Perhaps the most important thing about disturbances these days is the amount of attention she gets. Depicted in the image above, which is derived from searching for “Disruptive Innovation” in Google’s Ngram Viewer, the inescapable conclusion is quite clear: interest in disruptive innovation is on the rise. What follows is strong support for the argument that you discount the likelihood of industry disruption at your peril, no matter what industry you’re talking about. Far from being just another business school jargon, disruptive innovation is getting more attention than ever, and the reason is that we are seeing a wider range of industries being disrupted like never before. .
Whenever disruption is discussed, it is important to keep in mind that it is not the technologies that cause the disruption that are the most important artifact of what Schumpeter called “creative destruction”. ‘, but the changes in the composition of industry participation that occur because of this phenomenon. In this respect, and above all, a recent study of industry participation in twelve industrial sectors, over a period of fifty years (1969-2019), on the S&P 500, by qad.com, shows a widespread and quite fast for a wide range of industries due to external disturbances; a lot of change has taken place!
Data from qad.com indicates that disruption has been occurring at a healthy pace for some time, even before the digital revolution began. The period between 1970 and 1989 was marked by years of recession, energy crisis and Reganomics, all of which brought about large enough disruptions in the way business was conducted in most industries to witness a large number of new entrants, as well as departures. It can also be seen as verification that in disrupted markets, it is not so much that markets lose their potential, but rather that managerial imagination wanes within incumbent market-leading companies. In such situations, a rising tide certainly does not lift all boats, and many historic market leaders find themselves stranded, as hitherto unknowns embark on the easy way of life.
It was the period from 1995 to 2019, better known as the dot.com bubble of the early internet age, where digital technologies and internet commerce became major causes of disruption in many industries. It was also a time when the growing role played by digital technologies significantly affected the operations and business models of most industries, regardless of their distance from the Internet. All of this translates into, again, market upheaval, with enough new additions and departures to catch our eye.
It’s no surprise that the information technology industry has consistently flourished over the fifty years of study, with far more additions than deletions. The fact that there have been a number of deletions during this period is a reminder that the disruption is not a direct hit, and many of the information technology companies that ushered in our digital age are no longer ready. to take advantage of it. As a result, across most industries, the average lifespan of S&P 500 companies has shrunk over the fifty-year period.
Of all the industries, it is the industrial sector that has been reshaped the most radically, with only 70 industrialists, of the 166 participants in 1969, still remaining. The conclusion from qad.com is that this is a positive result, overall, as companies in this sector are seen to be adapting positively to the disruption, and the number of companies participating in this sector has actually grown slightly thanks to new entrants since 2005. Part of the underlying industrialist story, however, is that this sector has become much more of an arena, in the Rita McGrath sense of the term, than an actual industry. consistent, as business models increasingly reflect digital transformation, regardless of the resulting end offering, and offerings proliferate across customer journeys, however dissimilar the assets of competing organizations may be. This is a case where old definitions of statistical data collection may well misrepresent what is actually happening.
Last but not least, it is observed that with the exception of industries, as noted above, most industries have been affected, to a greater or lesser extent, by the same external forces of change that have acted to recast industry participation. The information technology, healthcare and consumer discretionary sectors have thrived, largely due to their ability to embrace new digital technologies that could change their business models, while less agile industries, like the diversified mines and metals, could not, or did not succeed, but all were affected to some degree by the external changes taking place around them; no industry or company has been able to escape the Kondratieffian wave that accompanied the start of the digital age and the transformation that accompanied it. The disruption turned out to be real and for everyone; and that no one doubts that it continues today.