As companies continue to wage war with global competition and attempt to figure out their next steps due to advanced technologies, organizations are dealing with unpredictable change that is disruptive. In fact, disruptive change is impacting everyone in all walks of life, from Wall Street to entertainment. The casualties of disruptive change are evident.
In a statement to the Associated Press about joining a Silicon Valley boardroom, Serena Williams said, “I feel like diversity is something I speak to. Change is always happening. Change is always building. What is important to me is to be at the forefront of change and to make it easier for the next person.” we will examine disruptive change and what leaders can do to navigate the resulting uncertainties.
Disruptive change is wrecking traditional thinking of industries and institutions. Long-standing organizations have long attempted to maintain the status quo, allowing flagship institutions like Harvard University and Princeton lead the pack. Non-traditional institutions, like the University of Phoenix, were frowned upon by academics because it was a for-profit university growing by using non-traditional models like online learning.
Despite the flaws with online learning and non-traditional institutions, few people (outside of traditionalists) would argue that these non-traditional ways of learning are a disruptive change. In April 2017, Purdue University (PU) announced it was acquiring Kaplan University, a for-profit university.[1] Many universities were stunned, as Purdue University is one of the leading research institutions in the nation.
With more than 40,000 students, PU has a reputation for innovation in science, engineering, and technology. Many academics would call the university… traditional. However, PU has decided to launch a new, public online university targeting non-traditional students and those people looking to enhance their work credentials.
PU will absorb Kaplan’s 15 campuses and learning centers, which includes 32,000 students and 3,000 employees. PU President, Mitch Daniel, argued that the move was strategic. If they did not do something different, the university would miss out on opportunities. President Daniel explains, “Online education is growing fast and is destined to grow further in ways that none of us can fully anticipate right now.”
President Daniel hopes that the university would be in a better position to assist working adults and better position itself for future changes. He notes, “None of us knows how fast or in what direction online higher education will evolve… A careful analysis made it clear that we are very ill-equipped to build the necessary capabilities ourselves, and that the smart course would be to acquire them if we could. We were able to find exactly what we were looking for. Today’s agreement moves us from a standing start to a leading position.”
Dr. Christenson on Disruptive Change in Education
Disruptive change is quite different from the normal change that most managers are accustom to. Most managers are adapted to dealing with some change. Managers work best when the change is slow and can be planned. Thus, incremental change introduces small, gradual changes for a certain time frame. For example, an organization prepares for the retirement of their four senior executives over the next five years. The human resource department works with senior managers to develop a succession plan for their leadership transition.
Yet, in disruptive or transformation change, change is unpredictable and often rapid. Limited information and uncertainty challenges the organization. In these cases, past experience could work against the organization. Things are different. Management expert, Douge Berger, explains the impacts of disruptive change to organizations: “Disruptive change is characterized by a shift in the underlying forces of an industry segment. It is not localized. It affects the entire value network… Executives work hard and put much thought into building their enterprise toward an expected future. When disruptive change hits, that future ceases to exist.”[2]
Berger outlines the following screenings to determine disruptive change: From the perspective of an executive, the following trends are strong indicators of approaching disruption for executives: (1) Consolidation within the customer base, (2) Increased customer dissatisfaction, (3) More government involvement (i.e. policy, legislation, regulation), (4) Public perception shifts, (5) More affordable/convenient products/services, (6) Consolidation of companies within specific industries, and (7) Change in customer accessibility.
Looking at the previous example of the retiring executives, I provide a different scenario for disruptive change. In the previous case, the organization has developed a succession plan for their four senior executives over the next five years. The primary assumption was to make slow, incremental replacements for each person by having an heir apparent shadow the executive six months out toward retirement. One day, all four senior executives were traveling to a typical business conference and were in a fatal crash. All senior managers died. That scenario was not anticipated. It has been over 10 years, but the organization never completely recovered. That situation shows how powerful disruptive change can be for organizations.
