Warding Off the Threat of Disruption

Innovation scholar Joshua S. Gans argued in MIT SMR that established businesses have more time than they may think to respond to innovations that may prove disruptive. But a software executive questions that advice.

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How quickly do companies need to respond to innovations that could upend their markets? In “Keep Calm and Manage Disruption,” an article in the spring 2016 issue of MIT Sloan Management Review, Joshua S. Gans argued that companies may have more time than is commonly believed. For example, his research suggested that established companies can often employ a “wait and see” approach, and if a new technology demonstrates its potential, the incumbent can acquire it.

That advice didn’t satisfy at least one reader. Daniel Cohen, vice president of business operations and strategy at Adobe Systems Inc., a software company based in San Jose, California, wrote to explain why he thinks companies need to move swiftly to avert disruption before it affects their performance. What follows is Cohen’s perspective, Gans’ response — and an informative dialogue about the importance of monitoring disruption in markets related to one’s own.

Why You Shouldn’t Wait

By Daniel Cohen

Managers facing a disruption are often advised to take a cautious approach by creating a separate business unit that can experiment with the new model. However, a cautious approach can be disastrous. While the leadership team first monitors developments and then experiments with new product and business models, upstarts are gaining critical competencies that put them miles ahead of the incumbent companies.

When a company faces transformative changes that disrupt both product offerings and business models, there is no time to waste. Although it can be costly to retool offerings, and business model changes may mean lower prices to existing customers, the revenue decline is a short-term trade-off for long-term growth.

Adobe knows this from experience. With the advent of cloud computing, we faced disruption in the software market. For software companies, cloud computing represents a change in how products get developed and delivered to customers as well as a business model change — from a one-time sale to a subscription model. Even though we were not yet seeing major inroads from cloud competitors, we realized we needed to get ahead of this trend and overhauled our business model in a span of 18 months in 2012 and 2013. The results have been customer growth and stronger customer relationships.

Until 2010, Adobe primarily sold packaged software that ran on desktop computers.


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Comments (3)
"Wait and watch" is also related to our perception of time. If a business model change by a large company in a decade's time would have been considered as "quick" response in the past, the same now might be considered as a "wait and watch" strategy.
Francis Oguaju
I think the Adobe's account made it a bit "straightforward" for incumbent firms: if they are unsure about how to respond, they can easily acquire the emerging firm, with a real potential for growth.
Wait and watch should not replace the ability to analyse.  The problem is if companies simple copy what the see successful competitors doing, whilst failing to understand why it works. Lean/ Toyota Production System is a great example of where followers simply copied the actions, without understanding the underlying idea, and then wondered why they didn't get the benefits they expected.

Same goes for strategic innovation. Wait and Watch will only work if you have the ability to understand the fundamental drivers of your business sector, great customer insight, and really understand how the new model makes a step change in both the customer's and your operations. 

Otherwise you risk a "King's New Clothes" situation!