"Disruption is not just a fact of life for today’s CIO, but something that is only going to become more prevalent."

Opening Statement

Borders. Blockbuster. Polaroid. Kodak. Teen magazine. Tower Records. Virgin Megastores.

When we think about these names, we recall once major brands that have undergone dramatic shifts that, in some cases, led to their demise. These companies were beset by external changes in their competitive environments brought about at least partly by disruptive technologies. In some cases the technology was used by existing competitors, but in others the competition seemed to materialize out of thin air. The entrepreneurial innovators are out there; the rest of us need help.

In 1934, the economist Joseph Schumpeter helped popularize the phrase "creative destruction" when he described how new, entrepreneurial companies, by harnessing technological innovations, could unseat incumbent companies. He believed that this was an endless cycle that would continue to play out as long as innovation continued. Extensions to the theory predicted that companies may be able to avoid being unseated by newcomers if they focus on economies of scale and scope or accumulate networks of complementary assets that make it difficult for new entrants to win in the marketplace.

THE NEXT NEXT THING MAY DISRUPT

We see these changes happening today as the newspaper and music industries are being transformed by new entrants with new technologies. What Schumpeter could not anticipate was the speed at which new innovations would arrive upon, and depart, the scene in the Internet age. Today, the Next Next Thing arrives in a blog or a tweet. It might suddenly appear as an app, maybe on your phone or on Facebook. Sometimes it works better than what we already have. Often, however, it's just good enough. Instead of creative destruction, it may be more useful to think about what is happening as creative disruption.

WHEN GOOD ENOUGH IS GOOD

Clayton Christensen's 1997 book, The Innovator's Dilemma: The Revolutionary Book That Will Change the Way You Do Business, has been a wake-up call for many businesses. This is a "must read" book for serious managers looking for the disruption just over the horizon. While the book covers many important topics, the notion of "good enough" keeps coming to mind. Christensen suggests that a disruptive technology most likely will not be a clear market winner. It may start off as an interesting idea with an interesting price point, but not as a clear threat. Slowly but surely, the market begins to evaluate the value of "good enough."

When designing a product, engineers consider two kinds of quality: technical and perceived. The technical quality of a product incorporates the physical tolerances, constraints, dimensions, and so on of the item. For example, the technical quality of a light bulb might be 2,000 hours of life. The perceived quality of the light bulb represents the quality the user thinks is in the bulb. We don't actually measure the number of hours of life in the light bulb, but we perceive that it lasts a satisfactorily long time (or not). The term "overdesigned" is often used to describe a product whose technical quality is significantly greater than its perceived quality. In other words, there is quality in the product that the customer cannot evaluate. Companies often overdesign a product either because they cannot accurately predict all of the ways it might be used or because their competitive strategy is based upon a high level of technical quality as a differentiator.

A good enough product is one where the perceived and technical quality are nearly equal. In other words, good enough means that the product can be useful in a limited way. When the good enough product appears, it causes the market to begin placing a monetary value on the difference between the perceived quality of the new entrant and that of the incumbent.

DISRUPTION HAPPENS

The debate about disruption isn't about whether it happens or not. The debate is, what should companies do to keep from being disrupted? Schumpeter himself was of two minds on the subject. Early in his career, he said that old companies would be replaced by new companies with new technologies -- end of story. As he studied innovative companies, however, he changed his position on the topic, suggesting that old companies had the ability to stave off entrepreneurs with new technology if the incumbent had the means of acquiring the new technology. In other words, buy them out. We see both scenarios playing themselves out in the marketplace every day. Google, Apple, Microsoft, and others all buy out smaller companies for their technologies, while some innovators like Netflix take the market by storm.

So why don't companies just watch out for the innovations or create them themselves? Sometimes, a firm's best customers are their worst influencers. When a disruption appears on the horizon, an organization may accurately see it coming, but their customers assure them that they aren't interested in it. After all, the best customers have invested time and money in training and process integration built around the firm's products and services. They don't want change.

Many managers don't want change either. Most of us create or recreate our work environments to fit our work style or other personal goals. New innovations might disrupt what works for us. On top of that, the new innovation might threaten a manager's power or experience base. So the innovation that might disrupt the whole company may be missed, shot down, or otherwise ignored until it's too late.

