Lets take a walk on the beach of Digitalization, The disruption wave and Leap.

In my country, when I was very young, there were a daily radio show that used to end with the phrase “when water reaches the neck, don’t make waves!” This is a powerful reminder of the vulnerability that comes with operating in a system with limited margin for error. It's a call to action for organizations to build resilience and adaptability into their systems, creating a buffer against inevitable disruptions and reducing their vulnerability to insignificant variations. By acknowledging the fragility of complex systems and the potential for small changes to have significant impacts, organizations can take proactive steps to mitigate risks and ensure their survival in times of crisis.

Waves that matter

Just as surfers navigate various types of waves, organizations must be prepared to ride the different kinds of disruption that can impact their markets. There are Reform Waves, Revolution Waves, Riptide Waves, and Tsunami Waves, each with its own unique characteristics and challenges. By understanding and identifying these different types of disruption, organizations can develop the agility and resilience needed to stay ahead of the waves.

Some organizations around the world have adopted Agile ways of working to navigate Reform Waves, while others have turned to Design Thinking to ride Revolution Waves, and a few have even leveraged Lean principles to mitigate the impact of Riptide Waves, all in pursuit of business adaptability.

The various ways of working that organizations have adopted, such as Agile, Scaled Agile, and Business Agility, have been successful in keeping pace with the gradual changes in consumer habits in the market. By working in cycles, teams are able to mimic the continuous motion of the waves, allowing them to adapt and respond to the regular and predictable changes in the market, much like a surfer riding the waves of the deep sea.

But there are also the breaking waves of the coast, unpredictable and energetic, ideal for surfing but potentially devastating for the unaware bather. These waves can be likened to market disruptions, where innovations from adjacent markets render current offerings obsolete, draining market share and leaving organizations struggling to stay afloat.

It's a powerful reminder that disruption can be a force to be reckoned with, and if a company is not prepared, it can be devastating. A leap, in this context, refers to a significant and sudden change or advancement in a particular field or industry, and companies that are prepared to ride the wave of disruption can harness its power and emerge stronger on the other side.

The root cause of disruption

When we talk about disruption, it's often a consequence of an innovation in an adjacent market, which can make it unpredictable. To understand this concept better, let's first define what innovation means in this context. Innovation is often misunderstood as simply implementing new ideas or doing something different or unexpected, but in reality, it's about creating new value or transforming existing value in a way that creates a new market, product, or service, ultimately disrupting the status quo and creating a new reality.

Innovation is often misunderstood, but in reality, it's about creating new value or transforming existing value in a way that creates a new market, product, or service. It's not just about being creative or trying new things, but about creating real value that can disrupt existing markets and create new opportunities. If you want to understand this concept better, I highly recommend watching this video: https://youtu.be/b9qzwg-07m8?si=vuu8f-fufs_9_wcn, it provides a great explanation of what innovation really is.

What we can see in this video are some applications of new ideas or discoveries that were refused at the beginning. So not considered as innovations until much later. So where does it point us? Innovation is not a phenomenon of implementing something new, moreover it’s adoption.

Another good example that illustrates the concept of innovation is innovation programs within companies. It's well-known that only about one in ten ideas implemented eventually become a product and reach any kind of monetization. This highlights that innovation is not just about generating ideas, but about creating an offer that adds real value to someone, not necessarily the customer or user originally targeted, and ultimately leads to the adoption of that offer.

From problem to situation thinking

Now that we've clarified our understanding of innovation, let's dive into disruption. We believe disruption is crucial because in digital markets, it's the driving force behind how markets evolve. Unlike traditional markets, digital markets don't follow a predictable pattern or pace. Instead, they're characterized by sudden, disruptive movements that hit the market and change it forever, until the next disruption comes along and shakes things up again.

As companies closely monitor their direct competitors, it's unlikely that disruption will come from within that same competitive landscape. Both companies are operating within the same dynamics, logic, and customer expectations, trying to gain market share. Instead, disruption often originates from a new company that enters the market with a fresh offer, like Uber did by connecting users and drivers, or from an adjacent market that enhances its offer by adding capabilities that align with the existing market, such as a computer that integrated various functions like text editing, worksheets, presentations, and internet connectivity, ultimately disrupting multiple markets like mailing services, communications, entertainment, and the workplace. Similarly, the emergence of Artificial Intelligence (AI) has disrupted numerous industries, from healthcare and finance to customer service and transportation, by introducing new capabilities like predictive analytics, natural language processing, and machine learning, which have transformed the way businesses operate and deliver value to their customers.

