an aggravation of their situation, but also creates a barrier to the development of innovation with respect to the entire Market (which derives from the fact that these Managers develop stratagems of various types to defend their pre-disruption business).
<see The importance of understanding how barriers to innovation work >
► SOME CAUSES OF THE FAILURE TO CHANGE
■ LACK OF RESPONSIBILITY FOR THE EXECUTIVE LEVEL (LACK OF THE ENTREPRENEURIAL SPIRIT)
Essentially, the crisis of most of the big companies derives from a lack of responsibility on the part of those who manage them.
The fact is that in the current big Companies none of the executive Managers is actually empowered with respect to the Company’s performance (while the entrepreneur who managed the companies in the previous phase of the market was empowered).
Today none of the executive Managers really risks being thrown out of the market (together with the failing company), since they can relocate to other companies (their reputation does not worsen in case of bankruptcy, because thanks to the widespread incompetence, nobody is able to understand the responsibility of Managers in the bad results of the Company’s strategies).
□ A defect of the human psyche: the search for a condition of comfort
One of the causes of resistance to business change is a characteristic of the human psyche (also called indolence): most people prefer to live in situations of comfort rather than accepting the challenge of evolving reality.
This applies to Managers: while for entrepreneurs (now absent from the big players market), as for sportsmen, the challenge is the essence of their life – and therefore of their business.
In fact, every change for the human being represents a considerable cost both as a psychological effort and as an economic effort. For this reason, man is spontaneously led to look for shortcuts, which unfortunately eventually cause him problems.
.
The strategies followed today by the incumbents consist precisely in
SHORTCUTS FINISHING FOR
CREATE PROBLEMS FOR THEM
It is the classic situation in which “the patch of the problem that you wanted to solve is worse than the problem itself”.
□ The mindset is a “belief” that resists the “test of reality”
Another flaw in the human psyche that afflicts the Incumbents is that they are unable to see what the consequences of their actions are.
It is the “ideological” mental habitus, in which the person “believes” preconceptively that the basic idea of his Philosophy is the “right” one.
This preconceptual idea (on which all other thoughts produced by his mind are based) leads people to filter any signal coming from reality. Or them
do not see the actual reality,
but they see “what they want to see”.
The mechanism underlying this condition is the one mentioned above: the human being tends to filter out the signals of reality that can put his psychology dimension of comfort in difficulty.
That is, in summary, those who today work in the Incumbents Market (Managers, Consultants, Authors, etc.) are so imbued with an obsolete culture that:
● they are unable to see things as they are because of the cultural filter placed by his mind;
● they do not want to see why it is more “comfortable” to think of being able to continue in the old way.
■ WHY THE PRESENT MINDSET OF THE INCUMBENTS IS DIFFUSED
The difficulty in getting out of the crisis by the Incumbents comes from the fact that the current mindset that acts as a barrier to change is so rooted in the Incumbents due to the fact that it has been developed over the years as a system to protect the business. This mindset has in fact worked very well for decades, keeping away Managers and Employees far from “distractions” with respect to the directly aimed at profit strategies typical of the previous Market phase of “linear development” (pre-disruption).
<see The Company Immune System: why the big Companies cannot develop real innovation>
The paradoxicality of this is that
in a World “upset” by the disruption,
now this mechanism designed to develop profits,
prevents you from making profits.
<see my Articles on Barriers to Innovation >
□ The amrored Market: the resistance to change by the Incumbents has created an armored Market with respect to innovation
The problem of the Incumbents is aggravated by the fact that the defense of their “incompetence” extends to the whole Company (due to the fact that they constantly operate in defense of their positions – of the pre-disruption business).
That is they basically have
“Armored” the Market towards innovation.
In other words, not only are there barriers to innovation within big Companies, but barriers to innovation have also been created in the Market in general.
This has happened as a result of the interaction of the Market (Incumbents) with the Media and with political institutions (various kinds of expedients, such as financial support – starting from Tesla; and forms of product protectionism, as in the cases of the rules that penalize new forms of Business like Uber and Airbnb).
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As a result of this Market condition, the Incumbents do not find people or institutions that can help them develop real Disruptive innovation.
