Disruption Survival Guide

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In a fast-paced market, the ability to defend a business against (and to take advantage of) disruption is crucial for staying ahead of the competition. Disruptions have traditionally altered the trajectory of many industries: Digital photography has rendered film obsolete, music downloads have diminished CD sales, and tablets have largely replaced netbooks. Health care is no exception. The field is constantly changing, with new developments in both policy and technology. Competitors are consolidating, alternative business models are emerging, and technology is improving. Some would say that the digital revolution in radiology has led to its own disruption, in the form of teleradiology. Fortunately, disruption is not a single event. It can take years, or even decades, before legacy markets disappear. People still go to movie theaters despite online streaming, cargo ships are still used despite the speed of air transport, and brick-and-mortar stores are here to stay (despite the presence of online retailers). These legacy markets persist because they offer advantages that disruptive competitors cannot: Theaters are a social experience, cargo ships can carry much more than planes can, and physical stores allow consumers to check products before purchase. In a recent Harvard Business Review issue, Wessel and Christensen¹ outline a systematic method for formulating a strategy to guard against disruption. First, identify your competitor’s strengths; second, identify your own relative advantages. After that, evaluate the conditions that will help (or hinder your competitor from adopting your current advantages) in the future. Wessel and Christensen borrow a definition of innovative disruption from Michael Raynor, DBA, business writer and Deloitte® consultant: Technological and business-model advantages change the dynamics of the market. This is not competition through pricing, but through innovation. In one example provided by Wessel and Christensen, in the early days of computing, manufacturers achieved radical cost savings by using standardized components to assemble desktop computers. In contrast, the computing solution of the time—the larger microcomputer—was built using more expensive and customized hardware. As performance and cost savings increased for desktop computers, microcomputers were eventually phased out of production. It is important to identify the strengths and weaknesses of a disruptive competitor (in terms of the jobs that it can do for customers) and then do the same for your own organization, the authors advise. For instance, many computing solutions other than desktop computers are available, from laptops to tablets to smartphones. These devices can browse the Internet, stream content, and access apps anywhere. Their portability and ease of use have allowed them to supplant desktops for general multimedia use, but for office networking, high-end graphic design, and software development, desktops are often the only solution (because of their power and versatility). No matter how advanced tablets become, they are unlikely to be as powerful as the desktops of the same year. An effective strategy predicts the impact of a disruption—and whether or not it represents a definitive shift in the market. Wessel and Christensen present five barriers to disruption that competitors have to overcome: momentum, technology implementation, the ecosystem, new technologies, and the business model. The momentum barrier concerns whether the behavior of general consumers is likely to change and how comfortable they are with the status quo. The technology-implementation barrier is the challenge of making the best use of existing technology, which can make new technology cost prohibitive. The ecosystem barrier takes into account existing infrastructure and channels of distribution. The new-technologies barrier determines whether or not the technology needed to change the competitive landscape exists. For the business-model barrier to be overcome, the disruptor would have to take on your cost structure in order to compete. Disruption Strategy After determining the nature of disruption, you must devise a strategy to deal with it. Gilbert et al² propose a method of dual transformation for companies for which legacy markets make up a large percentage of revenue. Their strategy (which they have found most effective) is to preserve the core businesses, emphasize legacy advantages, and adapt to new market conditions—but, at the