The age of disruption

Almost four years ago I was accepted for Singularity University’s GSP. The 10 weeks I spent in Mountain View in 2013 were memorable. I learned, had a lot of fun, made great friends and, in different ways, changed my worldview.

At that time, technology and disruptive innovation were not central topics in business and policy as they are today. A lot of people I knew in economic development and business were surprised when I said I would get a leave and pay to go to California. It seemed to them to be just fun, maybe an eccentric thing; surely, something not at the core of business or economic development.

But this post is not about my personal experience. It is about the shift that happened in the global agenda since then — and some of the implications that such a change brings about. Today, exponential (or disruptive) technologies and disruption are “the topics” in business and economic development!

In fact, “disruption” is not a new idea — it is the nature of capitalism, isn't it? That is a concept that Joseph Schumpeter introduced in 1942, when writing about “creative destruction”. New technologies, products and processes turn their predecessors obsolete and reinvent businesses, industries and the economy; that’s the nature of capitalism.

Technology evolution also isn’t a new concept. In one of my favorite books, Kevin Kelly introduced a theory on technology progress/evolution that I really like. As he noted and others had observed, technology has been expanding and “organizing” for millennia.

So… what is new in today’s reality? At least two things/facts are new and have to be noted: (i) the awareness that technology is the main driver for disruption and (ii) the acceleration of technology expansion.

Technology rules

Back in 1997, Clayton Christensen coined the term “disruptive innovation” and made the case that technology was causing well-established (and supposedly well-managed) firms to fail. 

An important subjacent idea to that concept is that technology is not just something to be managed or the object of attention for a single function/area in a corporation, it is much broader than that and has far reaching strategic implications. Christensen brought technology to the main stage of business strategy. But, still, it was technology being seen from the perspective of business strategy.

Ahead of other strategic consultancy firms, McKinsey (via highlighted in a 2013 report the impacts that “disruptive technologies” would/could have in business and society. Outside of futurist and techie/geek circles, that was one of the first moments when a leading global consultancy company approached business, society and economy through the lenses of technology disruption — that is, having technology as the key force and organizing principle for the analysis. 

A lot of things happened since 2013 and technology disruption became a buzzword, one that keeps spreading, and is taking by assault the mass media. More important than that, it became a major topic for business and policy in a variety of domains: innovation, health, sustainability, security, commerce and, ultimately, growth, economic development and prosperity.

Everybody is paying attention to disruptive technologies

Clearly, technology disruption is not just about software. All technology domains are expanding at a pace never seen before and areas such as materials, genomics, energy, robotics, neuro and others display the same type of exponential behavior we have been seeing for years in semiconductors and computation. Now, other technologies are moving from "deception" to "disruption" mode.

Naturally, the tech entrepreneurship world was fast in broadening its reach beyond software, internet and apps. Accelerators around the globe launched hardware programs and classes, including the well-known Y Combinator and Techstars; biotech accelerators and incubators flourish in the US, Europe and Asia; 3D printing accelerators and hubs are popping up across geographies; and space incubators/accelerators/funds follow suit — for example: Starburst. And so on, and so on…

Big corporations adapted and are also surfing the technology disruption wave, either through a la skunk works operations and innovation labs and corporate venture, which has been experiencing exponential growth, expanding more than 50 times since 2012. Not only digital, internet or computer companies are active in that space: all major automotive, consumer goods, telecommunications, pharmaceutics and industrial solutions companies (GE is one of the best examples) have relevant corporate venture operations.

VC and PE funds with tech portfolios apart, traditional investment companies that were not active in tech are now also focusing on disruptive and “exponential technologies”. The massive BlackRock recently launched an exponential technologies fund. I predict that others will follow.

As expected, business consultancy companies are strongly emphasizing disruptive and exponential technologies. Deloitte partnered with Singularity and has done a lot of work about disruptive manufacturing and the impacts of advanced technologies for the competitiveness of manufacturing — like this one in partnership with the US Council on Competitiveness. Bain & Company apparently elevated the status of its technology practice and created a map of disruptive digital technologies in different industries and value chain stages. BCG launched a report on digital disruption and another one about technology advantage. PWC bets in technology forecast. Accenture has been expanding and promoting its “technology vision” every year. AT Kearney had trends in technology as the main topic for its 2015 CEO retreat, launched a Silicon Valley Though Leaders series and increasingly highlights digital transformation. The British LEK features technology disruption in a series of reports. EY has disruption as one of the key topics for its insights and partnered with The Economist for a survey on disruption. And… these are just some cases.

It was back in 1993 when The Economist launched Technology Quarterly, the same year when Wired Magazine was launched. The number of vehicles covering technology and technology businesses exploded since then and, in 2017, any major traditional media vehicle — newspaper, magazine, radio, TV channel… — has a technology column, program or session. That happens in a reality in which traditional media is actually being disrupted by digital media and, of course, we are plenty of online vehicles like AOL's TechCrunch — by the way, its main event is called Disrupt — and personal blogs, sites, YouTube channels, Twitter profiles etc. dedicated to technology and technology disruption. Media — and a fast growing number of individuals (like me) — is eager to cover, spread the news, talk, tweet, write, live stream about technology and technology disruption.

Everybody in manufacturing, investment, entrepreneurship, research, consultancy, investment and media seems to be paying is paying attention to technology and the impacts it will have in business and life. But, how about the policy world? 

A sleepy awakening

In general, governments, policy and multilateral organizations tend to be slow in capturing tech trends, understanding and connecting with innovators. Sometimes, “discoveries” in the policy domain come late, as Fortune Magazine ironically noted when commenting WEF’s new Center in San Francisco.

Having worked several years in the intersections of business, technology and policy, two of the organizations that I know around the globe that best bridge technology and policy are the US Council on Competitiveness and NESTA. Without being research or tech organizations, both of them were created under the assumption that technology is key for competitiveness and that taking new solutions to the market is an essential driver for growth. Not as a coincidence, but also reflecting the growing focus on disruptive technologies, the recent US Council’s 30th National Competitiveness Forum addressed disruption, advanced manufacturing, artificial intelligence and other tech topics. In a similar fashion, NESTA's predictions for 2017 are much about technologies. No news in that.

The novelty is that the focus on technology and disruption has been spreading in the policy domain and occupying a space that was solely dominated by macro and development economics. A variety of examples suggest that this trend will continue and even grow:

• Different bodies and agencies at United Nations are doing research, convening meetings and developing policies in relation to disruptive technologies, including the Unctad, ECLAC, the Secretariat General and the UN-associated private sector Global Compact.
• Governments are increasingly concerned about the opportunities and challenges opened up by disruptive technologies — to be clear, national technology initiatives are not new per se, but surely have a new push in the disruption era. A few examples:
• Korea has lunched a strategy for Artificial Intelligence.
• The US has outlined policies and launched initiatives related to several “disruptive technologies”, like AI, internet of things, advanced manufacturing and fintech, to mention just some.
• France made a national assessment of key technologies, identifying application areas in global markets and priorities for France and French companies.
• The World Economic Forum launched in late 2016 the Center to Advance Global Cooperation on Fourth Industrial Revolution, which is part of a broader strategy related to the fourth industrial revolution, strongly emphasized in recent years.
• Multilateral organizations such as the Inter-American Development Bank and the World Bank have been researching and releasing content related to disruptive/exponential technologies and are likely to launch special initiatives related to the topic. I believe we will see more coming from multilaterals, stay tuned.

It is good news that governments and policy organizations are increasingly paying attention to technology growth, impacts in society and technology disruption. Nevertheless, as they do that, the challenges and opportunities are also changing, as technology expands at full throttle.

At full throttle

Technology has been accelerating. Performance grows exponentially, while prices go in the opposite direction. Things that seemed imaginable not long ago are becoming reality, accessible and affordable in different areas, as Peter Diamandis recently captured in a post that summarized key technology achievements in 2016.

We never lived in a world so abundant of information, devices, and technology. As technology continues to accelerate, the game keeps on changing.

Something new emerges in this new reality. As the pace of technology expansion increases, we will less and less see technology change in discrete steps, even if key milestones are met over the years. Change and disruption become the new normal. As Kevin Kelly wrote in Inevitable, technology is “becoming”, we are “becoming”, everything is “becoming”.

Challenges for organizations abound. Companies need to continuously adapt and fight to avoid disruption or, in the best case, anticipate it. Many companies are expected to disappear in the coming years and it is not a surprise that the average lifespan of companies has been being reduced.

In this new scenario, disruption management is a new discipline and attention area for corporate leaders. I first heard about it from my GFCC colleague Chad Evans, when he mentioned that CEOs and CTOs taking part in one the initiatives he leads agreed that a key role for them to play is to “manage disruption”. A lot has been written and said about it recently and consultancy companies and business schools are plenty of work to do. Actually, even a consultancy company (I don’t and I’m not affiliated to it, just found it curious) named “Manage Disruption” is around.

