Facts expire. It’s dangerous. It’s invisible. And it happens all the time.
The record industry imploded, then camera companies, now newspapers.
These industries were led off a cliff by tremendously smart and capable executives who thought they knew exactly what they were doing.
So what happened?
Academics and pundits have no problem explaining it after the fact: a firm had an offering that was substituted by a competing lower cost product blah blah blah. This may be true but it isn’t very useful—especially if you’re the one left looking for a chair when the music stops.
These arguments don’t explain why these businesses and industries are “ripe for disruption,” just what to do once they are. Not helpful for incumbents, or as they’re sometimes called, lunch.
A business can’t get destroyed from the outside unless something goes wrong within. This is exactly what happens, and it all boils down to one thing: a failure of knowledge.
Specifically, using outdated, dusty facts that aren’t true anymore—and not realizing it.
So what’s a dusty fact? How do you get one stuck in your thinking without you realizing it’s there?
A quick autopsy of yesteryear’s recording industry is a good place to look for hints:
For the entire history of selling music records, the recording was a physical thing: Only once you had a physical thing—a record, a cassette, a compact disc—on hand could you listen to music. This was such an obvious fact that people just plain stopped talking about it, like gravity. When was the last time you questioned gravity in a business meeting?
The ‘fact’ that music recordings were physical things was silently present in every conversation and every decision. This caused the ‘fact’ to inform and be embedded in every strategy, every process, and every product. This was fine while it was true that a music recording was in fact a physical thing.
But suddenly it wasn’t.
When the mp3 was invented, any computer with a CD burner was a perfect replacement for the entire supply chain that had been built and built up for nearly a century. Any computer with speakers could endlessly play every hit song without a word from their sponsor. A song’s popularity was no longer measured in sales, and music no longer needed to be sold back to customers each time a new format was invented.
Music was clearly no longer a physical thing. The rules had changed.
But the industry continued to behave as if nothing had changed: That stuff the kids were downloading might sound like music, but it wasn't their product. It was something else and it was against the law. One little dusty fact about the world was the difference between a strategy that seemed rational from the inside but, to everyone else, was obviously insane: suing your customers.
Moreover, the entire cost structure, strategy, supply chain, mentality, and understanding of the business was incapable of producing the most efficient way of meeting customers’ needs. We all know what happens when a new business sniffs out inefficiency in an old one, and it’s not pretty.
The music industry today is a muted echo of its former self.
This is how disruption happens. Facts do such a good job at being true that they get taken for granted, receding into the background where they’re ever present but never discussed. Then one day the facts change. Since there’s no magical tool that instantly updates our thinking when this happens we continue on and base our decisions on an outdated understanding of the world. And then we’re primed for disruption.
The music industry isn’t an outlier. It’s a canary.
This story is about to play out everywhere. The internet wasn’t the first technology to break facts about the world, but it was the fastest. It’s going to look glacial in retrospect. Think of all the technologies we have in the pipeline and what they're going to do to the world: 3d printing, artificial intelligence, perfect information on millions of consumers, all the crazy stuff going on in genetics. Now think about these things in combination.
Your industry, whatever it is, is built on old facts you never think about anymore. When those facts become untrue—something that’s already happening—your industry is going to be destroyed and rebuilt.
But there’s good news in all this too. Masters of industry know their industries the best, if you can figure out which facts you’ve forgotten, you can seize the moment when the world changes before someone else. You might not be as profitable, but you’ll still be in business.
It's time for some introspection.