My fifth-grade daughter is learning some basic laws of physical science in school this year, and I’ve been thinking about one of them in relation to a few articles in the spring 2019 issue of MIT SMR. Here’s the law, paraphrased somewhat: In a closed system, energy can neither be created nor destroyed. It’s just rearranged.
Could something similar be said about businesses and the value they generate? Companies are destroyed all the time — whether by their own hand, by macro forces, or by competitors they underestimated or didn’t see coming. But each time a new player emerges, is it always at the expense of something else? Should we view growth and destruction as simply value rearranged?
Far from it, argue INSEAD professors W. Chan Kim and Renée Mauborgne. They coin the term nondisruptive creation to describe how lots of new markets have come into being without negative consequences for existing industries and businesses. The authors walk us through a range of examples (life coaching, microfinance, online dating) and provide a framework for defining new problems to solve and seizing new opportunities. They remind us that companies needn’t destroy in order to create and grow.
Still, many do, and organizations that are behind the curve digitally are especially vulnerable to disruptive threats. No one knows this better than leaders of industrial companies. Dartmouth innovation expert Vijay Govindarajan and former GE CEO Jeffrey R. Immelt explain how tech giants, digital natives, and startups swooped in to create a market for studying machines’ performance data and helping manufacturers’ customers get more out of what they’ve bought. That’s an opportunity the manufacturers might have carved out for themselves if they’d been further along in their digital transformation efforts.
Through their research and experience, Govindarajan and Immelt have come to believe that survival in the fourth industrial revolution requires full-on commitment to going digital. That’s tough to manage in companies that are geared for continuous improvement rather than constant innovation, the authors say. But not doing it is no longer an option, and they provide hard-earned insights about fighting the inertia that inevitably sets in.
Of course, when industries are at risk, so are their people. Harvard Business School professor Boris Groysberg and his coauthors Whitney Johnson and Eric Lin share what they’ve learned about managing careers in volatile settings. Drawing on their analysis of the professional services industry and on existing research across sectors, they offer useful advice on how to preempt your own disruption by spotting early signs of volatility at your company, transferring your skills within your industry, and making yourself an attractive candidate in other industries.
How can we think about all this in light of the energy-conservation law? I suppose the difference for business is that it’s not bound by a closed system. When companies create something that doesn’t eat into anyone else’s share of market, mind, or wallet, they open up a new world of possibility for themselves and for the people who lead and operate them. And new laws may apply.