If leaders are savvy enough, they can take advantage of disruptive change in leveraging opportunities in the marketplace. External forces often drive disruptive change. These environment forces include social, technological, economical, environmental, and political. If not carefully analyzed, companies will eventually survive failure due to circumstances over time.
Hit with an onslaught of uncertainty in the marketplace, some managers seek the following behaviors when dealing with disruptive change: (a) minimize the disruptive change, (b) recognize the disruption but underestimate its consequences, or (3) ignore the disruption in hopes of it going away (i.e. digging a head in the sand). Under the backdrop of disruptive change, large companies are overtaken in the market by unassuming smaller companies. In this case, leaders fully utilize lesser, novel technologies.
Ian Palmer, Richard Dunford, and David Buchanan, author of Managing Organizational Change, further argue the challenges of these types of changes: “Aligned with the rise of e-commerce and the Internet, organizations are faced with global changes in consumer preferences, industry boundaries, social values, and, as mentioned earlier, demographics. Organizations are forced to deliver goods and services more quickly, more customized, and more flexibly. But hypercompetition means that market leaders cannot be complacent.”
Technology is disruptive too. Dr. Clayton Christensen, the author of The Innovator’s Dilemma, provides a framework for understanding the interrelationship between disruptive change and technology innovation. Penning the term disruptive innovation, Dr. Christensen outlines how successful, established companies are being upseated by small, less funded businesses.
In modern times, the Internet is a powerful disruptive technology. Individuals do not need to look further than at Amazon.com and its impact on traditional retailers. Amazon’s business model has created changes throughout the ‘brick and mortar’ universe. Amazon.com, Inc. provides online retail shopping services, targeting four primary customer sets: consumers, sellers, enterprises, and content creators.
Additionally, the company also serves developers and enterprises of all sizes through Amazon Web Services, which provides access to technology infrastructure that enables virtually any type of business. In 1994, Jeffrey Bezos founded Amazon.com, which is headquartered in Seattle, Washington. Buyers are willing to shop in the convenience of their own homes and a way that best fits their lifestyles.
If brick and mortar companies, like Wal-Marts and Barnes and Noble, cannot figure out how to maneuver better under disruptive change, they will be unraveled in the marketplace. Dr. Christenson further explains, “It’s not that managers in big companies can’t see disruptive changes coming.
Usually, they can. Nor do they lack resources to confront them. Most big companies have talented managers and specialists, strong product portfolios, first-rate technological know-how, and deep pockets. What managers lack is a habit of thinking about their organization’s capabilities as carefully as they think about individual people’s capabilities.”
If leaders want to sustain success, they must be willing to apply non-traditional methods and think strategically when dealing with disruptive change. Yet, researcher Paolo Aversa argues that innovation in an industry riddled with turbulence is dangerous. Disruptive change is the stimulus for turmoil and uncertainty. Dr. Aversa suggests that leaders should evaluate this turbulent environment with the following questions:
- Are any of the forces that shape competition undergoing a radical shift?
- Is the industry experiencing major changes in its structure, technological standards, or competitors?
- Are regulations stable?
- Are there major fluctuations in demand or prices?
- Does the industry change before you’ve fully implemented an innovation?
- How many changes has the industry experienced in recent periods?
- Are they releasing innovations much faster than you are?
- Can you foresee how industry forces will change?
- Can you predict when the next changes will happen?
- Was there a pattern in competitors’ recent moves?
- Can you influence the nature and timing of future industry events?
With these questions, a thoughtful leader can evaluate the current situation of their organization as they deal with change. Sadly, more executives are unwilling to think strategically about disruptive change because they are too comfortable with the status quo.
In summary, companies that want to compete in this time frame need leaders who understand and can maneuver in disruptive change. Disruptive change is making its way throughout various industries, including banking, commerce, retail, health/medicine, and education. If a leader underestimates the impacts of disruptive change, he or she could soon become a victim of this transformational change. In this article, I demonstrated that disruptive change is an ongoing occurrence that effective leaders can navigate with the proper knowledge, attitude, and actions. Additionally, disruptive technologies exist, which put lesser-funded businesses in a better position for success. Therefore, organizations, regardless of their size, can thrive in disruptive change with the right preparation. Pray that it is not too late.