<see Disruptive Business Consulting [1] – How disruptive Business Consulting changes >
■ THE DISRUPTIVE INNOVATION DEVELOPS ANYWHERE OUTSIDE THE DIMENSION OF THE INCUMBENTS
Naturally the innovation inhibition of which we are speaking is not able to contain the disruptive drive towards a radical innovation of the products of the current generation (ie towards an improvement in the living conditions of the Customers).
This drive to the radical innovation of an increasingly substantial part of the market is caused by:
● the existence of an increasingly stronger Demand by Customer (which, due to the current economic crisis, with extremely low spending, can no longer afford to buy the products of the current generation)
● the ease with which disruptive Statrup can be started today.
THE CHANGE: SOME CHARACTERISTIC
► WHY THE NEED FOR A DISRUPTIVE INNOVATION?
To understand the need for radical innovation (Disruptive innovation) of the products offered by the Market, it is necessary to understand the fundamental characteristics of this change:
● it is a change that affects the foundations of the Market: it is about developing completely new products. And consequently there is a need to redefine Business as a basis: strategies, project development and production methods, etc. (fundamentally, it is a matter of changing the mindset).
Keep in mind that the rules of the Business are revolutionized to the point that the reference becomes non-consumption; that is, the Business comes to be Customer driven (the Consumer is integrated into the product design and production process).
<see Business problems: the difference between original and current marketing>
● change is not an option: since it is the Customers themselves who experience the disruption, and they are no longer able to buy the current types of products (Customers are forced to fall back on substantially useful goods: those on the outgoing market almost exclusively satisfy ephemeral, emotional needs).
<see New mode of Innovation (Key of Changes #3) >
■ WHAT IS THE CAUSE OF THE CURRENT DISRUPTION
□ The need to frame the Disruption in a historical key
To understand the meaning of Disrutpive innovation is also necessary to frame the current phase of disruption (and economic crisis) in a historical key.
The current disruption is a recurrent phase of the evolution of human history: one of the periods of great change “from below” in history called “Revolutions”.
In these phases the changes are irrepressible – as was the case, for example, for the French Revolution and for the American Revolution – due to the living conditions of the people who have become materially unsustainable.
<see The drive for change>
□ Why the inevitability of change
The change is inevitable due to the fact that it is a spontaneous phenomenon: it was not decided by anyone (as it was instead for other changes of the Company and the Market) that nobody is able to manage it.
<see Why disruptive innovation is not an option>
That is today there is an unsustainability of the material living conditions that leads to development.
● intolerance that can no longer be alleviated by products from the current Market (more generally there is an intolerance towards the model of life imposed on them by the Market).
Nor can the new needs be met by the services of the Public Institutions, who live the same problem as the Incumbents of the Market. For this reason the Disruptive innovation in progress develops solutions that cover both the Market and the Public Services sector.
● expectations of improving their quality of life due to the fact that they see how the “crowd” is directly developing new Practices thanks to the new ICT and IoT.
<see New modality of Consumerism (Key of Changes #2) >
■ WHICH IS THE DRIVER OF CHANGE? THE CUSTOMER DRIVEN BUSINESS
□ needs become the driver of product development
The current situation is therefore: on the one hand there is the People with urgent needs (it is no longer possible to continue in this way), and on the other hand by a Market that is not able to satisfy these needs.
Consumer spending no longer allows them to satisfy their needs due, for example, to the necessity imposed by the current strategies of the Incumbents that oblige them to change after a few years products that can no longer be used (programmed obsolescence).
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This situation has led Customers to commit themselves to satisfy their own needs (“‘necessity is the mother of invention”). In fact, these non-Customers create organized niches of non-consumption solutions (the new practices supported by Web Social Netwoprk).
Basically now we recover the Basic Law of the Market, that of Supply and Demand abandoned in recent decades by the Market (this abandonment is precisely the cause of the current crisis).
<see ‘Towards a solution: the recovery of the Supply and Demand principle’>
□ The business moves from the search for a sector in which to enter, to the development of niches of non-consuption
As C. Christensen has well explained, (and example in “Competing Against Luck”), it is from these non-consumption niches that the new Dirsuptive innovation Businesses are developed.
