In their excellent Harvard Business Review article aptly titled “Big-Bang Disruption”, Paul Nunes and Larry Downes make the case that disruptive new entrants will radically transform more industries far faster than originally envisioned by Clay Christensen in his landmark treatise on this subject 18 years ago.
The authors attribute the accelerating pace and scope of disruption to:

• The increasing role of IP rather than physical product attributes in creating disruptive product performance gains
• The substantial decline in IP-driven development costs as inventors exploit  off-the-shelf SaaS technologies and cheap server and storage capacity to create new product mashups at breakneck speed.

Take Twitter for example, born out of a daylong brainstorming session, launched in alpha form within days and released to the public within four months, this information sharing platform has disrupted newspapers and national governments in ways which could not have been easily foreseen.  Or consider the plight of dedicated GPS navigation device makers Garmin and Tom Tom whose market has been obliterated by the explosive growth of smartphones equipped with Google’s free map app.

Truth tellers play a particularly important role in presaging the need and opportunity to develop new business models which disrupt incumbent business positions, long before the need to change becomes obvious (by which time it’s often too late to stop the destruction of your business by a disruptive newcomer).
By their nature, truth-tellers make most business leaders uncomfortable:

• Truth tellers are often eccentric, and their conviction can easily be mistaken for arrogance and stubbornness
• They generally have no respect for current achievements which are a source of considerable pride to top management (e.g. “we are the global market share leader!”, “our sales topped $5 billion last year!”)
• They don’t think/talk/act like “team players” in top management
• They argue with passion and conviction, but lack the thick binders of market research that management has come to expect
• They convey a message that is threatening to the organization. Believing it — even a little bit — requires a willingness to contemplate highly disruptive, unpopular and risky changes to the established order
• Truth-tellers’ view of the world creates FUD on steroids!

Most corporate executives thrive on the ability to manage their business in an orderly fashion — to harness the firm’s resources to deliver predictable, reliable and steady earnings growth.  Unfortunately, there is nothing orderly or predictable about big-bang disruption, and companies who ignore early signals foretold by truth-tellers do so at their peril.Thus how executives deal with truth-tellers is actually a good indicator of whether a company is likely to exploit opportunities as a disruptor, or be flattened as the disruptee.

Sadly, over a long career in senior management consulting, I’ve witnessed far too many cases where executives not only fail to continuously seek the counsel of truth-tellers, but rather willfully prevent such voices from being heard and evaluated within the organization.

What are some of the mechanisms executives use to stifle truth teller input?:

1. Ignore/dismiss/deny access
   The first line of defense is against dissonant ideas is simply to ignore, dismiss or deny access of truth tellers to the executive suite.  In too many cases, executives simply  deny any forum for truth tellers to air their views.  They are not invited to executive conclaves, their emails are ignored and if a truth teller does manage to lob in a point of view on disruptive threats (or opportunities), their views are publicly rebuked as quackery.  The upshot of course is truth tellers will find other forums more receptive to their views, including jumping ship to other companies who may emerge as industry disruptors
2. Grin-f*#k truth tellers
   When the voices of truth tellers become too loud to ignore, some executives move to a second line of defense.  With apologies to PC readers, grin-f*#king is a common and insidious technique to discount the input of truth tellers, while creating the illusion of responsiveness.  GF’ing is defined as  “when someone in business smiles and shakes your hand assuring you that they have heard and will act upon your ideas or concerns when in truth you have already been ignored and dismissed.”  The first time a truth teller gets GF’d, he or she may fall for the ruse of feigned responsiveness.  But actions speak louder than words, and persistent truth tellers soon learn to recognize when they’re being GF’d rather than taken seriously.
3. Create task forces to reinforce status quo behaviors
   The final line of defense of the established order in the face of an inherently uncontrolled disruptive threat is to establish a task forces stocked with “team players” who can be counted on to limit the strategic assessment to safe choices within the organization’s comfort zone.  Such task force initiatives are often publicized with great fanfare as a testament to a company’s commitment to cutting edge innovation.  But in reality, these companies are confusing activity for progress, and by design, task force initiatives wind up reinforcing the status quo.

If you see some or all of these behaviors in your organization, be afraid; be very afraid.  Big bang disruption is likely to be lurking sooner than you think and will take your company by self-imposed surprise.