Please share your insight on this subject of disruptive change.
© 2017 by Dr. Daryl D. Green
[1] “Purdue University acquires for-profit giant Kaplan University” by Lauren Camera
[2] “Leading in Times of Disruptive Change” by Douge Berger
Nu Leadership Revolution Blog 
Dr. Green
Your insights on disruptive change are refreshing. I believe that too many managers look to find a calm in the storm, but for many industries this is not coming. I work in the molecular diagnostic field of healthcare, this field has been out outpacing payers for years, which has caused many smaller laboratories to fold or be bought. The technology innovation seen in this field is a good example of disruptive technology. We now have the technology to look at all \ all active genes in the human body or a cancer tumor. This technology helps us better diagnosis diseases and provide more effective cancer drug cocktails. The problem now is that “many see the industry at a crossroads, with reimbursement issues at the center” (Caffrey, 2014). These technologies are costly and payers, both private and government, are hesitant to spend the dollars needed to back this technology. This puts the burden of change on the testing laboratories, requiring them to find ways to provide the best care to patients while working within the reimbursement confines.
Caffery, M. (2014). “When Science Outpaces Payers: Reimbursement in Molecular Diagnostics”. Retrieved from AJMC.com [WC192]
Hi Michele,
Your insight on the impacts of disruptive change in the healthcare industry is very beneficial to our discussion.
I look forward to more discoveries of disruptive change!
Dr. Green
Hi, Michele,
I really like your post how technology is affecting health system. According to an article I came cross, nature of patient care has been enhanced by consolidating RFID innovation into demonstrative tests. One case is the M2A patency case endoscopy (Banerjee, Bhargav, Reddy, Gupta, Lakhtakia, Tandan, Rao and Reddy, 2007), where a RFID chip is embodied in a biodegradable body and regulated to patients to examine their intestinal tract. A scanner is utilized to distinguish and track advance of the RFID tag through the patient’s framework.
The process they suggest for portraying and assessing RFID’s potential effect on social insurance is composed around two key ideas: The potential market and the potential providers to that market. Initially, we approach is there a business opportunity for RFID in social insurance and what is the idea of that market? Second, are there providers for that market and what are the qualities of the providers? The beforehand outlined ideas of maintaining versus troublesome and problematic versus augmentation are woven into this system (Crooker, Baldwin, Chalasani 2009).
[WC – 162]
Karen Crooker, Dirk Baldwin, Suresh Chalasani. European Journal of Scientific Research. (2009) RFID Technology as Sustaining or Disruptive Innovation: Applications in the Healthcare Industry: Reverted from: https://pdfs.semanticscholar.org/e84d/39ab8491deb640aa87dbde33961f86be5e34.pdf
Dr. Green
Indeed, disruptive change is rippling across various industries in the world right now. Perhaps the aftermath of such change in education is most poignant to me as it hits closer to home. Not only is it essential to understand the economic resources or limitations you are dealing with, but I think equally important is establishing a culture of understanding what your organization is capable of. Good management will know their people and exactly how best to play to their strengths, but knowing the strengths of your organization usually pays big dividends. As Christensen and Overdorf (2016) state, “One of the hallmarks of a great manager is the ability to identify the right person for the right job and to train employees to succeed at the jobs they’re given”. Having a firm grasp on your organization’s capabilities and processes can help mitigate the effects of disruptive change. [WC-190]
Reference:
Overdorf, C. M., Christensen, C. M., Mark W. Johnson, Clayton M. Christensen, and Henning Kagermann, Clayton M. Christensen and Harvard Business Review, & Porter, M. E. (2016, January 29). Meeting the Challenge of Disruptive Change. Retrieved August 23, 2017, from https://hbr.org/2000/03/meeting-the-challenge-of-disruptive-change
Hi, Daniel,
I agree with your statement. Companies are managed by people and people who are creating changes. When managers predict changes or at least they expect changes, they can deal with disruptive way better and what is a disruptive to other companies would be an expected change.