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The Disruptive Innovation Business
no longer seeks Market sectors in which to enter, but
LOOKS IN THE WORLD OF NON-CONSUMPTION
EXAMPLES THE NON-CONSUMTION PRACTICES
TO BE TRANSFORMED INTO BUSINESS.
That is to say
● no longer to study Big Data, but to intuit the real meaning of non-consumption trends (to perceive, at an empathic level, the current needs of people).
● no longer to look for a Market sector, but to create a new one (and thus become the First Movers).
<see Disruption is a quantum leap that can not be predicted with statistics>
□ The business goes from trying to understand the requests of the Customer, to his involvement in the product development process
The change brought about by the new phase of Disruption is truly radical:
we no longer try to find out what the Customer wants,
but we involves him in the product development process.
That is, no more tools are used to understand the psychology of the Customer, but new tools are given to the Customer to co-design its product.
<see Towards a New Marketing (1): beyond the Analytic Marketing, toward a pro-sumer Market >
► WHAT ARE THE PROBLEMS AND OPPORTUNITIES OF THE DISRUPTION
Obviously it is possible to continue to develop business even without resorting to Disruptive Innovation. However, this choice has some very important negative aspects analyzed below (see the problems of the Hybrid Disrutpive/Sustaining innovation in the next paragraphs).
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Let us remember that the disruption in progress is something ineluctable, uncontrollable: change is not an option. <see Why disruptive innovation is not an option >
● problems for established companies
As can be seen from the Market trend, the disruption is a problem for the established Compaines, which are no longer able to interpret the Demand; and also suffer from the inability to change to adapt to the new Demand.
<see The great Firms are not able to develop disruptive innovation within them >
<see New modality of Consumerism: the New Demand (Key of Changes #2) >
Remember that even if only a part of the “old rules” is applied, a potentially winning idea that underlies the product cannot develop its potential in the nascent Market (this is what happens in most Incumbents’ attempts to develop Disruptive innovation).
Or
it is useless to adopt some Disruptive innovation keypoints
if you don’t change your Business at the root
The fact is that if we do not adopt a radically new Business model (redefinition of Value propositions, Market sectors, etc.) we create “Hybrid Innovation” Disruptive/Sustaining Innovation businesses that are not able to maintain over time any eventual success achieved.
<see in The failure of Hybrid innovation (Disruptive + Sustaining Innovation) >
The problem of Hybrid innovation is at two levels:
● Hybrid corporate strategies: a Hybrid Business in which really Disruptive products are developed, but the previous Business model is maintained.
● Hybrid product: when trying to modify an existent product by introducing disruptive innovation elements (for example, the “electrified” cars).
● opportunities for Startups (of Disrutpive innovation)
For those who are not part of the estabished business, the disruption in progress is an excellent opportunity to develop a successful business (today if you measure yourself directly with the Incumbents you cannot succeed – unless you resort to a production located in China).
The opportunities for disruptive innovation derive from the fact that:
● the disruption taking place in the Market (in the Western Company) considerably disadvantaging the Incumbents – who are unable to understand the new Demand – leaving a huge market segment uncovered.
<see The Company Immune System: why the big Companies cannot develop real innovation>
● some features of the current market that create problems for the incumbents, are actually an advantage for those who want to enter the market:
– the over-developing of technologies has meant that today there are very low-cost Customer Technologies that, when used appropriately, are able to fully satisfy the needs of the new Demand.
<see The Over-serving/Under-serving problem of the Incumbents >
Moreover
– the development of technologies such as ICT and IoT (which the incumbents do not know how to use for what their real value is) allow to start Disruptive Business with relative ease: rapid starupping, starting from a small size, with low investments and with a product simple, to then gradually develop the offer based on Market requests, without the need for high skills (which are not required by Consumer Technologies introduced in the product, and used in the production <see Industry 4.0: the Smart manufacturing (& SmartFAB)>)
● ease of defining a new Product: to create an attractive product for new Demand, it is no longer necessary to carry out expensive studies (Market research, feasibility studies, complex industrial plans, creation of B2B relationships for the definition of a Value Chain, etc …) since the development of the Product is based on the imagination of the Startuppers.
< see “Beyond the Value chain“ >
<see Guidelines [2] What is and what is not Disruptive innovation>