The New York Times carried an ominous story this week on the souring outlook for  Barnes & Noble’s Nook business, portending perhaps its exit from the e-reader and tablet markets.  The Nook’s decline comes despite its technical competence and the recent infusion of $600 million of capital by Microsoft.

As the Times notes, “going into the 2012 Christmas season, the Nook HD, Barnes & Noble’s entrant into the 7-inch and 9-inch tablet market, was winning rave reviews from technology critics who praised its high-quality screen. Editors at CNET called it “a fantastic tablet value” and David Pogue in The New York Times told readers choosing between the Nook HD and Kindle Fire that the Nook “is the one to get.”

Unfortunately, high marks from pundits didn’t translate into sales.  Nook sales stalled over the Christmas season, losses mounted and profit and revenue guidance has been reduced.
What happened?
The Times article shares this explanation: “In many ways it is a great product,” Sarah Rotman Epps, a senior analyst at Forrester, said of the Nook tablet. “It was a failure of brand, not product. The Barnes & Noble brand is just very small.”
I beg to differ.  The Nook’s problems go far beyond B&N’s brand strength. There are three fundamental reasons for Nook’s failure that have implications for any company (and eventually this means every company) facing technology disruption:

1. Demise of single-purpose devices 
   The Nook was initially developed as an e-reader, i.e. a single-purpose device.  So too were digital cameras, wristwatches, travel alarm clocks, miniature flashlights, GPS navigators and Apple’s iPod.  The demand for each of these products has been decimated by all-encompassing smartphones and tablets, which include good-enough or better performing apps, often for free.
   
   For example, if you’re Garmin or Tom Tom trying to sell a standalone GPS navigator for $120 against a free Google Maps app on an Android or iOS smartphone, good luck to you!  Each of these product categories has suffered steep sales declines in the face of multi-function mobile devices.While purists may argue that purpose-built e-ink e-readers like the Nook Simple Touch (pictured above) has better readability in bright sunlight and longer battery life than tablets, I sure wouldn’t want to bet my business on these advantages against the relentless improvements (lighter, brighter, faster cheaper) in mobile devices from industry leaders.
   Undoubtedly this is why Barnes & Noble bet a lot of their own and Microsoft’s money to develop their own tablet devices.  But if oddsmakers were handicapping the tablet race between Barnes & Noble, Apple, Samsung, Google, Amazon and Microsoft, I think it’s fair to say that a bet on B&N would be a prohibitive longshot.  When it comes to dedicated e-readers, the market may be big enough to profitably support one major supplier, but that will be Amazon, not B&N.

     2.  Disruption redux
More broadly the Nook story is yet another example of how disruptive technologies transform value chains, destroying incumbents who no longer create value in the new industry order.  With the advent of e-reading devices and digital publishing, book retailers and publishers are severely threatened. We’ve been to this dance before in the music industry, where incumbent retail leaders were essentially wiped out.

For a variety of reasons, bookstores (if not the Nook) are likely to survive for quite some time, but only at a fraction of their former scale.Was B&N’s decline inevitable, given the transition from print to digital books?  One could ask the same question of Amazon, whose dominance of book sales on amazon.com was equally threatened by e-reader technology.  But to Jeff Bezos’ credit, Amazon chose to disrupt itself by aggressively launching the Kindle business, which quickly established itself as the dominant digital book platform.  By the time B&N responded with its own Nook devices and e-bookstore, it was too late.The willingness to disrupt one’s own core business before someone else does it to you is a hallmark of inspired leadership.
Bezos rules.

3.    Stuff Happens!  What’s up with Microsoft?
As a play on the well known adage, “Disruption Also Happens”!  In every industry, the question isn’t whether but only when.  The only way to  survive and prosper through successive waves of disruption is to be the disruptor, not the disruptee!One would think Microsoft would have learned this lesson by now.  Over the past decade, Microsoft has managed to miss five of the most transformative disruptions in the high tech sector:

• Internet Search
• Mobile Devices/Apps Ecosystems
• Social Networking
• Cloud-based SAS
• TabletsTo add insult to injury, Microsoft has tried to cover their innovation lapses with a series of über acquisitions and/or investments (>$500 million) in companies who themselves have lost the disruption race and/or have failed establish a viable business model.

