Keynote speech for the eBookCamp on 7th November 2015, Hamburg
By Marcel Knöchelmann
Disruptive Innovation: The Dilemma of the Fittest
The topic Disruptive Innovation is a long time around in the publishing industry. At least as long as the eBookCamp takes place. That may be due to the fact that for around five years many in the publishing industry realise that Amazon initiates some changes. Yet, although it is a well discussed topic, it is interesting in which context it often appears, or that people actively call for disruption. It won’t be an easy task, the attempt to disrupt something. And it wasn’t even the purpose of the theory of 1997 to deliver a How-to-disrupt-guide. On the contrary, the theory attempted to explain why companies fail when their markets get disrupted. The very essence is: it is their strength. The strength of a company hinders it to get through a disruption.
This becomes clear, when taking a closer look at what is mostly an obvious sign of strength: a company’s products. Companies always strive to improve their products. Every period, they want to launch new versions of their products or satisfy even more needs of their customers. Products develop – they go through an evolution, what totally makes sense. Disruptive Innovations though break with this evolution. They are positioned below the needs of customers. Thus, they create a new market and undermine the traditional one.
Disruptive Innovations in publishing
Throughout the history of publishing, there are plenty of examples for this. Yet, most people peek at the music industry in search for examples. The invention of print with movable letters was itself a major disruption. Another highly interesting development is situated in the 19th century. In the century before, most people read in groups or even read aloud to each other. That changed in the 19th century with people starting to read individually. Publishing houses reacted to this development and launched improved editions of their books: more illustrations, better quality, beautiful editions. However, with the rise of the industrial revolution, a new kind of people appeared: commuters. And they had a slightly differing demand: they needed something to read, something to concentrate on on their travels, which could be carried with ease. To meet this demand, Bernhard Tauchnitz (Leipzig) and Georges Routledge (London) launched paperbacks in around 1841. What a cheek! Paperbacks were toys compared to “real books”. And yet they exactly met the demands of the customers and gained an impressive market share. Until today, hardbacks are they luxurious editions. Those who only want to read buy the paperbacks.
This could be a lesson. We could approach it like: “Well, we are not at loggerheads with the paperback. Let’s just don’t be with E-Books as well.” Or with media-neutral processing, or Open Access. There are plenty of examples where we could take the paperback as a lesson. Yet, there are also plenty of people who’d say “it’s just not the strength of our company. Our company produces great paperbacks and our customers put their trust in these.” This kind of thinking defines itself only within its own value system. And the declared belief of strength is the foundation of these values.
The phenomenon value system in Disruptive Innovations
Clayton Christensen recognised the phenomenon value system as on the same level as the problem that companies have to satisfy investors and shareholders. Value systems – a construct that to the outside often appears as tradition. And tradition is something that in individual purchase decisions makes no odds to the customer, whereas within the development of new products, it is one of the defining factors.
To bypass this value system, companies regularly form separate project teams. A bunch of people who work apart of the company’s objectives, people who are not obliged to meet the revenue goals, and who are obviously free of any other of the company’s mental blocks. Yet, after launch of the product, the same marketers market the product, the same sales people sell it, and the ordinary developers develop it as is done with any other product of the company. Thus, the product submerges in the value system. Although individuals may free themselves of mental blocks, the learning ability of an organisation is much lower than these of its members.
Adaptive Leadership and Change Management
For that change is successful even on a higher level, one makes use of Change Management methods – Change Management, such a booming market when everything changes and the humans don’t keep up. One model that approaches change at a human level is Adaptive Leadership. It tries to divide between leaders and authorities and to approach adaptive challenges not with technical solutions.
To explain the difference between technical and adaptive challenges, the theory gives a plausible example which also clarifies how massively humans are led by their own value system. The example is about people who had a heart attack. In case they survived the attack, there are two challenges for the patients to recover. The first is a technical for which problem and solution can clearly be identified, e.g. a surgeon operates on the heart. The second is an adaptive challenge. Here, problem and solution cannot be clearly identified. The patient has to change her life to a certain extent. She may has to stop smoking, start eating healthier, or start making sport. This challenge is adaptive as the process is uncertain. It could take a long time and the end may not be predictable. Furthermore, a particular motivation is required to achieve this process. My question is, what do you think, how many people achieve it?
Only 10%. That means that in nine out of ten cases, the power of the established procedures is stronger than the fear of death. And this fear of death is commonly known as very powerful. Just imagine, if change is that hard even when faced with severe illness, how hard must it be for someone who sold printed books for 30 years to start believing in digital literature? This shouldn’t build a connection between eBooks and heart attacks – but it shows the power of the value system.
Traditional market research and Disruptive Innovations
To counter this power, businessmen often search for evidence. Proofs that should foster motivation for change. The publishing industry is particularly good at it: how big is the market share of Amazon, what did this period’s bestsellers do, how many people read digitally? Traditional market research is of no use for Disruptive Innovations. On the contrary, it even supports the strength of a company.
A study would probably look like this: you go to a customer and ask him whether he wants to read digitally, in chapters, or even as a subscription. And – not to forget – whether he still likes the paperback or not. The evidence would then perhaps look like this: two out of ten customers are deeply unsatisfied with the model paperback. Furthermore, 50% of these two would invest in an eReader if it were delivered with a colour display and one would be able to surf with it. As a man with customer focus – and especially as a controller – I’d rather say, we currently have to disregard from investing in eBook productions.
“We shape our tools and thereafter our tools shape us”
And this is something still tangible. When it comes to storytelling – intangible content – there won’t even be someone who can explain what she likes at the very moment. Though especially the content will face massive innovations. Not a few media theoreticians assert that a change of the medium always also changes the content. “We shape our tools and thereafter our tools shape us”, as Marshall McLuhan concluded. In terms of content, no one will be able to hint at what may come in the future and yet there will be people who master the innovation. People who will disrupt markets. These people will be those who don’t concentrate on a strength, who don’t concentrate on what is currently best for the customers. These people will be those who focus on problems that others haven’t even recognised.
The most descriptive example for such a person is the man who established the shipping with containers. Malcom McLean was a trucker. He could have been happy with his well running business. However, he recognised an inefficiency within the process of loading and unloading – something that shouldn’t even have concerned him. Yet, he was keen to change it and devoted everything to his idea. The biggest challenge he faced was convincing all the other people involved in the process of shipping: other truckers, railway workers, ship builders and captains, crane manufacturers, unions, and even the military. All of them were sure that it was of no use to standardise everything, to rebuild everything, refine all processes, load every freight into containers, and – most of all – buy hundreds of containers. Yet, this very innovation became one of the engines of the world economy. Nowadays, millions of containers ship every day around the world. Due to Malcom McLean who did not define himself as a trucker but as someone who ships freight from A to B.
Deliver. From the company to the reader.
This example shows vividly how important it is in terms of Disruptive Innovations to have the boldness of presenting a product which customers don’t know. To launch a product of which customers yesterday still thought that they would never use something of that kind. And that the product one launches solves a problem which both customers and companies didn’t even recognise.
The important question here is not whether you are a strong book or eBook publisher to solve that problem. The important question is whether you define yourself as a book publisher or as someone who ships literature from A to B – in whichever way.
Download the keynote on Disruptive Innovation here for free: