Disruptive innovation

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The pace of change is dizzying but where one sector sees disruptive innovation as a threat another spots a money-spinning opportunity, writes James Sproule 

It is all too easy to get depressed about the concerns of the day: a chronic budget deficit, the burden of taxation, the travails of the European Union, income inequality, despairing at the political class generally or, possibly, the results of the general election. Pessimists have no end of choice to feed their doom-laden scenarios, so let’s counter them with a welcome dose of optimism.

Roy Amara, one-time president of the Institute for the Future, memorably quipped that “we tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run”.

It is easy to opine that technology is going to be our great saviour but it is true, not just because it is developing so rapidly, but because it is harnessing the creativity of so many people.

Looking at Moore’s law, which states that computing power doubles every 18 months, we can see the underpinning of optimism. Gordon Moore first set out his observations in 1965 and the doubling of computing capacity has held good longer than anyone would ever have imagined.

At some point computing capacity will show signs of diminishing, but that will not be a signal that the technological revolution is waning. The real driver of prosperity is going to be how that technology is used, and that shows no signs whatsoever of slowing.

Think of technology like electricity. Electricity was first developed and utilised to drive machinery in factories. If that were all it had done it would be useful enough.

But quite obviously it has transformed our lives for generations, to the point where we can barely imagine what life would be like without it. Moreover, the uses to which electricity has been put were not conceived initially or after a generation or more of its universal introduction.

What one business may see as an opportunity, another sees as a direct and unwelcome challenge. But here the agility of small and medium-sized businesses is likely to be crucial in seizing economic advantages in coming years.

Take Uber, for instance, which might be seen as a threat to existing taxi drivers. But then again, it might also drive up the number of people using cabs and increase the utilisation factor of taxis generally, actually boosting the industry as a whole in the longer term.

Or look at how Instagram was, from the point of view of Kodak, a “killer app”. Much was made of the fact a company that employed 13 people replaced a business which employed 140,000.

But the pessimism at job losses in Kodak misses the point – digital technology changed the way we use photographs, allowing new businesses such as eBay to grow and thrive.

Change is rarely as rapidly radical as the media would like, but then it has been a good deal more deep-seated than is comfortable for many a newspaper journalist, even if it has taken a bit of time.

Imagine your starting point is this: how can my company supply goods or services that people need (or merely want), and how can these be effectively delivered? Then you have the optimistic outlook that is a key prerequisite for success.

Yes, the government balancing its books and how this might be achieved is still a concern, but it should not blind us to today’s abounding opportunities for business.

Watch more from James Sproule at youtube.com/DirectorMagazine
@jamesrsproule

About author

James Sproule

James Sproule

James Sproule has been Chief Economist and Director of Policy for the Institute of Directors since January 2014. Prior to joining the IoD James led Accenture’s UK Research and Global Capital Markets Research. He started his financial career as a merchant bank economist working with both Bankers Trust, Deutsche Bank and Dresdner Kleinwort, and eventually helped to found the boutique bank Augusta and Company.

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