Lots of loose language has been tossed about lately on the topic of “disruption,” and it may be time for a bit of perspective.
McKinsey, never late to a trend, published Strategic principles for competing in the digital age a few weeks ago, noting that “Digitization is rewriting the rules of competition, with incumbent companies most at risk of being left behind,” and presenting a variation on our familiar S-curve:
Meanwhile, there’s been a high-profile contretemps between Jill Lepore, writing in a New Yorker cover story, and Clayton Christensen, which I’ve talked about elsewhere, and which is nicely summarized by Slate, The New Yorker thinks disruptive innovation is a myth.
Back here in Law Land, as more than a few of you have surely noticed, the phrase disruptive innovation has never had more currency than it’s obtained in the past few years. In case you’re curious (I certainly was), I searched the archives of Adam Smith, Esq., and, with praise to the time-saving gods of software, learned that the phrase has appeared in these pages a grand total of three times, once each in 2006, 2009, and 2012, and in every single case it appeared within a quote spoken or written by someone other than yours truly.
Indeed, just this week The Lawyer published Peter Kalis’s column, There’s room enough for Big Law and LPOs, which I hope I can entice you to read in full by quoting its opening lines:
Moral conceit is the cancer of our profession. In our discourse, certitude is displacing reason as the medium of choice. Carefully nuanced distinctions are often bludgeoned by those without the subtlety to draw them.
He then talks about how these one-dimensional commentators “see little value in the traditional profession” and propose “that certain ‘disruptive technologies’ will obviate the need for much of traditional lawyering.” Pete doesn’t see it that way.
So, perspective is in order.
The quirky and often extraordinarily astute site, Asymco, which calls itself “an evolving experiment in collaborative and peer reviewed analysis,” and whose motto might be “you really can’t find this stuff anywhere else,” published The Disruption FAQ the other day and it’s a powerful a summary as any of what the much-abused term actually means. Herewith some highlights (emphasis mine except for the question headings):
Q1. What is disruption?
Disruption happens when the strong are defeated by the weak. More precisely it’s when those with unconstrained access to resources have them taken away by those with minimal or no resources. It’s a phenomenon that is in contrast to sustaining competition where the strong get stronger.
Q2. How can disruption happen? Don’t the strong always have an advantage over the weak?
The strong can be defeated when the fight is unfair. More precisely, “strength” is only a perception based on convention or historic precedent. The entrant may be weak in resources but may be strong in a way that is not seen as conventionally useful or valuable such as agility or a willingness to learn.
Q3. What makes a fight unfair?
A fight is unfair if the opponents fight according to different rules. This is also called asymmetric competition. […]
Q5: How often does it happen?
In some industries it happens quickly and in some industries slowly and in some never at all. Determining the cause of the rate of disruption is an important research topic. […]
Q6. How do incumbents react to asymmetric challenges?
This quote describes it best [after Gandhi]:
“First they ignore you, then they laugh at you, then they fight you, then you win.”
The main test of asymmetry is to ask whether a challenger’s entry is ignored (or welcomed) by the incumbents. Most asymmetric challenges are not taken seriously because they initially benefit the incumbent. The side-effect is that it lulls them into a sense of security resulting in a lack of response. Challengers have the child-like advantage of rapid growth and learning while incumbents are encumbered by their size and lack of flexibility. […]
Disruption can also happen to professions and institutions when less skilled individuals are enabled to perform complex jobs or when professionals can establish good enough services that used to take institutional support.
Q7: Why don’t challengers respond in kind?
Mainly because they don’t feel that they need to. The newcomer is either not seen as a threat or welcomed because the customers they obtain that are not seen as valuable. In some cases the business model of the entrant is contrary to that of the incumbent. In other words, the challenger makes money in a way that would cause the incumbent to lose money.
Our author then gets into a bit more detail about how incumbents tend to respond:
Understanding when a basis of competition changes and where competition is shifting is still very difficult. It is notoriously difficult to sense when it’s happening to you because you are working toward a strategy with assumptions that have been tested and proven to be correct. In other words, you, your colleagues, your competitors and everyone you’ve ever met knows the rules of the fight. Insider status makes you an expert, your knowledge is far beyond a lay person’s and you have a track record of winning. Hubris and pride make it difficult to accept a challenge from an ignorant outsider.
And some final words about whether we are simply imagining things when we think we’re living in a new, more-disruptive, era:
The speed of disruption is changing rapidly. It used to take decades but now it takes years and in some software industries it could be happening in less than one year. When it used to take decades it did not matter much because the “victims” of a disruption usually could spend a career in the firm being disrupted and would not have to adjust their behavior or assumptions. The consequences would have been felt by future generations. The rate of disruption today is so rapid that many careers and lives and families are having to deal with the consequences, sometimes more than once.
This final point echoes an unhappy phenomenon we’ve observed in too many firms: A generational divide, between the senior partners, with, say, a 10-year time horizon, and the more junior partners, with a 30+ year time horizon.
Will the roof fall in within the next 5—10 years? Since Law Land is not exactly in high tech, not a chance.
But will the model continue to function like the well-oiled Swiss watch it’s been for the past 30 years in, say, the year 2040, when those in their mid-30’s now will be the senior partners? You can provide your own answer, but I think our junior partners sensing a generational divide are on to something.
Finally: “Disruption” is not, ultimately, novel in the least nor is it anything we haven’t encountered before in every walk of life. It’s in the classics, it’s in Biblical scripture, it’s in the great American pantheon of Whitman, Emerson, Thoreau, Hemingway, and (Lord knows!) F. Scott Fitzgerald. It’s incarnate in the national holiday we Americans just celebrated, the 4th of July.
Ultimately, neither disruption nor stasis wins. In the long run, clients win. And the market always gets the last vote.
Quoting Peter Kalis: > …In our discourse, certitude is displacing reason as the medium of choice. …
Drawing on his work, especially with Amos Tversky and Paul Slovic, Daniel Kahneman extensively discusses the confounding of confidence with competence in his book Thinking: Fast and Slow. The book is full of a fabulous career’s worth of insight, and as important a book as I have read in years. I should think it was essential for lawyers.