Disruption in Wake of Environmental and Social Challenges Ahead
Social and Environmental challenges have become omni-present at the start of the 21st
century. This has also been shown most recently in the Global Risk Report 2022 published by the World Economic Forum. The top 8 most severe long-term risks covered by the report are related to environmental and social challenges. Additionally, there are enough wars raging around the world already that are at least partially attributable to it.
Hypothesis: Opportunity to Disrupt
I am raising the hypothesis whether success over the coming years will increasingly depend on tackling the stated challenges in new innovative ways. Or to say it in another way, does focusing on social and environmental challenges offer opportunities to disrupt the markets in ways not seen before?
The theory of disruption (Clayton, Rynor and McDonald, Disruptive Innovation, Harvard Business Review, December 2015) is based on the assumption that disruptive innovations originate either at the
"low-end foothold" i.e. parts of the market where incumbents either overshoot or undershoot the requirements of some customer group; or
"new markets foothold" i.e. parts of the market not yet visible to the incumbents.
One of the common misconceptions about disruption seems the notion that if you are "more digital" then you are on the right way. According Clayton, Rynor and McDonald disruption is a process that relates to the evolution of a product or service over time. Technology itself is simply one of many enablers that might help you to improve the way the customer consumes your product / services.
Disruptive innovation is a massive opportunity for the small players / start-ups out there to effectively serve a starving customer segment need underneath the radar of the incumbent. Disruptive innovation happens once that product / service starts to mushroom into the wider market becoming the new norm.
There are enough famous examples around in the 21st centry that truly disrupted their respective markets. Not surprisingly, what many of them seem to have in common is the usage of technology to improve the product / service. However, more importantly they first of all re-thought the processes of how they engage with their customers / key stakeholders from scratch.
Stuck in the Minset of Previous Solutions
Wherever you look in today's society you will find examples of working models that are based times where "real time" and "one on one" interaction was simply unthinkable. I am choosing the US election as a nice example but you will find similar examples around the globe. In the early days of US democracy, the presidential electors would have been riding to Washington to elect the new president. Today, some 250 years later, the US citizens still elect their president by choosing the presidential electors. What has changed in the meantime is that the presidential electors rely on new technologies to get them to Washington.
It would be untrue to suggest that technology has not entered other areas of this process like the introduction of electronic voting machines. However, that is arguably once again a good example of how technology was being used to automate an existing process instead of rethinking the process from the side of the customer.
That sounds too familiar with how many companies are still trying to use technology today. What separates the big disruptors from the rest is that they recognise the benefits from re-thinking their processes in order to build a customer experience that matches the long-term purpose of their companies. They use technology / digitalisation in that regard as an enabler to allow them to build processes that serve their customers / stakeholders in ways not thinkable before.
The omni-presence of lip service when it comes to social and environmental actions suggest that there is indeed something in it to win for new entrants. Given the significance of the social and environmental challenges ahead, would it not be sensible to assume that these may become the new opportunities to disrupt?
Focus on the Customer
In his book "Winning on Purpose" Fred Reichheld makes the point that you cannot really serve multiple primary stakeholders. He chose the customer as the primary stakeholder and provides the empirical evidence that companies that engage the principles of what he calls "customer love" beat the market significantly. In Fred's words, we have moved from Financial Capitalism to Customer Capitalism. He drives the argument that the customer serves as the best sole stakeholder to ensure that the interests of the remaining stakeholders like employees, investors, suppliers, community, etc. are served as well.
But what about social and environmental challenges? With the wealth gap bigger than ever and an environment on the edge it seems about time to recognise the wider implications of our actions. After all, how could you truly "love" your customer if you harm the people that your customer loves?
The social and environmental elements may be simply the next chapter in the "Customer Love" story.
Use the Opportunity to get the Edge
Disruption is about recognising the opportunity. Making a true difference to a customer implies staying ahead of the pack. Once everyone is doing it, it is no longer special. If you act now, you may be able to get ahead. However, do make sure to get to the heart of it.
Are you still thinking about new ways "to travel to Washington" or have you started to define what your existing and non-existing customers truly want to disrupt in the wake of the challenges ahead?