Five Stages of Disruption: A Digital Supply Chain perspective

By Kumar Singh, Research Director, SAPinsider                                                  

A disruptive technology will not be “disruptive” during all stages of its life

While every other provider, vendor, and “expert” is shouting about digital supply chain “disruption” in your ears, if you probe them, few will be able to explain what the technology disruption process is, what is the definition of disruptive technology and the more critical aspect – that most of the disruptive technologies eventually become demonetized and democratized and the “cutting edge” solution that you are planning to buy will eventually become a common technology. In order to make sure that the investment you make in building the supply chain of the future is optimal, you need to understand the journey disruptive technologies take so that you can plan the value extraction accordingly. In this article, I will leverage the stages of disruption, as defined in the book “BOLD” and apply them to a digital supply chain context to illustrate the process.

The Five stages of Disruption

The five stages of disruption defined in the book “BOLD” that are applicable to the supply chain, are shown in the illustration below. In the subsequent sections, we will apply these five stages to a supply chain scenario to understand the journey of digital supply chain disruptions. See Appendix below for a summary of the book “BOLD”.

Our example scenario – TransPredict

We will use the example of a hypothetical company, TransPredict. TransPredict leverages IoT generated data and Machine Learning (ML) models to optimize supply chains. As we go through each stage of disruption, we will see how TransPredict’s operating model evolves, starting out as a disruptive technology and eventually gets democratized.

The first stage – digitization

Digitization is essentially converting the manual aspects, specifically information sharing into a digital format. Any company or process that gets digitized gets on the exponential growth curve since the information now becomes easy to access, share and distribute.

For our company TransPredict, it will be building an infrastructure to generate and collect real time data from IoT devices on supply chain and logistics assets. An example infrastructure is shown in the illustration below:

The second stage – deception

This is the stage where the process or organization is getting digitized or has just got digitized. Typically, in this stage, a logistics organization has developed end-to-end visibility (like the infrastructure setup shown above) and has started leveraging that data. The setup then extends to platforms that start leveraging the data being collected in the data lake.

The growth at this point is slow enough to be deceptive (since exponential growths do not grow very fast at first but takes off after it breaks the whole-number barrier, as shown in the example below). This allows the organization to stay under the radar until it starts the true exponential growth – hence the stage name “Deception”.

The third stage – disruption

This is the stage where the existing market for a product or service is disrupted by the new market the exponential technology creates. At this stage, TransPredict which has leveraged real time data to develop Machine Learning models has started offering predictive logistics services to companies.

As the new offering hits the market, the adoption and growth start increasing exponentially and the company has moved into the disruptive stage.

The fourth stage – demonetization

In this fourth stage, the technology becomes exponentially mature and becomes cheaper, often to the point of being free.

In our example, Customers eventually become used to the services provided by TransPredict. Multiple other companies mushroom and soon this capability becomes common. Eventually, Logistics Services Providers start offering this as a standard feature in their 3PL and 4PL services, leading to the Demonetization of this capability.

The fifth stage – democratization

Democratization is a scenario where this technology becomes so commonplace that the usage gets adapted by not only organizations but the common consumer. Unlike delivery tracking where we can currently see which was the last station where our package was handled, the democratization of this technology will allow us to see the movement of the asset carrying our package in real-time.

What does this mean for SAPinsiders?

If you are able to get your hands on a disruptive technology, your goal should be leverage it to build a robust solution in the digitization and deception phase. Your goal should be to keep the capability unique (to your company) for a certain period of time so that you can not only extract value and competitive advantage from the solution but capability maturity as well. So by the time the solution becomes democratized, you will have a lead on others who would have just started to adopt this technology.

Partner with technology startups. Keep a close eye on relevant startups in your domain and form early collaborations with those who you believe are a good match. This allows you to evaluate the technology early. And if the technology (solution) turns out to be disruptive indeed, you have a unique opportunity to build solutions around it in the digitization and deception phase, and hence build competitive differentiators.

Plan your strategy for the demonetization and democratization phases. Even though many solutions imitating the disruptive solution will be in the market, you can still leverage strategies to keep your offering and capabilities unique. But the key is to think about them during the deception stage itself so that you can start executing those strategies once you get into the demonatization phase.

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