Another reason companies don't innovate is that change is expensive. Even in the most robust economic climates, most companies just don't have the capital to throw at any innovation that might be disruptive. And these certainly aren't robust economic times.

Finally, sometimes we just miss it. While we're looking at rearranging our store layouts to accommodate more DVDs, we totally miss Netflix. While we're signing new authors to write books, we miss the online serial fiction writer distributing his or her work through the Internet or Amazon. While expanding our sound recording studio, we miss GarageBand. While negotiating new supplier deals with Procter & Gamble, we miss the company's announcement to sell through Facebook.

THE CIO: FIRST LINE OF DEFENSE AGAINST DISRUPTION

CIOs are increasingly asked not only to provide a stable and cost-effective IT infrastructure, but also to provide insight as to how rapidly evolving information technologies might positively or negatively impact the organization's strategy, product lines, or customer relationships. Most IT managers are in the reactive role when it comes to disruption. Social networking, IT consumerization, and cloud computing are disruptive influences businesses face today. In addition to understanding the technological issues associated with running IT, CIOs are in a position to understand key business processes, important supplier and customer relationships, and how the business makes money. In short, they represent a company's best hope for understanding the impact of new technologies and new processes. It's not up to IT, however, to choose how to respond to the disruption; that's a job for the entire executive team.

IN THIS ISSUE

Disruption 101: What Can the CIO Do?

In our first article, Paul Clermont summarizes disruptive technologies many of us have encountered, reminding us of how information systems have been disrupted from the very beginning. He concludes his piece by posing the question "What is a CIO to do?" and offers helpful advice on whether the organization hopes to create disruption, merely survive disruption, or take advantage of the disruptive change that comes its way.

Three Strategies for Coping

Next, Dan Gordon describes three strategies (he frames them as design patterns) that we might use to fend off a disruptor. These strategies highlight the importance of having an organizational response to changes in the environment. All three strategies involve intentional and probably significant shifts in capital expenditures and require senior managers to recognize that the threat is real. Deciding which to pursue is a team decision and one that requires a clear understanding of how the disruption will happen.

Service as Disruption

In our third article, Kevin Brennan explores the disruption caused by service-oriented systems. While much of the attention in disruption theory has focused on one form of physical good replacing another, software and process as a service are likely to significantly impact most IT teams. These services force IT managers to examine the notion of "good enough" and the question that has arisen often in Cutter analyses: "What do we really have to own in order to gain value from it?" In other words, we understand that we don't have to own a payroll system in order to print checks, and we don't have to own a help desk in order to provide technical support, but what other services are on the horizon that we will weigh as being good enough?

Grass-Roots Disruption

Francis Braithwaite and Mark Woodman next focus our attention on the intersection between technology and use. For nearly three decades, researchers have tried to understand what makes some technologies succeed and others fail. Collectively, these attempts have led to the development of the Technology Acceptance Model, which suggests that there are a relatively small number of antecedents that predict if a technology will be used. For our work here, it serves to highlight the importance of users in the disruption process. In short, a technology will not disrupt if it is not used. Braithwaite and Woodman discuss the behaviors and experiences of Generation Y, explaining how these new employees are bringing technologies like social networking and mobile devices into the workplace and, in the process, changing the way we view the world and do business.

Cultures That Can Take Advantage of Disruption

Last but certainly not least, Beth Cohen talks about the limits that organizational culture places on technological innovation and responses to disruption. Cohen uses cloud computing as an example of a disruption that can be hindered by a culture that is too risk-averse or too invested in its legacy systems to benefit from -- or at least respond to -- the disruption. She describes those attributes of companies that are able to take advantage of disruptive change (in this case, the cloud) and offers suggestions for how your organization can do the same.

TECHNOLOGICAL DRIVERS PAVE THE WAY FOR MORE DISRUPTION

I think our authors would agree that disruption is not just a fact of life for today's CIO, but something that is only going to become more prevalent. Moore's Law tells us that computing power is doubling at a phenomenal rate; Gilder's Law says that bandwidth is doubling even quicker than Moore's Law; and Metcalf's Law tells us that the value of a network grows exponentially. Taken together, these three laws tell us that we are on a path toward more innovation, more interconnectedness, and more network-centric functionality in business and in our personal lives. Whether it is a business process that has been in place for years or a product or service that is the mainstay of our organization, all are potential targets for disruption. The lesson of this issue is clear: Prepare or be disrupted!

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