Patterns of Disruption
How can I anticipate the unexpected threats that could devastate my business?” This is the question that keeps us up at night. We fill our days with managing the expected, the things we can control: having the right talent, developing the right capabilities, getting resources to the right place at the right time, maintaining margin, growing revenues, delighting customers. These expected challenges are challenging enough. But what about the unexpected, the disruptive?
Unexpected, disruptive types of threats tend to be based in a new approach, a disruptive strategy, that was not previously feasible or viable in a given market.1 Something changes in the larger environment—technology or customer preferences or supporting infrastructure/ecosystem—to make the new approach possible and profitable. The incumbent, preoccupied with the status quo, doesn’t recognize that the ground beneath it is shifting. Hampered by the nature of the existing business, the incumbent struggles to respond effectively as the new entrant takes market share. The same aspects of the incumbent’s business that made it successful also make response difficult and tend to act as blind spots, preventing it from fully recognizing the threat when it is still on the horizon.
Why are these developments hard to see coming, and why are they difficult to respond to effectively? In search of patterns, we looked far and wide across arenas as varied as voice-over-IP, furniture manufacturing, fantasy sports, and travel guides. We analyzed dozens of cases from the past 20 years, including some favorite “unicorns”—the unprecedented pool of tech start-ups with funding-based valuations of $1 billion or higher2—to home in on the specific ways threats manifest in a world rapidly becoming digital. We also considered how the next wave of exponentials (including the Internet of Things, 3D printing, and Blockchain) might fit this dynamic. We looked for cases where a leading incumbent had been displaced from its market—either by being marginalized within an existing market or by failing to capture enough of a growing market—and tried to identify what they might have seen coming if they’d known where to look and what to look for.
In doing so, we have identified nine patterns of disruption. These patterns are more than “one-off” occurrences, but they also are not universal forces; they are disruptions that will likely occur in more than one market but not in all markets. Each delivers new value through a new approach subject to a set of market conditions. Each brings its own challenges for the incumbent. These nine patterns can’t describe every possible challenge a business will encounter, but, individually and in tandem, they do help make sense of the changing environment and competitive dynamics that many companies are experiencing.
The 9 patterns are split between two fundamental shifts in value creation. The first is to ‘transfer value/price equation’ consisting of 5 patterns and the second part is about ‘harness network effects’ encompassing the other 4. Each of the nine patterns entails a particular combination of tactics and enabling catalysts that pose specific challenges for incumbents under certain conditions. The patterns are not predictive or absolute, nor are the nine intended to be fully exhaustive. In some cases, patterns can occur in sequence, with one pattern laying the groundwork for eventual disruption by another.
Visit our interactive website to explore the 9 patterns by the conditions, catalysts and the subsequent challenges attached to them and browse through the use cases. Want to know more or explore the patterns most relevant for your business, contact the Deloitte Center for the Edge team in Romania.