Market Disruption Vs. Business Disruption: The Inertial Disruption Factor
According to Newton’s Third Law of Motion, for every action there is an equal and opposite reaction.
As with physics, so with business innovation.
Whenever an innovation impacts a market, it also impacts the business delivering the innovation. It is as though when the business pushes on the market, the market pushes back. Nudge the market just a little with an incremental innovation, and the business feels a nudge back. Rock the market with a major disruption, and there will be a rocking effect back on the business and its supporting ecosystem.
Whether nudged or rocked, whenever a market is perturbed, the extent to which the business is in turn perturbed is a function of the relative “mass” of the two. A large business (one with a solid market position and substantial resources) rocking a small market puts most of the impact on the market. In contrast, a small business trying to rock a large market is going to put most of the impact on the business. There is this relationship of relative inertial masses. At Legacy Innovation Group, we call this the inertial disruption factor…
FID = MMKT / MBUS
The inertial disruption factor explains why so many startups trying to disrupt existing markets face such massive uphill battles. The odds are simply not in their favor. This requires them to work much smarter than established companies, typically bringing entirely different value models to the market.
For example, with Uber (a small business) currently disrupting the taxi industry (a very large market), the vast majority of the stress has been on Uber, acting like an ant lifting hundreds of times its weight. Small businesses experiencing this sort of stress would do well to emulate what Uber has done… leverage the collective sentiment of the general public to win public opinion in their favor, framing the story as one of “us” (Uber and the public) fighting “them” (the established and entrenched taxi industry). This hasn’t worked everywhere for Uber, but it has worked in enough places to help them grow measurably. In this case, the inertial disruption factor is very large, but Uber has managed the situation by making the general public effectively a part of its business ecosystem, tilting things in its favor.
In contrast, when Samsung (a very large corporation) wants to introduce new LCD technology into a medical niche market, the impact may literally disrupt that particular market, but the tremor will barely be felt inside of Samsung. In this case the inertial disruption factor is very small. When FID is this small, the business ecosystem can easily absorb the change and the impact is not felt very far into the company.
In cases where the business and the market are of comparable mass, the inertial disruption factor will be closer to unity. Anything the business can do to reduce the inertial disruption factor, particularly in terms of aligning internal stakeholders to the vision and leveraging external partnerships, can help to move the balance of power more in its favor, improving their odds of success. Just as there have been many cases where markets got moved out from underneath established businesses by new upstarts, there have been just as many cases where established businesses (facing a high inertial disruption factor) have tried the heavy lifting needed to remake their markets and themselves, and the boulder they lifted over their head fell back down upon them, nearly killing them. Business books are full of these case studies, like the example of how Ron Johnson failed to remake JCPenney’s market positioning.
This concept of the inertial disruption factor is an important one that companies must take into consideration when prowling their hunting grounds for new market opportunities. Will they be able to marshal the resources needed to successfully move the market where they need it to go? What changes do they need to make (or will be forced upon them) in their own business ecosystems… new supply chains, new technologies, new production sources, new sales & distribution channels, new marketing channels, etc.? Will they be able to survive these changes? Do they have the management skills needed to navigate these changes? What other partnerships can they forge and leverage to help carry the burden? The answers to all of these questions will depend on the barriers standing in their way, their own strengths and weaknesses, and the ecosystems and partnerships they can leverage. Whatever this balance of might, it is accurately reflected in the inertial disruption factor.
While the inertial disruption factor is a key concept that businesses need to understand and respect, the balance of power it represents is not always what separates the winners from the losers. With hundreds of strategic details in play when trying to disrupt a market, what separates the winners from the losers is how they arrange the parts of the business ecosystem (internally and externally) to work in harmony with their mission and to scale as needed, tilting the odds in their favor. If they can successfully do this, they will still be “disrupted”, but for them it will be a positive disruption, not a negative one.
In business, as in many things, there will be winners and there will be losers. Knowing when and where to move, and how to manage the inertial disruption factor, is, quite honestly, an art… the art of disruption to be exact. Committed business leaders will work hard to gain a mastery of this art.