Why Most Founders and Investors Are Wrong About Disruption

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There’s something that every leader needs to understand about disruption: It is always happening.

It is always taking place. It can be easy to believe that disruption is limited to once-in-a-lifetime occurrences, where the world is forever changed. Or that it is always mass scale. In reality, everything is always in a state of business change. It can come in many different sizes and forms. It can also happen at any time and anywhere.

Yet, disruption is commonly misunderstood. It can be difficult to recognize. A lot of people overlook it or can’t see it. There is an overuse of the term. Many believe or claim they’re disrupting a market or industry when they are not — or the disruption isn’t large or significant enough to make a major impact. Some assume that disruption automatically means technology. It isn’t always the case. Innovation typically plays a role, but it can come in many forms.

Your company, market or industry can be disrupted, or a combination of the three. Larger macro issues also take place globally that can spark major changes: economic conditions, geopolitical issues, weather, conflict, currencies, and other factors. It then trickles down to everyone. The only real truism about disruption is that it constantly occurs everywhere. In today’s market climate, leaders can gain an in-depth understanding of disruption, when to recognize it, and how to create opportunities when it happens.

Related: How to Bounce Back and Succeed During Times of Disruption

Real disruption changes the normal course of an activity, process, or behavior on a mass scale. Airbnb and Uber are great examples. Consumers once predominantly relied on hotels and motels for lodging when traveling. Airbnb changed this; today, consumers are as likely to opt for Airbnb as another option. With Uber, people began to use gig economy drivers instead of taxis or other traditional means. It significantly impacted the transportation business. These two case studies illustrate major changes that challenged an industry’s fundamentals. The COVID-19 lockdown was a large global issue that incited a giant fundamental shift. Companies had to change how they operated dramatically — what they offered, how they served customers, led employees and generated revenue. It forged entirely new ways of doing business. In all these scenarios, genuine disruption was at play.

What are the tell-tale signs of disruption? Are there ways to detect when disruption is occurring? How can you tell if your business or idea is truly disruptive? An excellent general rule is to look at your market leader/incumbent. If the market leader is copying your offering or that of another disruptor, it can be a clear sign – i.e., replicating tactics, products, services, etc.

It is likely a signal that the market leader is losing position. Challenging market leaders can be a place to identify where disruption is needed or likely to occur – i.e., what isn’t working, what could be done better or differently, what is outdated, etc. Additionally, disruption is a new technology, tool, or process that your industry is adapting to. Shifts in outputs can also be a form. These are just a few examples of what can indicate disruptive change is underway or on the horizon.

It’s also important to determine if the disruption you’re witnessing is large or small and whether it can make an impact. This is particularly relevant if you’re an investor or looking for investment capital. Investors typically want to disrupt big things to get big rewards. They want big problems and solutions. Is something disruptive creating or solving a problem, and if so, how big is it? Investors want to know whether disruption will be valuable at an appropriate scale.

Recognizing disruption requires an open mind. In many instances, people can’t believe or see something is disruptive at first. They think the idea is foolish or won’t work. Disruption is usually caused by something that hasn’t existed before or something new. Airbnb is a great example here as well. Its founders are said to have gone to every venture capitalist in Silicon Valley and were famously laughed out of meetings. People couldn’t see what they saw — it hadn’t been invented yet. Even the most seasoned business leaders can misunderstand and mistake disruption or fail to recognize it.

Related: 3 Mindset Shifts Every Disruptor Must Have

Disruption doesn’t always mean extinction. History has proven this for countless companies, processes, products, services, and ideas. Organizations can collapse after big changes. They did not or could not adapt. But something new or different tends to fill in the gap. It’s often better, and the cycle continues. I have been on both sides of disruption at my company, BriteCo. We are one of the jewelry industry’s disruptors – we were the first to move jewelry consumers to 100% paperless processes with technology and the internet. We also provide our customers with different ways to buy our coverage, unique to BriteCo, versus an outdated analog process at the retail point of sale. Yet, we still face disruption by the latest emerging technologies and innovations — ChatGPT and GenAI are good examples.

Your ability to adapt to disruption begins first with recognizing it and determining its size and scale. Then, you must gauge its potential impact on you and your business. This can enable you to adapt more effectively and better decide if you need to take action. And, most importantly, help you navigate and succeed despite whatever change comes.

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