Can disruption be predicted?
On the morning of September 11, 2002, 19 hijackers commandeered four passenger planes into the twin towers of the World Trade Centre and the Pentagon. This moment in history has been described as ‘disruptive’ and it cast a long shadow on the US orientation towards the Islamic world in general and Iraq and Afghanistan in specific and changed security protocols the world over. The disruption arrived out of the blue skies.
Not every disruption comes suddenly though. The US manufacturing workers who lost their jobs to other countries in Asia (and arguably put Trump in the White House a few years later) did not do so overnight. Globalization was meant to be a panacea for the shrinking global markets for the rich countries. But that is not how it turned out.
And then there was the technology that brought about sweeping changes for many. Kodaks of the world found themselves crashing at the altar of digital photography. The music makers struggled to protect their work in a world where the proliferation of bytes was impossible to suppress.
No two disruptions are alike. It can be argued, though, that all disruptions can be categorized into four slots. Looking at the four divisions, the next question would then be — is there something we can do in advance to win in a disruptive environment?
This military expression describes a fascinating phenomenon of the ‘weak’ fighting the ‘strong’. If the weaker player chooses to fight the stronger adversary using the same tactics and strategies as the latter, there is a good probability that the weak will be defeated. But if the weaker guy chooses tactics and strategies that the more established player is unfamiliar with, the former stands an excellent chance to win.
Take the case of the terrorists. Why is it so hard for the armies to end militancy? Because the militant plays by a different set of rules: he does not wear a recognizable uniform, does not live in units and cantonments, does not travel in distinctive transport and follows no laws. How do you vanquish an enemy that you can mostly not even see?
The moment the terrorist chooses to adopt conventional ways, he is easy to find and defeat. That is what happened to the ISIS when they ‘graduated’ from unseen evil to the ground holding armies.
This phenomenon is equally relevant to economies and businesses. This is the paradigm at play when developing countries like Bangladesh, Vietnam, India and even China play by a different set of rules of worker remuneration, environmental protection, safety and infrastructure standards and observance of local laws. These countries can produce goods at a cost that the US companies cannot even begin to imagine. That is asymmetric warfare in action.
It is also in action when established manufacturers come face to face with the reality of start-ups and the unorganized sector where the cost of maintaining establishment is so low that it eventually translates into a discernible competitive advantage in the market.
Technology Innovators and Exploiters.
The Indian retail scene, long dominated by Brick and Mortar, has been changing ever since the eCommerce players entered the field. Flipkart, Amazon and others of their ilk showed how demands could be generated online and met without the expensive intervention of multiple warehouses. In one stroke, businesses that sold goods that could be purchased without the need to feel and touch came under severe pressure. Bookstore after bookstore has shut down or converted into, say, a toy store. Even items that needed a trial — shoes for instance — are sold online.
Through this disruption of sorts, one thing remained constant — the ubiquitous presence of the Kirana store that met immediate grocery needs in a small geographical area. They did not threaten the big players — the Big Bazars — who sell a deeper and wider range of goods and deal with large volumes. Here a consumer can walk up to the store for the smallest possible quantity and fulfil urgent needs. These Kirana stores have, however, been outside the pale of digital sales.
All that might be changing very soon. It is common knowledge that Mukesh Ambani’s Reliance is developing a super-app that will provide more than a hundred services, including access to the nearest Kirana store. Via the app — which, of course, will challenge the supremacy of many online platforms in a variety of categories — it would be possible to place orders for the smallest quantity and have it delivered in the least possible time. The supplier store will also be replenished automatically based on the cumulative data the app will generate. Will this disrupt established retail of grocery? Time will tell.
One of my favourite quotes goes ‘some people like the status quo, long after quo has lost all status’. Anyone happy with the status quo and indifferently drifting across the firmament of time runs the risk of being extinct in a world where many are lying in ambush, the gun of technology in hand.
In his seminal work published in 1970, Alvin Toffler pointed to the discomfort of “too much change in too short a time”. It isn’t the change that hurts us because change is the only constant there is. What befuddles us is the accelerating change that threatens to makeover our world in increasingly shorter periods. What took decades to change, now takes years even months to transform. Anyone who is not consciously imbibing this change will be under the ‘shock’ of disruption.
Look at how we consumed entertainment and socialized. In the first 70 years of the 20th century, we mainly relied on the radio in its various evolving and miniaturizing forms. Going to a neighbour’s house for a conversation was pretty much the only ‘social media’ we had.
