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Recognizing Disruptive Innovation

When Peter Drucker first met IBM’s CEO, Thomas J. Watson, he was somewhat taken aback. Drucker recalled ” He began talking about something called data processing. It made absolutely no sense to me. I took it back and told my editor, and he said that Watson was a nut, and threw the interview away ”. This was in the 1930s – when “ computers ” were usually teams of women who performed complex or rote calculations. The idea that data could be a valuable commodity and processing information could be a business wasn’t on anyone’s radar – then or for decades later. This would change over time with advancements in technology, transformation of business practices, and more people recognizing new opportunities.

With the eras of recent major innovations in the 1920s and the 1990s, we’re now in a new era of innovation with the potential to also significantly impact business and society. However, as experienced by Drucker long ago and many others over the years, it’s still difficult to fully grasp, leverage and benefit from important emerging technologies and the ensuing disruptions from change.

The First Wave of Disruptive Innovation – Internal Combustion And Electricity

The first era of 20th century innovation actually began in the 1880s, with the invention of the internal combustion engine in Germany and Thomas Edison’s opening of Pearl Street Station, America’s first electricity plant. These were akin to tech gadgets today that gain a following among early adopters. Over several decades, change gained momentum. Hundreds of automobile firms sprung up, including Henry Ford’s first failed ventures and his ultimately successful Ford Motor Company, which pioneered the assembly line. The “ war of the currents ” broke out between Edison and Westinghouse, which expanded electrical generation and reduced costs. Still, until the 1920s, the impact on society was minimal. Cars needed infrastructure, like roads and gas stations, to be built. Electricity provided cleaner and better light, but factories needed to be redesigned and the nature of work had to be reimagined – before having a measurable impact on productivity and delivering important benefits to society. Subsequently, change occurred more quickly. As we now know, the automobile transformed transportation and logistics, the nature of factories and manufacturing changed, corner stores were replaced by supermarkets and eventually shopping malls and big box retailers. Electrical appliances, such as refrigerators, air conditioners and radios transformed everyday life. Life got better and nothing was ever the same again.

The Second Wave of Disruptive Innovation – The Microbe, The Atom And The Bit

The second wave of innovation began around the 1950s, but had its roots long before that. Alexander Fleming discovered penicillin in 1928. Einstein’s theories led physicists to develop the first principles of quantum mechanics in the 1920s and David Hilbert’s mathematical program inspired Turing’s model of a universal computer in 1935. Yet much like internal combustion and electricity, the implications of these discoveries weren’t clear at first. Fleming’s discovery of penicillin was not initially therapeutically useful and needed much further work before it became commercially available in 1945. Quantum mechanics and Turing’s “ machine ” were little more than theoretical constructs. Then, once again, change gained momentum. The first commercial computer, UNIVAC, burst into the public consciousness during the 1952 election when its predictions outperformed human experts. That same decade saw the first nuclear power plants and the rise of nuclear medicine. Further research into antibiotics led to a golden age in the 1960s and 70s. Today, these revolutions have largely run their course. The standard model of physics has been largely complete since the 1960s. Only one new class of antibiotics, Teixobactin, has been discovered since 1987. Moore’s law, the continuous doubling of classical computing power, has slowed considerably and will end shortly.

Interestingly, the first era of innovation led to a 50 year boom in productivity between 1920 and 1970. By contrast, the second only resulted in 10 years of measurable productivity gains between 1995 and 2005.

The New Era of Disruptive Innovation – Genomics, Nanotechnology And Robotics

Today we are entering a new era of innovation, and, like those of earlier eras, it’s difficult to know what will have major impact. This is like people a century ago who might enjoy electric light or a Sunday drive, but have no notion of things like modern highways, attractions, shopping, devices, changing social values, the nature of work, etc. Extending on this, key is the need for digital platforms, delivering a great User experience, adding intelligence to processes, personalization, etc. In conjunction with this, particularly significant technologies pertain to genomics, nanotechnology and robotics – which will revolutionize how to make and deliver new products and services, identify and cure diseases, power the economy, etc. Much like the digital age was built on top of electricity, the new era of innovation will be built on top of computing and sophisticated analytics. New services, computer chips, etc. that are specialized for artificial intelligence, as well as completely new architectures such as neuromorphic and quantum computing – will power how we engineer genes and other compounds, such as proteins and materials, at the atomic and molecular levels. While it has yet to be determined how this will play out, these new technologies offer significant business opportunities and a better future for society.

Next …

To get more benefits from the above innovations as well as gain insights on emerging technologies and disruptive innovations in the making, let’s look at quantum computing. Quantum computers, having the potential to be thousands, if not millions, of times more powerful than today’s systems, can not only perform current tasks much faster, they are able do new jobs not previously possible. For example, quantum computing can simulate quantum systems, like atoms and molecules – to transform drug development, materials science, manufacturing, etc. While scientists are still determining what to do with the data a quantum computer produces, they are learning and developing new insights. This, in turn, enables engineers to design new products and entrepreneurs to create new businesses. While still early, and the potential is staggering, it’s ironic that the next big thing frequently starts out looking insignificant ! Further, emerging technologies and disruptive innovation are frequently challenging for people to appreciate initially and typically portrayed out of context. This is a reflection that many people struggle with change mainly because of comfort with the familiar and they aren’t interested in looking ahead, doing the new, etc. In addition, there is a need to build up ecosystems around the new capabilities and identify meaningful opportunities and problems to solve. That takes time as well as an entrepreneurial mindset and a disruptive innovation strategy to meaningful improve business outcomes, create significant stakeholder wealth, make the world a better place, and make good on new opportunities.

For this to occur, it’s important to be open to change and a willingness to look at things from a different perspective. This is important to facilitate learning, adapting and realizing the benefits of these new capabilities – as indicated by Peter Drucker, while having initial reservations about Thomas J. Watson’s views, he kept talking to him. Today, both are considered visionaries.

Jan 15, 2018 – Greg Satell / CAIL Innovation commentary