​

• Cases in point include:
  
• Yahoo ($44.6 billion failed acquisition bid; ~2X Yahoo’s current market cap)
• Nokia (>$1 billion invested in partnership deal)
• Nook ($600 million invested for equity stake in Nook spinoff)
• aQuantive ($6.3 billion digital marketing acquisition, since fully written off)
• Skype ($8.5 billion acquisition)
• Yammer ($1.2 billion Social Networking acquisition)
• Dell (>$1 billion investment offer pending for LBO deal)

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Bottom line: Serial innovation is the only proven antidote to the accelerating pace of disruptive technologies.  It certainly looks like Barnes & Noble and Microsoft have not been up to the task.

On June 11, 2012, Tim Cook graced the cover of Fortune Magazine, in a hagiography
about the man with perhaps the hardest job in America: to succeed the legendary
Steve Jobs who Fortune had already lionized as “the best CEO of the decade” and
“the best entrepreneur of our time”

As the Fortune piece noted: “Considering the widespread handwringing over how rudderless
Apple would be without Jobs, it is remarkable how steadily the company has sailed along without him.”  Time Magazine also weighed in with similar praise: “Highly ethical and always thoughtful, he projects calmness but can be tough as nails when necessary. Like the great conductor George Szell, Cook knows that his commitment to excellence is inseparable from the incredible ensemble he leads at Apple.”

Such plaudits certainly seemed warranted at the time. When Fortune’s story appeared, Apple was trading at $571 per share, 52% higher than when Steve Jobs stepped down 10 months earlier.  Apple’s stock and was well on its way to cresting at over $700/share in the coming months, prompting Forbes and the New York Times to speculate that Apple — already the most valuable

company in the world — was well on its way to becoming the first trillion dollar market capcompany.
These were heady times indeed, and Apple and Tim Cook apparently could do no wrong.
Or could they?

Apple’s fall from grace
Less than four months after the Times wondered how soon Apple’s market cap would break the trillion dollar mark, the Wall Street Journal ran a story under the headline “Has Apple Lost Its Cool to Samsung?” CNN had already scooped the Journal, with its own version of: “Is Apple Losing Its Cool Factor?”

And what about Tim Cook, the Szell-like conductor of Apple’s innovation band? In mid-January,The Motley Fool asked “Is Tim Cook The Next Steve Ballmer?” which was not meant as a compliment. And two weeks later, Forbes Magazine weighed in with “The Problem with Tim Cook“, raising serious questions about whether Tim Cook was up to the job!
What’s going on here?!  Sure, there were a couple of missteps with Apple Maps, perceived missing features in the iPhone 5 and the still-unfulfilled promise of Apple iTV.  But these events hardly seemed damning enough to signal a cataclysmic reversal of fortune.

Can Tim Cook and the company he leads really go from a heavy dose of smarts to serious ineptitude in just four months?  Has Apple really lost its mojo and its cool to Samsung, who for so long toiled in the obscurity of Apple’s giant shadow?

The Halo Effect
Earl Weaver, the Hall-of-Fame manager of the Baltimore Orioles twenty-five years ago opined an answer to these questions, which is as true in business as it is in baseball:
“You’re never as bad as you look when you’re losing, nor as good as you seem when you’re winning”

There is actually considerable academic research validating Weaver’s sage advice, that falls under the rubric of “The Halo Effect”. In IMD Professor Phil Rosenzweig’s excellent book of the same name, the Halo Effect is defined as the consistent tendency for people to ascribe positive ratings (particularly on subjective assessments like “executive vision” or “leadership”) when the overall measurable performance of a company is good, while tending to be overly critical of management when business outcomes display signs of weakness.

One can see this for example in the glowing praise of successful business leaders (such as Reed Hastings of Netflix, Fortune’s 2010 CEO of the year) as “visionary, dynamic and customer-focused”, only to have the very same CEO widely vilified as “complacent, arrogant and unwilling to respond to customer preferences” one year later when the company’s financial performance stumbled. The Halo Effect probably hit bottom for Hastings when SNL parodied him in a bitingly funny skit in 2011.  ABB’s Percy Barnevik, GE’s Jack Welch and Groupon’s Andrew Mason are other examples of executives who have felt the sting of hyperbolic punditocracy.

It’s fair to say that Tim Cook is the latest victim of the Halo Effect – neither worthy of his early sanctification, nor deserving of his asserted fall from grace. As usual, the business press has been too quick to praise and condemn a man who, in reality has not changed the very essence of his being in just four months!

