While disruption was a bad word when we grew up – goofing off in class, talking during a movie, interrupting an adult conversation – today in business and technology, disruption is a magic word.
The words ‘disruptive technology’ were first coined by Harvard Business School graduate and current HBS professor Clayton Christensen in his 1997 book, The Innovator’s Dilemma.
In his later book, The Innovator's Solution, Christensen replaced the term disruptive technology with ‘disruptive innovation’ because he recognized that few technologies are intrinsically disruptive or sustaining in character – rather, it is the business model that the technology enables that creates the disruptive impact.
The 1908 Model T Ford was a disruptive technology but the previous 30 years of combustion engine automobiles were not. Why? Because they were not mass produced – it was the business model of the assembly line that made this happen.
The disruptor's secret
Let’s talk about some disruptors today, starting with Uber. In 2010 Uber had 10 cars and 100 friends. Six years and 1 billion rides later, Uber has destroyed the 100-year old taxi industry.
The three greatest things about Uber are:
- you can rate your driver
- you can order a ride from your cellphone and get picked up in minutes, and
- the price is cheaper for superior service.
More people are using Uber than taxis now. After all, who doesn’t want a faster, cheaper, premium service? I will pay for that any day!
Amazon is another example. In 1994 a New York finance guy named Jeff Bezos left his job to jump on what he saw as a fast moving train – Internet commerce. He had a vision to start an online ‘everything store’ and he picked books to be the first product he would sell. Within the first two months in business, Amazon had sold books to all 50 states and 45 countries. Turns out, people wanted an easier way to buy books. The Internet was the answer and Amazon made it happen. The company withstood the dot com bubble and is now the world’s largest online retailer.
But Amazon didn’t rest on its laurels, built on books. Enter Amazon Web Services. Amazon created a complete retail computing infrastructure for standardized, automated web services including storage and virtual servers that created an entire new revenue stream.
Amazon is both a B2C and B2B disruptor which is very rare.
These are examples of companies who knew the disruptor’s secret. Their founders reimagined existing technology. They grabbed decaying models crying out for reinvention and applied a better solution by pushing the limits of technology. So what was their secret? Disruptors tend to share these three common traits:
- They rethink with technology
- They are consumed by the consumer
- They are never satisfied
And there are several industries out there right now that are ripe for disruption – industries that are not so focused on the customer. When was the last time you called your bank, airline, credit card company, software provider, and how was your experience?
A call to action for today's CIO
What does this mean for today’s CIO? It’s a call to action to throw out the old rules and look at models within your business through a new lens, one that questions, “How can we better engage our customers, take market share from our competitors, and grow our business exponentially?” This is now your purview as CIO – to drive digital transformation initiatives for your business.
But where to begin, and why is it so hard to go digital? There are two reasons. The first one is that many of the technologies out there are not quite ready for prime time and CIOs wrestle with whether or not they should build their own solution or leverage vendor applications. The second reason, and this is a biggie, is that many IT budgets can’t afford it.
According to industry analysts, about 89% of a typical IT budget goes towards keeping the lights on, leaving only 11% for innovation initiatives – things that will actually increase revenue, decrease costs, engage your customers, or take market share from your competitors. But the only way you can get there is to drastically turn this spend model on its head.
Take our industry for example – enterprise software support. This industry is ripe for disruption – it’s a decades old model dictated by the software vendors, and no longer sufficient for many of today’s CIO.
You can no longer afford to be held hostage to these outdated IT models. You have to find more budget to invest in innovation if you want to become a disruptor. The days of CIOs being strictly technologists are long over. The best CIOs are revenue generators. They are business people who leverage technology to create new business models.
How a $1.3m savings brought $60m new revenues
One of our clients in the manufacturing space is a great example of this. This client is a leading manufacturer of metal buildings in the commercial and industrial markets, with revenue over $1 billion. The CIO moved its Oracle support to Rimini Street, immediately saving 75% on the company’s total annual maintenance costs. He then reinvested this significant savings – $1.3 million saved annually – into a customer facing eCommerce portal that now generates an additional $60 million revenue stream annually. Now that’s what I call disruption!
Examples such as this demonstrate that, despite the budget struggle, there has never been a better time to be a CIO. With a digital and customer-focused mindset, companies are relying on their CIOs to contribute so much more than operational IT. And the ones who do that are separating their companies from industry peers. They’re adopting an ‘innovation agility’ strategy, choosing a new path that opens up an array of choices for their organization.
An innovation agility strategy is about liberating your resources — your people, your money, your time — so you can invest in business models that move the needle.
For example, with an innovation agility approach, you can manage your on-premise applications together with your cloud applications in a hybrid IT environment, like Gartner and Forrester recommend.
You can take advantage of the big data capabilities out there today, and drive enterprise mobility or social solutions and beyond. If you are a retailer you can free up funds for critical ‘omnichannel presence’ initiatives that drive revenue.
It’s this kind of freeing up of resources that allows you to innovate throughout your organization, empower your business units, and better engage both your employees and your customers. With this simple change in thinking, the possibilities are limitless. You can build the next Uber with this mindset, and create exciting change for your organization by thinking like a disruptor.
Edwards Deming once said, “No one has to change. Survival is optional.” So choose to become a change agent – don’t be held back by complacency, frozen by the status quo, just keeping the lights on. Capitalize on emerging trends and transform the way you do business today.