Pioneers in any position must show authority qualities, for example, adaptability, relational aptitudes, and the capacity to coach and assemble trust. Transparency is fundamental for responsibility. All partners must be proficient of the organization’s realities what’s more. New chiefs may require formal preparing in fund and vital administration, and existing administrators must perceive the requirement for continuous expert improvement to remain current, so they would not fall behind in the market.
[WC- 117]
Joyce A. Cox. AORN Journal. (2016). Leadership and Management Roles: Challenges and Success. Reverted from: https://www.aorn.org/websitedata/cearticle/pdf_file/CEM16531-0001.pdf
Hi Daniel,
Thanks for providing such an intellectual stimulating thought!
As I reflect on what you said about disruptive change in education, I ponder why our achievements (as a nation in education) is slipping across the world. An education can propel folks in poverty to wealth. A education can open doors that were once closed. Is money the answer? Legislation? The United States needs answers.
All,
Can anyone share examples of educational organizations (especially K-12 grades) that are handling
disruptive change well?
Dr. Green
Dr. Green,
Really enjoyed reading your view of disruptive change. Disruptive change is something that hits with a surprise, similar to the example of the fatal crash of the senior managers. When disruptive change hits, it is important to have a leader in place that does not become hesitant. Disruptive change is a time when an organization can step out and take advantage of the situation. Doug Berger says, “Disruptive change is a call to action for executives to re-think their ambitions and strategy for the future of the enterprise” (Berger, 2005). The key word here is future. Anything that worked in the past may not necessarily prove to be successful in this time of change. This is why innovators such as Bezos have become successful, and why it is key to re-think strategy when facing this change. Disruptive change cannot be predicted but it can be taken advantage of if the right actions are taken.
Reference:
Berger, Doug (2005). “Leading in Times of Disruptive Change.” Retrieved August 23, 2017, from http://www.innovate1st.com/newsletter/august2005/DisruptiveChange.html [WC-172]
Dr. Green and Daniel–
The most obvious disruptive change that I have seen come to the classroom of K-12 students in my neighborhood is the quickly advancing technology landscape. At my children’s school kids are expected to monitor their assignments on Google Calendar and prepare and post completed projects to Google Classroom. It is not uncommon for an 8 or 10-year-old to put together a PowerPoint presentation or participate in classroom on-line discussion boards. These “seismic shifts we are witnessing as a result of technological advances will continue to reshape our world in ways that we could never have imagined” (Sheninger, 2016). I only hope that these changes help our kids thrive in the world that they will be running and do not stunt their ability to directly interact with others.
Sheninger, E. (2016) Education Is Ripe for Disruption, Retrieved from huffingtonpost.com
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Michele,
Wow, I had no idea that students so young were learning how to do power-points and online work. Surely, this change will benefit them in the long run and they will be better prepared for higher education. I never imagined that I would be able to partake in an online course when I was younger because the internet seemed so slow. Does anyone remember when you had to choose whether to use the phone or be on the computer, as you couldn’t do both simultaneously? This passage echo’s what you stated in your comment, “Fully Virtual K‐12 Classrooms will become more common in the future, with many students never setting foot in a physical classroom space.” (Hanover Research, 2013.) In Oklahoma, many classrooms have seen changes recently due to budget cuts. The teachers that I know have been reaching out to their communities for help in supplying their classrooms. Perhaps, in the future the migration to more virtual based learning will reduce the cost burden to schools.
(WC-168)
Reference:
Hanover Research. (2013, December). Future Trends in K-12 Education. Retrieved from https://ts.madison.k12.wi.us/files/techsvc/Future%20Trends%20in%20K-12%20Education.pdf
Hey Michelle
Great example.
Indeed, education place is a good situation to illustrate the case of disruptive change, because students have different view and adaptation when they face a new technology.
And to illustrate that we can say that disruptive innovation is already at work in higher education, and universities have to look no further than online classes to see examples of change at scale. And how universities respond to this change will determine whether they live or die. Modularization will change the way universities make money
Technology typically follows two paths: closed proprietary or open modular. And higher education is increasingly moving toward the modularization model, which breaks down education into different components and results in the outsourcing of certain functions. Modern-day examples include a shift toward online certificates for chunks of knowledge and standards for these short online courses.
Organizations that adopt modular strategies tend to overrun a market in which no one makes money, as the Android operating system has shown in the last number of years. If organizations are competing based on making better products faster and at a lower cost, they have to adopt an open modular strategy. [WC-154]
source
Center for digital education
http://www.centerdigitaled.com/news/3-Things-Higher-Education-Should-Know-about-Disruptive-Innovation.html
I think this could also fall under the category of disruptive innovation. To be sure, there are benefits and disadvantages in our surge in technology in education. This is being used from K-12, all the way through Higher Education. I use it in my classroom every day, so I can definitely see that there are pros and cons to its usage. It does shorten the distance and bring with it quality programs and subjects that may not otherwise be offered. “Disruptive innovation in K–12 education in the form of online learning is also the catalyst to bring about more equitable access to high-quality education. Far too many students attend schools that don’t offer the full suite of classes they will need in life to be successful, but through online learning, we can deliver high-quality teaching and learning experiences regardless of where students live (Horn, 2017)”. I think one of the largest problems that we see with this particular issue is that many schools are open to such technology, but simply do not have the funding to provide it. [WC-188]
Reference:
(n.d.). Retrieved August 26, 2017, from https://www.forbes.com/sites/michaelhorn/2014/07/02/disruptive-innovation-and-education/#105719803c6e
Thank you, Dr. Green, for sharing a good article on such an important matter. In our textbook says that through observation there are some companies are better in implementing changes more than other companies who has longer history in the market. Edward Lawler and Christopher Worley mentioned that they have noted that there are companies are designed in a way to discourage changes (Palmer, Dunford, Buchanan 2017). The problem with what I mentioned is that as mentioned in the text book there are companies think they are built to last, but they are supposed to be built to change. When companies stay for very long not accepting changes. If they are not changing as the time goes by, they will be having so many changes that must be implemented. After that this company will be very difficult to change. When that happen, the same company will create a new opportunity for new competitors to enter the market. It will be very easy for the new competitor to implement all necessary changes to the market and consumers needs. In my opinion that when disruptive happen for the big organizations in the market. Companies must enhance innovation and changes.
[WC – 197]
Palmer, I., Dunford, R., & Buchanan, D. A. (2017). Managing Organizational Change (3ed.). New York: McGraw-Hill Education.
Hello Abdul,
Thanks for your revelation on this topic! You stated “companies think they are built to last.” Your statement is so true as we watch countries (like Roman, Great Britain) or companies (like Sears, Netscape) believe their success will last forever.
Given this outlook, is it possible to have sustainable success during disruptive change?
Dr. Green
Yes, Dr. Green,
I think there is a good chance for any company to succeed. They just must be alert for necessary changes and they must be ready to make a huge changes.
Hi Abdul,
I like how you said, “companies think they are built to last, but they are supposed to be built to change.” Too many organizations think what they have been doing in the past will be successful no matter what they go through, but this often turns out wrong. In an article by Christopher Smith he says, “Managers are instead scared as they see disruptive changes coming on their way and even if they have the resources to deal with it like technological know-how, specialists, strong product portfolios and the money, they do not take time to realize the capabilities of the organization as they do with individual capabilities” (Smith, 2014). Companies may have the ability to change and adjust but they just don’t do it. Some of this is arrogance and thinking they are “built to last” as you said.
