”History suggests the mobile Internet has potential to create / destroy more wealth than prior computing cycles based on 10x user multiplier effect (from cycle to cycle, the number of users / units increases tenfold). Regarding pace of change, more users will likely connect to the Internet via mobile devices than desktop PCs within 5 years.”
Mary Meeker, Morgan Stanley, December 2009
As companies begin to consider how to react to the rapid and explosive rise of the mobile web, as predicted by the Internets number one analyst Mary Meeker from Morgan Stanley, it’s worth revisiting Harvard Business School professor Clayton Christensen’s brilliant insights into why well managed firms fail at disruptive innovations.
In his classic book “The Innovators Dilemma” Clayton distinguishes between sustainable innovations, meaning innovations that enhances product performance, and disruptive innovations, innovations that typically make the products cheaper or more convenient, but also less attractive in the short term in the eyes of existing customers.
The core of Christensen’s groundbreaking findings is, that companies fail at creating disruptive innovations, not because they haven’t done the right analysis or are lazy, arrogant or blind to customers needs. To the contrary, it is exactly because they do what’s right and rational to do that they fail.
From the perspective of a large firm, disruptive innovations simply don’t make sense to invest in before it is too late to do it. Disruptive innovations typically promise lower profit margins and aren’t attractive to the core customers – and therefore well-run companies choose not to pursue them.
But history shows that disruptive innovations often can get a foothold in the market by selling to the least attractive customers. And from there they improve their performance more rapidly than sustaining innovations and therefore end up as better overall alternatives. By then they will wipe out entire markets and outcompete even the most competitive market leaders.
Christensen’s advice to companies who wants to avoid being disrupted is not to listen to it’s customers and instead invest in small independent, entrepreneurial units who can pursue disruptive opportunities.
The mobile web is a typical disruptive innovation. Currently the screens are small and the functionality low. Most mobile services today are still very simple and what they offer can be solved much better and more efficiently through the desktop web or other channels. The money in mobile services is still small. In other words: For most companies it doesn’t make much sense to invest heavily in creating mobile products and services.
But if history is a guide, that’s exactly why companies need to do it anyway. Most likely, mobile web services will improve their functionality more rapidly than other types of services. In the future the mobile web will be able to provide better services than what’s available on the desktop web or even in-store.
The mobile industry will enter new and completely unforeseen markets and at that point, only companies with already established mobile offerings will be able to compete.
If companies don’t initiative their mobile investments now it will very soon be too late.