Alex scooting in our Ruoholahti office

Rethinking disruption

It's time to look at disruption from a new angle.

One common take on disruption is to look at a particular aspect of human life and to understand how the recombination of a fresh process approach together with a revolutionary technology creates disruption. 

In the late 18th century, textile manufacturing was disrupted by the invention of the mechanical weaving loom (the early prototypes were powered by oxen before the steam engine later disrupted the ox).

We tend to associate disruption with a lean process, and little historic and procedural baggage. Creating a future that would be independent of provenance appears as a path to do things in a smarter way, more value-driven, and genuinely more modern. 

Disruption, revisited

In more recent times, we have seen more disruption examples: Airbnb has become an alternative to staying in a hotel, Uber is about to disrupt the taxi business, and we are currently witnessing how the e-scooter business is trying to disrupt other means of individualized last-mile transportation.

At the same time, Airbnb did a lot of damage to the rental market for apartments, Uber has been largely criticized for short-changing drivers (and for producing huge losses), and e-scooters are found littering up cityscapes. It seems clear that disruption has more than one angle.

Once you look beyond the shiny venture-capital funded technology that is prevailing in all the Silicon-Valley success stories, you see the mechanics of disruption in a different light. In a recent essay written by Dirk Baecker, disruption is better understood as “the unbundling of established activity clusters in order to separate the wanted from the unwanted effects.”

Looking at disruption this way, you can forego all the preposterous claims that technology will ultimately help us to create a better world. It is not the technology that helps build or change societies, but the successful unbundling of effects that we need to pay attention to. And here is where complexity enters the stage.

Complexity is created by systemic dependencies that prohibit the separation of wanted and unwanted effects.

If you consider changing house with your family, you basically have two starting points. You either know what kind of space and size you need, or you can start from a preferred or affordable neighborhood and see what’s on offer there.

The tricky thing is: no matter how you go about it, you will always have to deal with a set of possible downsides you cannot beat hands-down. In the first case, you may find yourself looking at far too expensive options that may force you to look for suitable homes further away from your workplace; in the second case, you may find places to live that simply don’t meet your family’s space requirements.

This type of complexity is called path dependency, and it can occur in every situation where you are structuring choices by taking them one step at a time. The sequence in which decisions are being made are both determining and limiting the next step in the process. And the ease with which decisions are being presented as simple one-offs along the process is often preventing us from seeing the dependencies we create through our choices. We submit to complexity without even noticing.

Where does that get us?

In business and in technology, we are very much used to declare complexity as unwanted, and unwarranted. To break down and to simplify complexity has been in the focus of both industrial and digital design for decades now. 

But creating sleek interfaces and dumbing down complicated selection routines make up only one side of the equation. 

What we get with that, and what we tend to often overlook, are systems that are not particularly versatile. We, of course, can create simple systems by drastically reducing their functionality scope until they fulfill a very narrow purpose very well. We fall, in other words, victim to “the focusing illusion” – a cognitive bias that the Nobel prize winner Daniel Kahneman has labeled with the acronym WYSIATI (“what you see is all there is”). 

I heard the brilliant Rory Sutherland state in various podcasts recently that if you ask a Silicon Valley company to re-think what a doorman (of a hotel) does, they tend to replace the doorman with a technical system that employs a proximity sensor and a hydraulic or electrical system that opens the door upon a person stepping closer. 

While this solves the primary problem of opening the door while you are walking towards it with your hands full of luggage in a technically sophisticated way, the complementary value the doorman creates for your hotel (greeting and recognizing guests, providing a sense of security and an appearance of personal service) is not even remotely covered.

On the other hand: a similar automatic door-opening technology (including an identifier module for preventing unauthorized access) can be appropriately used in residential buildings (and it already is used there). The disruptive effect is neither created by the technology bit nor by the functional scope of the underlying system.

It seems to me that the distinction of wanted and unwanted effects is much more contextual and situational than meets the eye at first. The hotel context produces an entirely different set of wanted and unwanted effects than the residential context. And even the term resident recognition that appears in both contexts has an entirely different meaning.

What needs to change?

Our idea of disruption is largely grouped around two distinct ideas: 1. The principle of simplicity, and 2. the principle of adequacy

Simplicity is largely a concept of reduction, of uniformity, and of control. “Making tax-paying simpler” was a disruptive approach for the manufacturers of tax software in the early nineties in Germany. As one may expect, a lot of private taxpayers who were using this new software found tax-paying much easier than before.  At the same time, the amount of tax advisors has not been significantly affected (data for Germany from 1962 to 2017 is available on page 6 of this PDF), as these advisors and companies mostly worked with corporate tax-paying anyway. The principle of adequacy that acknowledges the subtle differences between tax-paying for private persons and for corporations allowed the two modes of handling taxes to co-exist, without much cannibalizing effect. Turns out: plurality, not simplicity is the real key here.

