Monday, October 6, 2014

Big Bang Disruptions: Everywhere!! Even in Automobile Industry Supply Chain Management!

Big Bang Disruptions: Everywhere!! Even in Automobile Industry Supply Chain Management!

Big Bang Disruption, mentioned in a book by Paul F Nunes and research fellow Larry Downes, is a new and lethal disease that kills businesses through large-scale fast-paced innovation that can go global all at once (2). Big Bang Disruptions are products and services that are better and cheaper when they enter the market. It is everywhere and if not, then the time is not far away for any industry to be disrupted by it. The time has come for everyone to rethink the approach to the strategy. It has the power to obliterate the entire market at once.
 According to Professor Clayton, there are two types of innovations: Sustaining technologies, incrementally improved existing products and disruptive technologies. The big thing about BBD is its fastness and scale. On the other hand, traditional disruption, Innovator’s Dilemma, mentioned by Clayton Christensen in 1997, is also another dangerous disease, but it happens slowly and operates step by step. The “innovator’s dilemma” is that “doing the right thing is the wrong thing (1). If the company misses the opportunity to take everything into perspective rather than concentrating on one thing, the market for disruptive innovation is created. No company/Industry can escape from BBD. It’s inevitable and also defies the traditional approach of strategic planning. Disruptive technologies attract margin customers due to their underperformance in the market but once the product keeps improving with time, they become the real time products/services for the main market. The idea of handling the new technology on having some time in hand without cannibalizing the own market is the Innovator’s Dilemma.
 I like this topic because of the intensity how can any innovation disrupt the entire market. It has penetrated almost every market and industry such as electronics, manufacturing, healthcare, hardware, software, and global networks. BBD product or service has many qualities that is: cheaper, quicker, smaller, personalized and convenient. Because of all these qualities, customers tend to go for this market, leaving incumbents that gives very less time to react that leads to collapsing of supply chains.

I will be talking more about how BBD had spread across the automobile industry. Google, and apple maps, when introduced, are cheaper and better (integrated) than paper maps. Due to these smartphone apps, People don’t need to buy GPS navigation devices because it became easier to navigate through these devices. The innovative companies realized that customers already have smartphone devices with faster Internet. These navigation app companies will be competing in the software world. The software can be duplicated many times, if written once with zero marginal profit. All the focus could be directed to advertising the product/service. This android and iPhone market brought down the market share of stand-alone navigation devices. This also happens due to the shift of existing customers to the new market and the existing technologies don’t get enough time to respond. Disruptive technologies have suddenly become much more devastating, and much sooner. It is a nightmare for the innovators.

The actual reason behind BBD is exponential technology, which has unique economic properties, better and cheaper, and also powerful in terms of improved performance over a period of time than the existing products. Everything is improving and digitalizing. This makes the industry/company more exposed to BBD.
The automobile industry has also been disrupted by BBD. The car has processors ranging from 30 to 80. Each specialized with some high-end functions such as voice recognition, assisted parking, braking transmission. The future of cars is more autonomous or self-driving. The computerization is just one of the example in automobile. It has also reached to metals and materials, which are improving exponentially, leading to lesser defects and maintenance problems. The exponential technology has gone to alloys and other raw materials such as fuel, roads etc. EBay alone sold some 4.3 millions used cars.
It is not just the vehicles but also their consumers have been reshaped by exponential technologies. They got more resources and knowledge to research, negotiate, and purchase using Internet. Now, customers can pull the information from other consumers whenever they want on price, quality, and customer service.
The new computing technology has also altered the car usage. The innovation technology has reinvented the idea of public transit, including Zipcar, Uber, Lyft. These new services improved the efficiency by keeping the cars on road for most of the time. This also leads to fewer car sales and traditional rentals.
There are still many opportunities that could be explored by dealers and suppliers. Recently, I had to purchase car and I had to go to thousand different websites to collect information and also find the better deal. If the suppliers and dealers could bring some technology to ease out the process of finding all the information at one place, they could easily be benefitted by lot of profit but if left unnoticed then it could bring someone else to bring their innovative technology. It’s all about the information exchange that makes one powerful.
 According to the BBD book by Larry Downes and Paul Nunes, there are four stages of BBD. (a) Singularity; (b) Big bang; (c) Big crunch; and (d) Entropy. The graph depicts the length of the period of singularity (i.e. experimentation), the shortness of the exploitation period (the big bang itself) and the rapid decline or big crunch, which can be almost as steep as the big bang (4). The success of big-bang disrupters is driven by easy access to opinion, facts and comparison data, which is something closer to consensus.

BBD cannot be avoided but strategic approach could be taken. The BBD phase could be handled by:

1) Survive catastrophic success
Scale up and redesign the technical and business architecture while operating at full speed.

2) Capture winner-take-all markets
Give up short-term profits to win all the market. This could then be leveraged to create followed on products that could be created and launched faster than original.

3) Create bullet time
Judiciously employ litigation and legislation to slow the progress of disruptors, even as you proceed with your own experiments, partnerships, and well-timed acquisitions (4).

Automotive Industry’s supply chain is fully disrupted and reshaped by exponential technology and BBD. Disruption may come not from traditional competitors, but from companies outside the industry—perhaps even software-based startups. The transformation is already happening.  The question is whether the next car is better and cheaper than the last one? If not, how many rounds of exponential technologies it will take to bring that design and efficiency?

This topic leaves us with several interesting arguments and questions.
1)   Why does BBD need to be disruptive?
2)   What is the way to handle it or get around with it?
3)   What industry/service could be protected by it?
4)   What industry/service is next on the list?
5)   How BBD will change the future in terms of technology?
6)   Will it always be disruptive?



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