Reference:
Smith, Christopher (2004). “Meeting the Challenge of Disruptive Change.” Retrieved August 25, 2017 from http://change.walkme.com/meeting-the-challenge-of-disruptive-change/ [WC-158]
Abdul—
Disruptive change is a very real risk to those companies who feel that they are immune to change and have already identified the “magic solution” to remaining a successful company. In Randy Bean’s article, he found that “a remarkable 46.6% [of surveyed companies]— see disruptive change coming fast, with many fearing that their companies are at significant risk of disruption or displacement” (Bean, 2017). Many of the companies that were surveyed for his article are names that we hear daily—Disney, General Electric, Visa and Bloomburg just to name a few. I feel that this 2017 survey shows that many companies are taking a hard look at the disruptive changes that are coming and the risks that they pose to their longevity. It will be interesting to see if these managers can take this knowledge and in turn create the change needed to survive.
Bean, R. (2017) Companies Brace for Decade of Disruption From AI. Retrieved from Sloanreview.mit.edu [WC160]
Abdul,
I found your quote from our text about organizations designed in a way to discourage changes interesting. I guess the reasoning here is that the organization is designed to last by using the same methods they always have. It is important for organizations who are facing changes to determine where any resistance to change is coming from. Determining the force of resistance and how employees react to change will help in guiding the organization in the proper direction for success. “However, resistance depends heavily on the scale of change and the way it is implemented. The reactions of employees to change move along a broad scale. Coetsee (1999) listed seven alternative responses: commitment, involvement, support, apathy, passive resistance, active resistance and aggressive resistance.” Using how employees react to change can help maneuver an organization from falling behind the status quo to raising the bar in their industry.
(WC-148)
References:
Faldt, M. M. (n.d.). Employees Change Competence – a result of learning experiences from organizational change. PsycEXTRA Dataset. doi:10.1037/e604062012-254
Palmer, I., Dunford, R., & Buchanan, D. A. (2017). Managing Organizational Change (3ed.). New York: McGraw-Hill Education.
Dr. Green,
Your thoughts on disruptive change echo what I have been thinking over the last few weeks in our course. The passage in the blog by Doug Berger “Executives work hard and put much thought into building their enterprise toward an expected future. When disruptive change hits, that future ceases to exist.” (Berger, 2005) really stood out to me. In my field, the banking industry, there have been rapid changes, especially the last few years. My brief experience on the regulatory side of the industry has allowed me to view numerous institutions, and their ideas on how they compete for market share. Those that have been able to adapt quickly to an increasingly technological dependent business model have fared better than those who have not. “At some point in the near future they (banks) will not have the wherewithal to effectively and successfully compete in key segments without digital competencies.” (Raftery, 2017). The main problem that comes with this technology driven change in the industry is the cost burden put on the financial institutions to stay ahead of the game. In my opinion, we will see more and more smaller commercial banks bought out by larger banks who already have the capability to be digital service providers.
(WC-208)
References:
Berger, D. (2005, August). Leading in Times of Disruptive Change. Retrieved August 23, 2017, from http://www.innovate1st.com/newsletter/august2005/DisruptiveChange.html
Raftery, D. (2017, February 07). These are the top trends that will define the banking industry in 2017. Retrieved August 23, 2017, from http://www.businessinsider.com/these-are-the-top-trends-that-will-define-the-banking-industry-in-2017-2017-2/#1-onerous-carl-compliance-audit-risk-and-legal-costs-abate-1
I would like to point out two main ideas about this topic, such as unpredictable event and the thing that change is inevitable.
Like I said in my previous writing, people live in a world with a perpetual change, and if change does not happen the world does not forward, even the change has been good or bad.
First of all, the probability that an event happen is always greater than zero, in other word an event or change cannot be predict at 100%, so by consequence managers or leaders have to deal with it and evaluate the risk on each circumstance when they have to take a decision. The evaluation of risk is extremely important to understand a change. Second, innovation is the new concept to be competitive and to be successful in the market. In any field, such as, education, technology, sport, business, managers or leaders have to understand that if they do not innovate, they will be out of the market, in other words if their new product is not better than the last one, they will not be competitive.