Let’s get real
So what can we expect from Apple in the months and years ahead? In my view, there are two parts to answering this question:

1. Apple has done nothing yet under Tim Cook’s watch to fundamentally call into question his leadership of the company or the potential for attractive growth
2. Having said that, the gut-check question for Cook remains the same as it would be were Jobs still leading the company: can Apple continue to profoundly redefine the value
   proposition in large new sectors of the economy?

It is no secret that Apple’s extraordinary growth over the past decade was propelled by the sequential breakthrough success of the iPod, iPhone and iPad.  Each of these products succeeded in realigning the value chains of multiple large industries, creating enormous profits for Apple.

But as good as any of these products are, the simple fact remains that over time, continued improvements yield marginally decreasing utility to consumers.

Take Apple’s biggest success to date for example, the iPhone.   When the first generation iPhone went on sale in the summer of 2007, it was received with unprecedented global enthusiasm, teasingly dubbed by The Economist as “The Jesus Phone”.  And no wonder…it’s design, user interface, functionality and apps support were so radically different and better than any other smartphone on the market that it appeared to many to be miraculously conceived!
By the time early adopters’ initial two-year contracts were up, Apple had unveiled its next generation iPhone, the 3GS with faster digital download speeds, an improved camera and considerably more apps.

And in every year thereafter, Apple continued to enhance the iPhone.  The iPhone 4/4S/5 got progressively, thinner, lighter, brighter (displays), faster, better (cameras), and eventually marginally bigger. While each new version was better than the last, none had the breakthrough market impact of the initial iPhone.
​
Economists have long recognized the marginal decreasing utility – more prosaically, the “wow” factor — associated with virtually every product in the market over time.

​For example, except for the most extreme technophiles, most consumers hardly notice the latest generation PC, home printer, digital camera or even automobile these days – a far cry from when the first primitive versions of these revolutionary products first hit the market.

Seen in this light, the fact that Apple’s latest iPhone lacks NFC capability or the best-in-class
screen size or the highest megapixel camera does not necessarily signal the end of their
innovative spirit.  Even if an iPhone 6 were released tomorrow with all of these features, it would fail to create the buzz of the first “Jesus Phone”.

Relatedly, it’s entirely to be expected that Samsung and others have largely caught up to Apple on most of the features and functions that define state-of-the-art smartphones.  If you have any doubt whether this is a unique failing of Apple, just ask BMW how they would compare their vehicles to the best Hyundai has to offer today vs. ten years ago. Competition happens, and no one is suggesting that BMW has lost its edge.

Where now?
So what will it take for Apple to continue to be, well, Apple?  Its unique challenge is not just to stay abreast of the relentless demands for continuous improvement in its current core products — daunting enough against competitors like Samsung, Google and Microsoft. It is to find thenext breakthrough product category that will once again disrupt a large business value chain to Apple’s profound benefit. A rumored rendition of an Apple “iTV” home entertainment ecosystem is probably the most likely possibility.

Critics of Apple should realize that epic business disruptions do NOT operate on a predictable product release timetable, and it is clearly premature to condemn Tim Cook for not pulling another blockbuster rabbit from under his hat during his eighteen months as CEO.

Expecting Tim Cook to continue Apple’s growth to unprecedented levels on an arbitrarily imposed timetable is simply not a reasonable standard by which to judge CEO performance.
​
While it is still too early to pronounce judgment on whether Apple’s astonishing string of revolutionary product launches has run its course, the clock is definitely ticking.

Businesses are constantly seeking new products, services and business models to create widespread market appeal.  But one of the mistakes innovators often make is underestimating the challenge of getting consumers to change their behavior and beliefs in order to realize the benefits of a promising new product.

Numerous tomes have been written on overcoming this challenge, perhaps most notably by VC Geoffrey Moore, who shares his wisdom on how to move beyond early adopters to reach the mass market in his 1991 classic, Crossing the Chasm. Spoiler alert: Moore notes that most new technology ventures fail to get across the abyss!
So how do companies that launch businesses requiring the marketplace to radically rethink their preconceived notions of product attributes get consumers to change their beliefs and behavior?  For starters, successful products of this type — either high or low tech — must inherently have a killer value proposition — e.g. the original Apple McIntosh or Timex watch.

