Businesses used to be able to see their competitors coming and anticipate their threats. As part of his theory of “disruptive innovation,” Clayton Christensen taught that a new entrant attacks a market leader by launching low-end, low-priced products and then continually improving them.
Consequently, Christensen’s frameworks themselves have been disrupted-because you can no longer see the competition coming. In addition to attacking the core business models of leading companies, the new entrants come from a variety of industries. As Netflix decimated the video-rental industry and Uber is changing transportation, new business approaches and technological advances will disrupt practically every industry.
As technology advances exponentially, there is no proven model for innovation. In order to innovate, you can’t look at companies like Procter & Gamble, Johnson & Johnson, and General Electric, because they haven’t reinvented themselves. Using the same business models and organizational structures as before, they are doing more of the same.
There is no one who understands advancing technologies better than Google’s founders, Larry Page and Sergey Brin. They realized that dramatic changes were needed to keep their company at the forefront of technology. Another grand experiment is being conducted: breaking Google into competitive pieces, before they are forced to do so.
Former technology leaders, such as Microsoft, should have done this years ago.
Microsoft was like the former Soviet Union – Politburo, five-year plans, etc. The best strategy for it would have been to break itself up into independent companies, each able to develop innovative products and compete with one another.
Depending on your perspective, this could have been along the lines of Microsoft’s target markets—enterprise, personal computing, mobile, or entertainment—or by products: Windows, Office, Xbox, and Surface. In reality, its employees were occupied with internal political battles and defending its old businesses. Therefore, it lost its momentum and lead. The new management team faces an extremely difficult task in reinventing the company.
Compared to large monoliths, small independent firms are more competitive because their structure allows them to unleash their talent and improve the company by eliminating parts that need to be transformed. Google is also enabling its founders to focus on what they’re best at: innovating, by separating the company into separate divisions that can independently focus on existing and new markets.
It will therefore be possible for the company’s independent divisions to develop virtual reality-based operating systems to replace the Android operating system. Self-driving cars, mobile entertainment systems, home health monitoring systems, and holographic contact lenses will revolutionize the way we commute in the future. It can also be used to extend life and to create nanobots that kill disease cells. The businesses will not need to coordinate or have divisional politics.
Companies must make bold changes in order to survive in this new era of disruption. It is important for them to take big risks before someone else disrupts them. The only companies who have shown courage to do so are Dell, Apple, and Starbucks.
A management expert from Yale School of Management notes: “Digital Equipment, Data General, Wang, Prime Computer, Apollo, Control Data, Nixdorf-and Motorola-might have survived if they stirred up the pot more. Maybe Andy Grove’s philosophy at Intel shows this best—that only the paranoid survive. Too often founders, like Ken Olsen of Digital and Ed Land of Polaroid, become religious symbols of sacred rigid past greatness.” Sonnenfeld believes that Brin and Page are following the lessons of Grove, Michael Dell, Steve Jobs, and Howard Schultz.
It will take time to see if Google’s moonshots and restructuring are successful. However, it is certain that Google would have gone extinct if it hadn’t done it.