When we switch our perspective on disruption from “How can I use technology to create a company that changes the lives of millions of people and is one day worth billions of dollars?” towards “What are our value creation principles today – and which wanted or unwanted effects can change these principles tomorrow?”, we gain valuable nuances in how we look at the complexities our disruptive approaches try to address.

Implications

The example of the power tool manufacturer Hilti comes to mind. Hilti has been providing products for the construction and building industry since the 1950s, and over the decades they have gained a reputation for producing high-quality machine tools for builders (its value creation principle).

As it turned out about a decade or so ago, building companies had discovered unwanted effects of using professional tools: as the construction sites got bigger and bigger, and as the number of builders employed by one company grew bigger along with it, the number of Hilti devices in use on these construction sites increased. So: managing, maintaining and replacing the tools in use became a logistical issue. Or, if we look at it the other way around: additional value was to be created by offering a fleet management service for Hilti machinery in use on large-scale construction sites. And this could indeed remove many of the unwanted effects.

Preventive maintenance could reduce unscheduled machine downtime, a replacement service could ensure the availability of functioning machinery in the unlikely case one of the tools broke - in essence: the complexity that resulted from owning (and managing) an increasingly bigger stock of machinery got addressed. Even further: replacing the formerly prevalent ownership model with a much easier access model would ensure the builders always have access to the latest generation of tools without the need for an upfront investment. 

The innovation approach that is at work here is not a technological one (although we’d imagine that sensors built into the tools would massively simplify the tracking and monitoring of the device fleet in use), but Hilti’s service outline addresses the logistical complexities of owning machinery

A similar thing has happened with the principle of owning cars in the past. Switching from owning it to leasing it removed some of the complexities (similarly as with the Hilti example mainly with regard to maintaining and replacing machinery), but the problem with parking at your house and parking at your workplace remained unaffected by the purchase model. 

Switching to an access model of car use (of which the oldest form is probably calling a taxi) eliminated those unwanted effects of parking by and large.
We, of course, have to concede that eliminating complexities is not simply a one-way path. Disruptions create new complexities, such as streetscapes being littered with abandoned e-scooters, or ride-sharing increasing street congestion in cities. As the set of wanted and unwanted effects is a system in constant flux (due to their shifting contexts), disruptive efforts never are a simple one-off. 

Service integrations, not killer applications

Technology enables disruption but is not identical to it. Displaying available rides on a map of the surrounding area in real-time applies to car-sharing systems and taxi services alike. For the end-user, the real-time display primarily reduces uncertainty: Will there be an available car-sharing car at the designated parking spots around the corner? Will there be a taxi at the next taxi stand? And where the hell is the tram that was supposed to be here at this stop two minutes ago? 

Integrating location information for shared cars, rides to hire (e-scooters, rental bicycles, chauffeur services) and public transport options into one single screen creates a vast possibility space for integrated mobility services. The growth and congestion of cities already have created a huge demand for individualized mobility beyond the use of private cars, so we don’t have to fear a lack of new, clever, disruptive mobility services in the years to come. 

If we keep a close eye on the wanted and unwanted effects of our activity clusters we should be able to deepen our insights and outlooks on how we can make disruption a positive force for transforming our world towards the better.

 

Further reading / related materials:

What “Disrupt” Really Means
https://techcrunch.com/2013/02/16/the-truth-about-disruption/

Dirk Baecker: Verantwortung für Digitalisierung in einer postdigitalen Zeit (in German)
https://www.uni-wh.de/detailseiten/news/verantwortung-fuer-digitalisierung-in-einer-postdigitalen-zeit-7804/

Path Dependence in Decision-Making Processes: Exploring the Impact of Complexity under Increasing Returns
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1568004

The Hotel Doorman example is as well contained in Rory Sutherland’s recent book, “Alchemy: The Surprising Power of Ideas That Don’t Make Sense”
https://www.productgems.io/blog/tag/alchemy-the-surprising-power-of-ideas-that-dont-make-sense/

Hilti’s business model for fleet services (Alex Osterwalder / Strategyzer.com):
https://www.youtube.com/watch?v=b_X18bmpHaw&feature=youtu.be&t=1388

Paris’ electric scooter experiment demonstrates the dangers of failing to regulate tech
https://venturebeat.com/2019/07/03/paris-electric-scooter-experiment-demonstrates-dangers-of-failing-to-regulate-tech/

Uber, Lyft say they help ease traffic congestion. A new study says otherwise.
https://www.nbcnews.com/mach/science/ride-sharing-firms-say-they-help-ease-traffic-congestion-new-ncna1003051