Far from being distracted by technological disruptions, legacy organizations are increasingly understanding how to manage and survive the impact of changing technologies and the new organizational and consumer behaviors that inspire them. In fact, “the smart money lies with established organizations that are leaders in adopting new technologies or in partnering with disruptive startups to grow their traditional businesses into powerful fulfillment ecosystems capable of thriving in the new economy to lead and to win,” said Mosa Issachar, Digital Assets Investment Lead at Trium.
Trium, an SEC-registered venture capital fund manager, is a leading digital venture builder inspired by a vision to seek and solve challenges in Africa’s emerging and frontier markets by harnessing the transformative power of technology driven by intelligent capital and expertise is supported.
The key to understanding disruption and how new technologies are replacing older ones is to understand the power of exponential effects. For example, if it were possible to fold a single sheet of paper 50 times, the first fold would be a fraction of a millimeter thick. At the 50th fold, the layer would be about 100 million kilometers thick, about two-thirds the distance between the Sun and Earth. This illustrates the impact that exponential trends can have on workers and companies. It also defines what Trium means by disruption.
True disruption must have an exponential impact on a company. Despite the current hype about disruption, disruption has always been with us. In 1436, Gutenberg’s printing press disrupted the scale and speed at which information was being disseminated, dividing the monopoly the Church had on the production and reproduction of books and information. This not only drove the Reformation, but is very similar to countless other social, cultural, economic and political changes in Europe over 400 years.
In order to clearly define the nature of disruption in the current context, some classifications of technological disruption in particular are discussed in this article. Aside from being exponential in nature and how the printing press can distribute previous monopolies;
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- Disruption should challenge existing structures. Digital asset ecosystems inherently position themselves as parallel and alternative systems, rather than just augmenting existing traditional analog structures. Blockchain, for example, offers an entirely separate banking ecosystem in which value is not created, defined, or governed by governments. In fact, governments or other authorities on the blockchain have no authority to manipulate or manage the ledger. “The fewer gatekeepers prevent or disconnect the use of the system, the more the system increases its transactional capability,” says Issachar. As such, blockchain technology presents the first real challenge to how money is created, valued, accessed and deployed since central banks began issuing national fiat, first in 11th century China and medieval Italy and then very generally after the world had left the gold standard by the early 1970s.
- Technological disruptions should also offer greater efficiencies than traditional or outdated systems by eroding or replacing the infrastructure previously used. When the telephone replaced the telegraph and then the Internet replaced landline telephone systems, not only was the technology completely replaced, but the capabilities that the disruptive technologies made possible were far greater than what was previously possible. In short, the next generation really needs to deliver significant benefits. Unless the gains in efficiency, performance, or capability are truly greater, expensive legacy systems are unlikely to be abandoned.
- Truly disruptive technologies also generally follow an S-shaped adoption curve, appealing first to early adopters who are able to recognize and leverage the value of disruption. The exponential benefits that result for early adopters then inspire.
- True technological disruption is also defined by a network effect. Internet technologies, for example, are increasing the scope and speed of relevance of technology adoption. Technology has enabled people across the world to communicate, share, and connect on the same global technology, language, and interest platforms.
- A final defining feature of technological disruption is late-stage exponential growth. The development from the printing press to the personal computer (PC) took about 500 years. Less than 20 years from PC to Internet. Nevertheless, the network effect over the past 20 years has been exponentially larger than in the previous half millennium.
Once legacy organizations can understand the nature of true technological disruption and recognize its value or potential in their business, the challenge is to adapt to integrate technological disruption for growth. Trium’s own experience of building technology startups from the ground up and then establishing them as standalone operations or integrating them into existing legacy companies provides valuable insight into how legacy companies can leverage disruptive technologies for sustainable growth. It’s always smart to “ride the wave.” This clearly means not positioning legacy organizations against technological disruption. Instead, companies should seek to understand the nature of the disruption, specifically how companies can use the disruption to improve their own capabilities.
Therefore, the second principle for using technological disruption effectively is to understand how to redesign from the first principles. For example, failing to understand that Napster had changed the fundamental principles of legal writing and ownership, traditional music producers and marketers soon found themselves redundant amid an exponentially expanding global music distribution and sales environment.
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Legacy organizations should rapidly and extensively integrate new technologies. This cannot be done piecemeal or too slowly as companies phase out outdated technologies, develop or acquire new capabilities, or build appropriate structures. Speed of adoption and agility of adaptation are critical if legacy organizations are to successfully leverage disruption.
Additionally, the rule of thumb for legacy organizations is the need to build new technology systems outside of legacy models. Disruptive technology should be developed, tested and adopted in smaller systems “separate from the business” – and then quickly implemented into the formal structure. Legacy companies should also develop a dual or multi-speed organization capable of running different systems at different speeds and capabilities.
In addition, it is advisable to understand, develop or use new skills. While reskilling is important, employing technology natives who are already fluent in disruptive technologies is key, both for immediate skills and for deeper organizational learning and change. Finally, legacy organizations need to be able to measure the impact of the technology they develop or adopt. Only when companies understand the impact of disruption can they create products or services that exponentially improve the customer experience by being more than just the sum of its parts.
Trium has developed a core principles-based operating model enabled by its hands-on experience in identifying, developing or partnering with high potential, disruptive technology start-ups in Nigeria and other emerging and frontier African markets. This experience has developed at Trium a culture capable of integrating disruption into a multi-velocity corporate culture, capable of understanding, interpreting and advising existing organizations to access the full power of disruption and use them.
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