Sunday, January 1, 2012

Disruptive Cycles

Being an upstart is one thing.  Translating it into success is a completely different animal.  In the former, you simply aim your sights at altering the status quo.  It's what happens after you win (IF you win) that defines your legacy.  And that legacy is directly related to transitioning from operating outside the establishment to becoming effective as the establishment.

The difficulty in this transition is evident most readily in politics and armed revolutions. When everybody is dissatisfied with the status quo, it is easy to rally support against it.  True differences don't manifest themselves, as the enemy of my enemy becomes a friend.

Fighting is the Easy Part
Revolutionaries like Mao, Castro and Lenin were able to catapult themselves to power on the back of taking up arms against long-established regimes, convincing the populace at large to support them.  Vague promises of a better life from a charismatic figure are usually all that is needed in the midst of acute dissatisfaction.  When it came time to rule however, and the disparate parties once united in Revolution tried to exert their influence, the new establishment re-imposed rules that were eerily similar to those they initially fought against.  They themselves became what they most ardently opposed.

This has happened time and again in American political history.  The outsider promises great reform, a break from the past, a hopeful vision of the future.  They capture the imagination of the electorate with emotional pitches that captures the imagination.  And when they take office, assuming the mantle of the Establishment they argued so vociferously against, they become the problem.

The Republican Revolution in 1994 began the most recent iteration of this trend.  They were soon voted out as charges of corruption and ineffectiveness became rampant.  Congress has changed from one party to the other rather frequently in the past decade as a result of dismay that bounces from Democrat to Republican.  The Presidential election of 2008 was billed as a new way forward, bringing much needed "Hope" and "Change" (again, vague, emotional platitudes).  But the realities of leadership, as history demonstrates over and over, have foundered these noble aspirations.  It's easy to run a race against a failed administration.  It's much harder to be successful yourself.

The business world is a bit more fluid.  Yet, it too is beset by the same sickness of bureaucratic inertia.  All the Fortune 500 companies were once small affairs, scrappy start-ups challenging the conventional wisdom and established interests.  The market proved their foresight however, and they rose to prominence.  As they got larger, they wanted to protect their gains, so instituted methods to cement their incumbency.  In the end, many helped erect the same barriers for entrepreneurial minds that they bitterly fought against during their initial ascent.

Michael Lewis describes this cycle in his book "Next: The Future Just Happened:"
Do as I Say, Not As I Did
1.  Rules are established to create order and maintain profits for incumbents.  Examples of rules are: social mores, professional licenses, government regulation, locked-up distribution channels.
2.  Cheaper technology suddenly allows for the bypassing of these rules
3.  Incumbents are fat, dumb and happy with current monopolistic profits and their general situation, so they badmouth any new stuff which threatens their incumbency or profits, or both.
4.  Fringe players emerge to use this ever cheaper technology to simply ignore the rules.
5.  Fringe companies attract venture capital since there are great profits to be made underselling incumbents.
6.  Incumbents are in denial until their profits are really threatened and/or market share begins to erode meaningfully.
7.  Chaos ensues; fringe players are threatened with lawsuits, government regulation, public shaming, etc.
8.  Growth at the fringe accelerates, as it is the right way to do business using new technology.
9.  Incumbents co-opt the fringe, or fringe players become the new incumbents and seek to establish new rules.
10.  Go to 1.
This process plays out in many parts of life, business being only the most apparent example.  After all, capitalistic churn is what keeps our economy, and social structure, dynamic.  Yet, once you reach the top of any endeavor, almost no one ever wants to give up their power.  Academics, warfighters, politicians, sports teams -- all usually start out weak and without cache, but upon gaining grand success, snipe at those daring to ascend.

The challenge, then, to being truly Disruptive, is to maintain the sense of rebelliousness that got you to the heights of success in the first place.  This is increasingly difficult the larger an organization becomes, but failure to do so leads to stagnation.  Eventually, withered influence, or even extinction, is the result.  One need only look to Borders, Blockbuster, the US Postal Service and Sears (among hundreds of others) to see this truism. 

How do you do this?  Bring in fresh blood, foster a culture where new, unorthodox ideas are encouraged.  Let your people tinker and experiment.  Most of all, embrace change.  It's cliche, but very few effectively do it.  It is really the only constant in the Information Age. 


1 comment:

  1. Really thought-provoking, Ben. Look forward to discussing this with you in Austin next week!