Tuesday 17 May, 2016

One of the hottest topics in business is disruption theory.

But recent developments in consumer markets are pointing towards the popular theory being itself the subject of disruption.

The issue was the subject of a recent debate at Alliance Manchester Business School, at which Weber Shandwick’s Jon Mcleod chaired an “in conversation” event with representatives of taxi firm Uber and electric performance car manufacturer Tesla (watch the video below).

Before we go any further, what do we mean by “disruption”?

It may be a business buzzword, but the theory of disruptive innovation is more than 20 years old: it was defined by Clayton Christensen, of Harvard Business School, in his book “The Innovator’s Dilemma” and first published in the Harvard Business Review in 1995.

Christensen used the term to describe innovations that create new markets by discovering new categories of customers. “Disruption” describes therefore a process whereby a smaller company with fewer resources is able to successfully challenge established businesses.

Companies do this partly by harnessing new technologies and also by developing new business models and exploiting old technologies in new ways. Personal computers, for example, were disruptive innovations because they created a new mass market for computers. Previously, expensive mainframe computers had been sold only to big companies and research universities.

Classic disruption theory holds that disruptive innovations are often the poorer cousins of the incumbents’ products and services. Typically, customers are not willing to switch to the new offering merely because it is cheaper.

Instead, they wait until its quality rises enough to satisfy them. Once that has happened, they adopt the new product and happily accept its lower price. This is how disruption drives prices down in a market.

So we are not talking about plain, old-fashioned competition or market forces.

Disruption is a specific form of market entry. It is often accompanied by a frenzy of consumer communication, social media activity, market debate and, sometimes, regulatory and political intervention.

Which brings us to Uber and Tesla.

Disruption purists say Uber can’t be a classed as a disruptive market entrant because its service is of at least a good quality. Uber cars tend to be clean and on time, as well as cheaper than conventional rides. So it has not entered the market, by stealth, from below.

But if you have witnessed the ferocious opposition encountered in markets such as Spain and France, it’s clear that Uber has entered with a bang.

Uber argues it is disruption for the good of the public, and it is extending the model into a range of new services, including an upmarket fleet and a delivery service.

Tesla, for its part, is anything but downmarket. Its cars, in terms of design intelligence and real-time technological updating, are world-beating. The battery technology is improving all the time, to the extent that a mass-market, all-electric vehicle, with Tesla’s allure and performance will be with us by 2017.

So both Uber and Tesla are disruptors from above – not in line with the classical theory.

Yet there is something instinctively disruptive about both companies. Their appetite to bring about change. An almost missionary zeal. And an immediacy with the mass public. These are all signs that the way disruption is done is itself changing.

And that means a change in the way established businesses and disruptors conduct themselves in terms of communications and engagement.

Immediacy and relevance to consumers’ needs are both paramount.

As such, a preparedness to engage in real time is a pre-requisite.

So there is an enhanced role for digital and social media in communications programmes.

The ability to visualise and retell change, in turn, means visual media come to the fore, as does an approach to storytelling which seizes the popular imagination.

The stately complacency of incumbent market leaders is increasingly set to find itself the subject of challenges as the march of the disruptors takes hold across industry and consumer markets.

Alliance Manchester Business School is a Weber Shandwick client.