Then arrived the black and white TV, moving to its colour upgrade in 1982 to coincide with the Asian Games in Delhi. And then in a short decade, new technologies came and disappeared — the cassette recorder, the VCP and the VCR, the dial phones with only intra-city connectivity, the millions of STD booths that sprung up and coloured our markets with their yellow signposts — and then disappeared — the arrival of a cell phone and then the smartphone, our technology factotum, less than two decades ago. Social media platforms too come and go — My Space, ICQ, Google Plus, Flickr, Whatsapp (less than a decade old and already the chief source of ‘intellectual sustenance’ for most!) and Zoom would surely look magical to someone who went to sleep in 2000 and wakes up now! This is an ever transmuting list, changing not by evolution but by a distinct revolution.
Till 2005, we relied on strangers for directions in an unknown place and friends for recommendations for movies. In 2005, Google maps quietly ‘replaced’ all the conversation with strangers by giving the most accurate visual and aural instructions. Four years ago, Netflix stepped in as the surrogate friend, reading our minds by using an algorithm that watches us watching movies.
The wave of accelerating change that is forever hurtling a brand new future towards us can look like disruption. Unless we learn to ride it.
For many centuries, Europeans believed that white was the only colour that swans had. That changed in 1697 when a black swan was spotted. Unprecedented events that could have a large impact came to be called Black Swan events. The term was popularized by Nassim Nicholas Taleb, first regarding financial events (Fooled by Randomness) and later to everything else (The Black Swan). COVID-19 falls in this category, as did the fall of the Berlin Wall, the dissolution of the Soviet Union, the arrival of the internet, the 9/11 attacks, the 2008 subprime lending fuelled economic crisis and, travelling backwards, the start of the First World War.
Arguably, the disruption caused by Black Swan events is the hardest to surmount. After all, these arrive without a warning (or do they?), have no precedence and affect large swathes of the population, even the entire world.
Is there something we can do?
There can, of course, be no silver bullet for all situations. But the following framework can help.
Most of these are phenomena that can be predicted. We now know that with a more robust system of sifting through mounds of data and better coordination, the 9/11 attacks could have been predicted and prevented.
China may have been surprised by the bat-consumer who unleashed COVID-19, but did the rest of the world have to be caught napping? After all, the information of the virus was available as early as in December 2019.
For decades tomes after tomes had been written about the shallowness of the Soviet economy. For example, Inside Russia Today by John Gunther was written in 1962 and it graphically described the parlous state of the Soviet economic life. Should we believe that no one could have foreseen the collapse of the Soviet State?
And could the subprime lending economic crisis not have been predicted? Even the former RBI governor Raghuram Rajan had warned against this housing bubble.
The requirements are a strong feel for the market (including by an institutionalized Competitive Intelligence structure), agile thinking and response and a system of scenario-building that looks at every ‘uncomfortable’ possibility. Only nations and companies that have both the agility and the sense of urgency are likely to thrive.
It is no longer about redundancy in your existing organizational structures. What is needed is a resilience that is born out of robust business continuity management systems, exploring of alternatives and contingencies in the pre-disruption, a healthy respect for creating and recreating reserves, a change in the always-lean-inventory approach and an institutionalized lessons-learnt mechanism. Motivation is the other unsung hero in efforts to build resilience. This is a leadership responsibility and must be at the core of creating a strong human bulwark against disruption.
Great organizations understand the power of continual communication to ensure that when disruption hits, the entire team is already aligned. Opacity is the worst enemy of preparation. How much more would have been our uncertainty during the ongoing Coronavirus crisis but for the multiple sources of information from authorized sources? How would have our alignment to the prevention been if the instructions were scanty? The information must be disseminated on an ‘as is’ basis and should there be doubts about its complete veracity, caveats can be added.
This is a no-brainer. We can endlessly moan about the disruptive nature of the wave of technology. But you cannot roll back a wave. Artificial Intelligence (AI) may not fill every worker’s heart with optimism about his employment prospects, but AI is here to stay. As are robotics, the Internet of Things (IoT), possible Space Colonization, 3D Printing, Medical Innovations, High-Speed Travel, Blockchain Technology and more. Just as the Reliance example shows, anyone who is eager to be a step ahead in this game will win.
So, better prediction capabilities, resilient organizational structures, seamless communication and a bias for technology, coupled with a sense of urgency will be needed to match the challenges posed by disruption. The alternative would be to wring hands in regret.