But the fact remains that lots of products with breakthrough potential fail to gain market acceptance.
One of the key lessons learned from a number of products that have crossed the chasm to widespread market appeal is the use of jarring advertising campaigns with explosive imagery to literally blow up consumers’ comfort with old habits and category norms.
Here are some of the best examples:

​

1. The Apple McIntosh Launch, 1984
In this iconic commercial, considered by many to be the best TV spot of all time, a renegade female warrior hurls a sledgehammer that explosively shatters an IMAX-size screen image of an Orwellian dictator, thinly disguised as the leader of the Microsoft evil empire.  A picture is worth a thousand words, so if you haven’t seen this ad recently, check it out.
Adding to its mystique, this ad was broadcast only once, during the 1984 Super Bowl.  YouTube views since measure in the millions.​

Needless to say, Timex watches always survived the lickin’ and kept on tickin’! By literallyshattering the prevailing consumer image of cheap watches , Timex emerged as the market leader, selling one out of every three watches in the US by the end of the 1950’s.
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3. SodaStream Banned Super Bowl Ad, 2013
Fast forward to Super Bowl 47 in 2013. One of the game’s ad sponsors — SodaStream — made quite a splash literally and figuratively by having its ads banned by CBS.  What was considered a banish-able offense by the game’s broadcaster?  See for yourself.
SodaStream’s use of exploding glass — in this case bottles of Coke and Pepsi (themselves perennial heavy advertisers of the Super Bowl) — underscores Sodastream’s marketing challenge. Generations of consumers have been brought up consuming soft drinks from bottles whose signature design are an American icon. To communicate the benefits of a radically different approach to soft drink home consumption, SodaStream used — you guessed it — the exploding glass motif to blow up consumers’ prior behavior and beliefs.

Rumors are flying that Apple has a cheap iPhone in the works.  Coming on the heels of the iPad Mini, a growing chorus of groans is hitting the Twitterverse and blogosphere (to use two horrific terms) bemoaning that Apple is turning its back on Steve Jobs’ obsessive commitment to über product superiority; i.e. the best or nothing!
Perhaps.
But consider this:

• The iPad mini is NOT a watered down iPad.  It’s a fundamentally different form factor that has different use patterns (e.g. a lot more e-reading) and different users than the full-size iPad. For purists who believe Steve Jobs would never have compromised the size of the original iPad (as if a 9.5” X 7.3” rounded-corner rectangle were handed down from the gods), keep in mind that the iPad Mini still sells at a considerable price premium to other similar sized Android tablets.  The Mini’s screen resolution may not be best in class (for now), but there’s no doubt that the smaller Mini benefits from Apple’s elegant design, pleasing user interface and extensive apps library.  It’s still an Apple product

• Apple has created a powerful ecosystem of cloud-connected devices. It is in their interest to ensure that consumers can continue to affordably access multiple devices on iCloud.

• Apple’s growth prospects are increasingly tied to Asian markets, where price sensitivity is greater than in the US.  For those with the appetite and wallet for Apple’s very best technology, the company is continuing to roll out new products at an accelerating pace.  For billions of other consumers who might think an iPhone “Lite” is still an astonishing product, it’s a good thing for the company and its consumers that they now have a choice.

• This same angst dogged the product line expansion of German luxury carmakers as they began straying from their original über car roots.  In the 1970’s for example, Mercedes Benz ONLY made large, expensive sedans and a big-engine roadster. But as their global popularity grew, MB progressively expanded to midsize and (sacré bleu!) compact cars as well.  The purists were outraged that the company was abandoning its elitist roots.  But Mercedes wisely asked itself, “if a customer only has need for a more affordable small car but still wants a Mercedes, what would it look like”?  And so they produced smaller sedans and coupes with the same engineering refinements that makes a Mercedes, well a Mercedes.  Ditto with Porsche who started selling a four-door sedan (the Panamera -- sacré bleu squared!) in 2009. Still a Porsche, through and through.

• So the challenge for Apple is to ask itself, if a consumer wants an iPhone (perhaps a first phone for a teenage daughter) but not necessarily with all the bells and whistles (and price) of a top-of-line model, “what would a lighter duty version look like – and still be an Apple”?

Strategic rigidity to an unwavering elitist ideal would not serve Apple well going forward, nor would reckless abandonment of its core
values.  I’ve seen little evidence that Apple is moving in either of these undesirable directions.  But like all great companies, the brand is only as good as its newest products.  Roll on.