When it comes to the stock market, weather, and technologies, wouldn’t you like to be able to predict the future? When it comes to the stock market there all kinds of models – from throwing darts to stochastic models. But for most investors, then best they can hope for is matching the market.
When it comes to weather, I always think of the old joke – Weathermen are the only people I know who are wrong more the 50% of the time and still able to keep their job. Yet predicting the weather, again with all of the complicated models, is still as much art as science.
Technology innovation and how it may impact your business is just as hard if not harder to predict.So why do we even try? Because what we really want to do is not predict when Apple will hit $500 a share, or if it is going to rain today, or even what will replace Facebook, but what we want is to reduce risk.
Just a few days ago I experienced my first earthquake. I spend a lot of time in California and had never been through an earthquake. So I got to experience my first earth shaking not in the Bay Area but instead sitting at my desk in my house. Did you know that Virginia is a big earthquake zone? Neither did I nor the USGS. The earth shaking was totally unexpected in DC and resulted in a number of people running from their buildings and out on to the streets. Was it predictable? Yes, actually it was since Virginia is an active tremor zone. Did we know when it was going to happen? Or how big it was going to be? No, of course not. Why does all of this matter? Because we make choices based upon risk. It is the same with technologies.
When it comes to emergent and disruptive technologies, when we do pay attention it is often because we want to reduce risk. Some people would argue that it isn’t risk but opportunity, but aren’t these just different sides of the same coin. We want to reduce the risk of a disruptive technology unexpectedly marginalizing a current technology we use, a market we are in, or customers that we have. To reduce that risk we have to identify them as early as possible, chart the projected maturation cycle for the technology, and then identify ways to work within the new context. Starting at the beginning, how do you identify potentially disruptive technologies? Three methodologies that I have used and seen used that are drawn from the area of risk management are:
- Taxonomy identification – A taxonomy methodology partitions a body of knowledge and then defines the relationship between the parts. In this case, the body of knowledge around consumer use of mobile devices might be partitioned, relationships defined, and the gaps or weak links identified. Technologies that appear to identify these gaps have the potential to be disruptive.
- Disruption charting – Disruption charting is type of what-if exercise. In a simplified form the business model, the underlying technology, and the corresponding and tangential markets are all run through a series of what-if exercises which can expose areas that are ripe for disruption. The results from these exercises are often matrices that list the aspects of the areas being examined, potential disruptions, factors which may impact the severity of the disruption, and the potential consequences of the disruption.
- Scenario identification – In a scenario identification exercise, a series of scenarios or alternative paths are constructed based upon achieving a specific objective sometime in the future. Each of these scenarios are then analyzed for current or potential technologies that could disrupt progress alone that path. When the same technology is found on multiple paths, it is scored as a higher risk factor.
Bottom Line: Identifying potentially disruptive technologies is never easy, but when you realize that the wealth of the Virgin companies and its CEO Sir Richard Branson was built upon identifying areas ripe for disruption and exploiting them, the you realize it is a worthwhile exercise.
Question: What types of processes and methodologies does your company have in place for identifying potentially disruptive technologies?