In summary, disruptive change or advantage change, both have to be understand and evaluate on terms of risk by leaders. [WC- 202]
Hi Paul,
Going off what you said about change being unpredictable, Doug Berger says, “When people are unprepared for problems, the problems stop them dead in their tracks” (Berger, 2005). Because it is unpredictable it is important to find way to be prepared for different scenarios. I like how you mentioned sports when it comes to innovation and change. This is very prominent right now in the NBA. With it being a business, many players want to join other teams in free agency in order to find success. This was something that was very uncommon but now happens all the time. This is a major change that has occurred and owners and the commissioner have to adjust to it.
Reference:
Berger, Doug (2005). “Leading in Times of Disruptive Change.” Retrieved August 23, 2017, fromhttp://www.innovate1st.com/newsletter/august2005/DisruptiveChange.html
[WC-134]
Paul, I like your thoughts on this subject. I particularly enjoyed your thoughts on innovation. Innovation is key within any organization that wishes to stay relevant in their industry. As Charan and Lafley (2008) state, “A culture of innovation is fundamentally different from one that emphasizes mergers and acquisitions or cost cutting, both in theory and practice”. These are very competitive and constantly changing times that we live in and we have seen the deaths of many large companies that at one time or another dominated the marketplace, but due to their lack of creativity, keeping up with the time, and innovation they have shut their doors. Change is inevitable, but how we deal with it will determine our success or failure. [WC-140]
Reference:
Staff, F. C. (2012, July 30). Why Innovation Matters. Retrieved August 26, 2017, from https://www.fastcompany.com/874798/why-innovation-matters
Hi Paul,
Thanks for your insight on change!
Your perspective is timely as we watch the United States on the global front (i.e. wars, terrorism, economic sanctions).
All,
How does an organization evaluate its risk strategically?
Dr. Green
Hi Dr Green
Thanks you for allow me to give my insights in other views
How does an organization evaluate its risk strategically?
Company use managing risk to evaluate and predict this kind of risk by three specific approach.
First preventable risks, these are internal risks, arising from within the organization, that are controllable and ought to be eliminated or avoided. But in general, companies should seek to eliminate these risks since they get no strategic benefits from taking them on. Second, strategy risks, a company voluntarily accepts some risk in order to generate superior returns from its strategy. A bank assumes credit risk, for example, when it lends money; many companies take on risks through their research and development activities. Strategy risks are quite different from preventable risks because they are not inherently undesirable. A strategy with high expected returns generally requires the company to take on significant risks, and managing those risks is a key driver in capturing the potential gains. Third, external risks, some risks arise from events outside the company and are beyond its influence or control. Sources of these risks include natural and political disasters and major macroeconomic shifts. External risks require yet another approach. Because companies cannot prevent such events from occurring, their management must focus on identification and mitigation of their impact.
Paul
Hi Dr. Green,
Thank you for sharing your insight on the topic of disruptive change. You brought many things to my attention that I had never thought about before. I enjoyed reading your blog.
I have truly never thought about the different kinds of changes within the business world. I knew that many things happen unexpectedly, but, for example, the way you mentioned the impact of eCommerce on big box stores was interesting. I have always figured that giant organizations knew that the impact of the internet was coming, but how you mentioned the impact being larger than expected was a good thought. I agree with you that it is a giant impact on the big stores. An industry that is experiencing one of the biggest disruptive changes is the taxi business. Cramer and Krueger state “Ride sharing services such as Uber and Lyft, which use modern internet-based mobile technology to connect passengers and drivers, have begun to compete with traditional taxis.” They go on to say how the impact of these other riding services came as a surprise because the taxi business has been dominated for so long. This just shows that no business can become complacent in their industry because disruptive change is waiting around the corner.
Judd, C., & Alan B., K. (2016). Disruptive Change in the Taxi Business: The Case of Uber. NBER Working Papers
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