This is a classic scenario where disruption is unfolding. As new customers access services like the ones your company provides, but in a more convenient, affordable, and accessible way, they start to expect the same level of service from your company. The adjacent market, with its promotions and price improvements, is fuelling this shift, and customers are rapidly moving from the traditional way of doing things to the digital era. It's like a cannonball effect, where the momentum is building, and it's only a matter of time before it hits your business. While you may be able to identify the signs of disruption, the real challenge is responding to it effectively, which is a topic we'll explore in future articles, where we'll dive into what happens inside companies when disruption strikes.

Let's recap the concept of disruption. It's not about what a company does in the market, but rather a multi-causal consequence of an innovative offer. Contrary to popular belief, disruption isn't about fulfilling an unmet need, but rather about creating a new level of necessity in current customers. It's like unlocking a new level in a game, and those who aren't prepared to adapt to this new terrain will be left behind. For those who can adapt, there's a lot of work to be done, but that's a topic for future articles.

The next level

The pattern of disruption in digital markets can be described as follows: a company tries out 10 new ideas, and only one of them gets adopted by the market. Then, competitors start to pair the offer and fight for market share with price and promotions. As this new market grows in size, new companies and players from adjacent markets start to take notice and jump in to be a part of it, eventually making the previous market obsolete. This pattern is quite common in digital markets, to the point where it's become the rule rather than the exception. Digital markets are inherently disruptive environments, and companies that grow in these markets have to be adaptable to survive. However, when these companies become big and incorporate traditional executives and staff, they often become more traditional organizations themselves, exposing them to the risk of disruption. This phenomenon is what some bibliography refers to as a "leap" - a sudden and significant change that disrupts the status quo, which is the third and final part of this article.

The concept of a "leap" refers to the pace of disruption, which exponentially increases uncertainty within a company. To navigate this uncertainty, organizations need to adopt a special way of thinking and working, enabling them to perform in these conditions. As companies become more confident in the new rules, they also become more predictable, allowing people to improve quickly and stabilize the organization until the next leap arrives, bringing uncertainty to an even higher level. Over time, residual uncertainty accumulates, forcing companies to make a decision: either grow the organization or scale back efforts to a healthy level. To thrive in these markets, organizations must know when to lead with innovation and when to follow, when to drive and when to hold on and wait for the wave to pass.

There is a model developed by EAU that can help change agents and leaders understand how to evolve from disruption leap to harmony, allowing them to diagnose where they are in the journey back to sustainability and work together on what's next. This requires another mindset shift, as it's essential to recognize the difference between a wave and a leap, both of which are market behaviors that impact people dynamics, organizational culture, and health. Being able to identify and manage these disruptions is crucial to minimizing their impact on organizational health, which is a vital asset for companies to succeed. In fact, many companies are now recognizing the importance of organizational health, as it provides the necessary margin to face disruptive periods. However, in organizations with poor health, a leap can be devastating, leading to significant investments in rebuilding health, which can be costly and sometimes yield disappointing results, ultimately affecting the company's financial health.

Sometimes the lack of results in rebuilding organizational health can be attributed to external conditions that hinder the recovery process. In a previous article, we explored the difference between ego-systems and ecosystems in companies, highlighting the importance of conscious management of relationships with the world around us. By adopting a mindset shift in this field, organizations can become more aware of the whole and why, laying the groundwork for this new edition where we address how to identify the type of entropy they're dealing with. In future publications, we will share our assessment tool that helps organizations understand if they have the healthy behaviors needed to turn their company culture into a disruption-proof one.

As a leader, you're likely no stranger to the challenges of navigating disruption in the digital age. But how can you get help in understanding and managing these disruptions?

• Assess and diagnose: Identify areas where you may be vulnerable to disruption and develop a plan to address them.

• Strategic guidance: Develop a roadmap for success and stay ahead of the curve.

• Training and development: Build the skills your team needs to thrive in a disrupted market.

• Coaching and mentoring: Get personalized guidance and support to develop the mindset and skills you need to lead your organization through disruption.

Some key takeaways to consider from this article:

• Understand the difference between a wave and a leap:

• Waves are gradual changes, while leaps are sudden and significant disruptions.

• Innovation is not just about new ideas: It's about creating new value and transforming existing value.

• Disruption is not just about technology: It's about creating a new level of necessity in current customers and unlocking new opportunities.

• Organizational health is key: A healthy organization is better equipped to navigate disruption and stay ahead of the curve.

Don't let disruption catch you off guard. Take the first step towards building a disruption-proof organization today. Contact us at OrgFit International to learn more about how we can help.