Four Reasons Your Company May Be Susceptible to Disruption

Disruptee vs. disruptor: Every MBA knows economist Joseph Schumpeter’s theory of creative destruction. So why is it that established, resource-rich companies still get the stuffing kicked out them by upstarts that seemingly appear out of nowhere? Steve Blank, who’s credited with launching the Lean Startup movement, offers an interesting take on that question in a new post on his blog.

“In the 21st century it’s harder for large corporations to create disruptive breakthroughs,” writes Blank. “Disruptive innovations are coming from startups — Tesla for automobiles, Uber for taxis, Airbnb for hotel rentals, Netflix for video rentals and Facebook for media.”

Blank says there are four reasons for this. “First, companies bought into the false premise that they exist to maximize shareholder value,” he writes. As a result, they subscribe to metrics like return on net assets, return on capital deployed, and internal rate of return that discourage investment in in long-term innovation. Second, too often company leaders are execs who excelled at functions like finance or procurement. “They knew how to execute the current business model,” says Blank. The third reason is “the explosive shifts in technology, platforms and markets that have occurred in the last 15 years.” Presumably, this adds too many wild cards for companies to track. And finally, there is the explosion of startups that has been engendered by easy access to venture capital. “For the first 75 years of the 20th century, when capital for new ventures was scarce, the smartest engineering talent went to corporate R&D labs,” says Blank. Now, these talented people are starting their own companies.

What can you do about it? Start by reading the rest of Blank’s post.

A new mindset may be your company’s best defense against cyber attack: Most business leaders are thinking about how they can put digitization to work, but far fewer are thinking about how it might be working against them. They should be: A study by IBM and the Ponemon Institute just revealed that the average cost of a data breach is running around $4 million.

How can your company protect itself? IBM says that an incident response plan that cuts response time — a plan that doesn’t exist at 70% of companies — can substantially reduce the costs.

Michael Lester, the chief information security officer of Magenic Technologies and the co-founder and director of SecretValet LLC, adds that an ounce of prevention might be worth a pound of cure in an article in CSO. “We have an archaic view on security,” he argues. “Our view of security … our overall feeling of security … comes from a time when we hid in caves where there was only one entrance, and we could guard that. In the Middle Ages, we hid the king and queen behind a castle wall and a moat with a drawbridge. Today, we hide our important information behind a firewall.”

The problem: Once bad guys get beyond the firewall, your company becomes their playground. Instead, says Lester, “we should be focusing on continuous authentication and focused more on actions than on identity. In a continuous authentication system, every act of the user (mouse movement, keyboard biometrics, browsing locations and actions) is measured and compared to the norm for that user. If anything is out of the norm, the system locks the user out until they authenticate further via another method.”

Moreover, instead of spending money on stronger, thicker, higher firewalls, Lester says that your company needs to recognize that human error accounts for far more breaches than firewall failures. “If you want to make your system a third more secure than it is today,” he writes, “continuously train your people and then continuously test your personnel to ensure that the training is being applied.”

That’s no robot; it’s an electronic person: We all like to anthropomorphize robots, but perhaps the European Union has gone too far. Georgina Prodhan reports at Reuters that the EU is considering a draft plan to treat robot workers as “electronic persons.” As a result, the companies that own the robots would have to pay social security for them.

The impetus behind this bemusing plan is the same impetus behind the idea of a guaranteed minimum income or a basic income — fears that robots and other intelligent machines will replace employees, result in unprecedented levels of unemployment, wealth inequality, and alienation, and bankrupt social welfare programs. Which, of course, could happen.

“Their growing intelligence, pervasiveness and autonomy requires rethinking everything from taxation to legal liability, a draft European Parliament motion, dated May 31, suggests,” writes Prodhan. “The draft motion called on the European Commission to consider ‘that at least the most sophisticated autonomous robots could be established as having the status of electronic persons with specific rights and obligations.’”

Unsurprisingly, companies that make robots, like Siemens and Kuka, aren’t thrilled with the idea of creating “a register for smart autonomous robots, which would link each one to funds established to cover its legal liabilities.” If the leaders of your company are thinking about replacing humans with robots, it’s probably a safe assumption that they feel the same way. And I’m wondering what a robot’s rights might be.