Managing disruption at the company level is not an easy task — mindsets, resources, procedures, processes, incentives, organizational structures and systems need to be retuned. It is even harder at the society level. While technology grows exponentially, in the best case, institutions evolve linearly. There's a growing gap to be overcome.

A new OS has to be installed

Governments (and societies) are doomed to fail if they try to avoid or hamper technology expansion, but they need to find ways of dealing with this inexorable force — preferably, in a positive way. Technology will hardly be neutral to them.

The most conservative approach is to react to technology change. Governments and societies can (i) adapt regulations and policies to catch up reality and (ii) mitigate the negative effects that new technologies might bring about — technology unemployment and security threats, for instance.

From a proactive perspective, governments and societies can (i) use technology to address existing problems in new ways and/or (ii) build competitive advantage in relation to other cities, countries and regions — if they manage to put in place institutional frameworks that allow for and encourage experimentation and the controlled deployment of new technologies.

Imagination, knowledge and new thinking are needed to unleash the potential that disruptive technologies have to address and solve societal issues. Initiatives like the Fast Track Institute and a variety of urban innovation experiences around the globe are worth of being highlighted — in fact, it seems to me that the positive use of new technologies is much more concrete and have more chances to succeed at the city level. But we need to take into account that the actual deployment of new technology solutions and business models usually requires some type of institutional change, often involving national regulations and frameworks.

As we realize the potential that disruptive technologies have to change our lives, for the good or the bad (think about the impacts in work, employment, income…), we need to shift the attention to "institutions". Institutions are the OS of societies and institutional innovation is an enabler for the positive utilization of new technologies.

The deployment of drones across industries provides good examples of the nexus connecting new technologies, institutional innovation and competitiveness. For instance, Canada recently established the Foremost Airspace for Unmanned Systems in the Province of Alberta. Companies are testing and developing drones there and, more importantly from a competitive perspective, not in other places. Amazon is one of the companies that has been on the spot because of its drone delivery service, for which the company has research and development teams working in Canada and the UK, but apparently faced difficulties to take off in the US. The same logic applies to other technology domains — biotech, AI, nanotech, neurotech etc.

It is clear that regulatory bodies have the duty to protect citizens and minimize risks. No doubt on that. Nevertheless, as technology progress is inevitable and the pace of change in increasing, new approaches are needed. The question should not be whether new technologies will be adopted or not, but “how” they will.

Institutional learning and innovation are needed in a systemic way and in large scale. Cities, regions and countries that are able to create innovative institutional frameworks for the controlled test and deployment of new technologies will increase their chances of attracting research and development facilities, innovators and new business — they will jump ahead of their competitors. The economic development practice is full of examples of special economic zones; that is, geographically delimited spaces in which trade, investment and capital flow constraints are lifted and taxes lowered. It’s time for “special institutional zones” to emerge as spaces where both new technologies and regulatory frameworks could be jointly prototyped and tested in a controlled way. Time is ripe for governments and policy organizations to have, support, sponsor or get engaged with the “skunk works of institutions”.

Technology expansion creates a lot of opportunities, but also uncertainties. To make the scenario even trickier, technology growth is part of a complex global landscape that also includes climate change, urbanization, demographical changes, wealth concentration, political turmoil. Thomas Friedman’s new book — which I didn’t read, but enjoyed the review that GFCC fellow and Singularity University faculty Banning Garrett wrote — highlights three “accelerations”: technology, global flows (trade, money, people, connectivity in general…) and climate change, population growth, and biodiversity loss. Combined, they configure a new era of turbulence, instability and complexity.

The future of governments will depend on their capacity to provide better living conditions to their citizens and count with their support in times of turbulence. In a fast-paced and technology intensive world, that will depend on their capacity to put in place institutions and governance solutions to leverage the positive impacts and minimize the downside of technology disruption. If governments don’t do that they will not only miss opportunities, but increase the risk of their own disruption.

Governments and societies will need to be resilient and prepared for the turbulence ahead. The tech-enabled future that most of us envision can be bright, but the road to get there will be bumpy and technology alone will not have all the answers that are needed. In the age of disruption, policy organizations, governments and societies will need new frameworks to think and act — in order to be ready for a future that is approaching fast, like never before.

PS 1

For those interested in Singularity University, and the impacts of technology in society (and business), I strongly advise to apply to GSP 2017.

PS 2

Christensen’s idea on the effects that technology disruption has for companies is not free of polemics. A good example can be found here.