Disruption is all around us; it never seems to go away; it simply appears in a different and often entirely new form. The result is the same; it disrupts what we know and often in how we suddenly need to set about doing it differently.
Much of the innovative disruptions seem so obvious; you wonder why we were not doing these before. They connect up lots of the “dots” we have previously been focusing upon and make them blur into one bigger dot that becomes the new norm. Think Amazon, Airbnb, Uber. Think China.
Many of these are defined today as marketplaces, where innovation has pushed the boundaries and stretched thinking to combine aspects of multiple transactions into connected and seamless ones.
Let’s realize that most of what we undertake has been “disrupted” in recent years. We have marketplaces that have gone horizontal and vertical in the way they have sought out connectivity and brought it onto one platform.
Just stop and think about how we undertake transactions around our homes, cars, jobs, travel, deliveries, and how we can all become freelancers. We have so many on-demand services, products, fashion, groceries, cosmetics, food, banking, wellness, lifestyle, health and eyewear choices online, all changing our past ways of life.
Many previous and known innovation boundaries have been pushed through the changes that digitalization brings, all capable of building a different value chain and customer proposition and experience.
The effect has been on changing the way we go about our lives and attracting risk capital from venture capitalists, as this has become a tech-driven bull market.
Nowhere is the pace of disruption stronger than in China, where Alibaba, Meituan, Pinduoduo, Didi Chuxing, JD Health are among the most valuable world marketplaces in their trading valuation.
We are seeing such forces, trends, technologies that are enabling these and in some very distinctive ways, we are seeing many more radical concepts emerging from China first.
Any company today is undoubtedly forced to rethink its digital strategy. A company can remain an island or become part of a set of multiple chains, often not limited to one platform offering to connect with its customers.
Why does China have a natural advantage?
I previously have tried to capture the Ecosystem Dynamism in China and Asia in a previous post on my ecosystem posting site. I had evaluated this previously in another post Dynamism in Chinese Ecosystems and Platforms. Both are useful background reads on China’s continued dynamism.
I concluded ” There is a lot to learn and understand in exploring the approaches that the Chinese are taking in their thinking about what makes their Ecosystems and Platforms work. This is in delivering value, in extending reach, scope, and scale; speed is of the essence but they are constantly evolving and pushing the boundaries of what is known and accepted into the connected. Understanding the ‘possible’ boundaries and learning to build and compete in Ecosystems is a global competitive imperative”.
*China has a vast connected consumer space that is comfortable to trade, link and correspond online. The investor has this immense pressure to scale fast. Otherwise, others will take the idea and give it a different spin to undercut these nascent businesses. China is a highly dynamic and changing society, in constant change.
*China has such a population size, but this is rapidly evolving into the world’s most extensive digital ecosystem that encourages disruption through the combined use and thinking of technology and innovation.
*Through the government’s encouragement (possibly lesser today, think Alibaba), the on-demand economy has thrived through the sheer force of technological enablers, e-commerce and the nature of the distribution culture of the Chinese in a country of such geographical size.
*The whole social life of living in China is becoming governed by your smartphone. You transact your life on your phone. Services are virtualized, digitalized and revolutionized.
In the West, much of this connected behaviour is hard to imagine.
The argument goes that you are giving up all your freedom, personal liberties and individual freedom of choice. Perhaps there is a lot of merit in this. Each of us in this world is caught up in some form of “forces” that can suddenly bring disruptive change to our lives.
Living in multiple challenging countries, like I have, over thirty-plus years that can constantly challenge you, you gain by learning, avoiding and staying within that country’s (accepted) boundaries. At times I was left very uncomfortable and challenged, but there are “counter-forces” that can resolve flashpoints and reduce confrontations. We are in a world where we can all get that “knock on the door” that spins ourselves.
China has several traits that are offering these “counter-forces”. They provide an environment where nimbleness, skills and agility can propel ideas into concepts but can suddenly have that “cloud of uncertainty” that quickly hover over you if you go beyond certain limits.
The Chinese environment permits organizational and operational capabilities that can extort and be excessive but can equally provide and build opportunities to break out and realize something better in equal opportunity or time for many.
Recognizing the Darwinian forces at work
The seeming ruthless ways of gaining traction and reaching scale does have many Darwinian forces at work. I wrote a piece some time back, “Our innovation era is it creative destruction or destructive creation.”
I argued, “Schumpeter saw “creative destruction” as the renewing, through innovation, society’s dynamics that would lead to higher economic development and welfare levels. At the same time, recognizing that this destroyed a few of the incumbents to benefit many more newcomers and increase value creation for broader society.”
Today we are in a destructive creations world, I further offered this view: “Today, we are caught in the reverse of this- the process of “destructive creation”- which benefits a few rather than the many. This destructive creation sets out often to destroy or greatly diminish the usage value of existing products and services before it is optimal. In the process, it often incurs significant costs not taken into account at the time. These unforeseen issues have consequences that negatively affect parts of society not foreseen or contemplated at the time.”
My conclusion was the shift had emphasized the role of destruction rather than creation in driving innovation activity.
I went on to say, “This is becoming the game for a few to make money, corner markets, dominate and want to achieve monopolistic positions, and not worry over the wealth creation aspects of creating jobs, building communities, and cherishing certain values.”
Does this apply to China and its quest for innovation and disruption?
The Chinese are good at blurring the boundaries, in this case between strategy, organizational boundaries and execution.
A new force is possibly coming into play, of finding a new balance between delivering new business model innovation and the concerns for social well-being.
Yet will the present “way of life” constantly need to build scale and deliver momentum-changing forces that propel China onto the world? If so, growth and innovation are inevitably interlinked to a digital and technology ecosystem.
Then for China to continue to succeed, it needs innovation, and it needs to constantly “tear down”, making those disruptive forces central to its business and social model.
The forces behind marketplaces
I come back to marketplaces; they are a place that we all can equally play; these are disruptive forces, no question, but if they can provide better services to society, then great.
Yet if they become the Western alternative in monopoly, in counterweight forces that take over the role of shaping our lives in ways that can distort, tear down old habits, patterns and connections within communities, then no thank you.
We see the undermining (up to now) of past accepted values; then we are indeed moving within my question from “creative destruction to destructive creation.”
My biggest fear with unleashing innovation as a destructive force and not disruptive is this:
“The quicker we adapt, the sharper we suffer declines somewhere else.”
For example, we need to balance technological choices and social consequences- new gadgets vs decline in privacy. Yet the natural industry consequence of one party dominating in “destructive creation” is only seen that much later on, when that total deterioration cannot be halted or reversed.
How far are we prepared to push innovation boundaries through technology? A digital economy needs to be inclusive, sustaining and balanced in the changes innovation can bring but in so much more in providing fresh economic value to our broader society, not to a selected part or few.