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Happily, the term “Perpetual Disruption” is gaining more and more approval. Since I raised it in the t3n article, I’ve been receiving positive feedback, suggestions and – fortunately – criticism nearly every day. In some instances I’ve noticed that business contacts perceive “Perpetual Disruption” simply as a trivial buzzword. I therefore think it’s time to provide a short yet detailed explanation of the concept.
On the one hand, the term “Perpetual Disruption” represents an era in which the waves of societal and economic renewal and upheaval we have hitherto observed are being replaced by a state of continuous change.
On the other, I’ve been dealing with the issue of how a company needs to be positioned in order to be competitive in the long-term in such an environment. I’ve summarized these insights under the term “Perpetual Disruption (Business Structure)”, as well. There’s already quite a lot of information available which I’ve developed in discussion with decision-makers in companies. This article, however, only deals with the fundamentals of change, without the business aspects.
Large parts of the economy have not yet realized that the accelerated transition will fundamentally change the rules of the game by which we play when creating economic value. Basically, what is meant is what Schumpeter has introduced as “Creative Destruction”. In other words, this is far from being a new concept. The currently changed factors lie in the velocity in which these “Creative Destructions” occur. Even if Schumpeter doesn’t explicitly describe them as waves, one generally holds the opinion that, for example, industrial revolutions represent this “Creative Destruction”.
Characteristics of these fundamental shifts were, on the one hand, the shifts themselves; on the other, however, long phases of consolidation. The cadence of “Creative Destructions” has been increasing exponentially due to the accelerated technological progress. The phases of consolidation no longer exist and society, and thus the economy, is in a constant state of change.
The basic premise of this theory is accelerating technological progress. Whether this acceleration is exponential or not isn’t a decisive factor in the concept of “Perpetual Disruption”. What is important is that the progress isn’t linear but progressive.
The following diagram shows the effects of accelerating technological progress with the assumption that equally-long consolidation phases would occur between the shifts.
The blue curve represents the accelerated technological progress. Even after many discussions there is no clearly defined standard of measurement for it. The straight lines in green show social and economic inertia: This means that society and with it the economy have not yet realized that it is essential to continuously keep pace with technological progress. One reason for this is that society hasn’t really recognized progress as such, since the changes have only matched a person’s lifespan during the past 80 years. The other reason is that these improvements in technology were in fact not attractive enough, as they were too small. Here, I call this effect socioeconomic inertia.
The red straight lines show the effort that society and the economy must undertake to adapt new technology. My term for it is socioeconomic transformation effort.
If one now combines socioeconomic inertia with the socioeconomic transformation effort one arrives at what I call “Disruptional Debt”. Of course the term is based on management debt or technical debt and is to be applied correspondingly. As such it’s a restructuring backlog, if you will.
What this first diagram actually shows is that if these shifts would occur in constant interv
als (b, consistent straight lines in green), then the socioeconomic transformation effort (a) would increase more and more, thus also increasing “Disruptional Debt” (a). In other words, it would become increasingly difficult for people to make the effort.
In reality the intervals have become shorter and shorter during the last 500 years.
The result is that disruptional debt (1) decreases with every cycle. If we keep the socioeconomic transformation effort (3) at a consistent level, the cadence of the upheaval cycles will increase. This is what we can observe in our lives when viewing the big picture: Those technological advances that substantially improve people’s lives occur at ever-shorter intervals.
But, more than anything else, the concept of perpetual disruption is intended as a message to today’s economy and society (read also as, politics).
“To presume that the changes in the digital arena, which we can now observe, are merely another technology boost in the sense of another ‘Industrial Revolution’ would be fatal. Instead, what is applicable is that we are confronted with substantial technological improvements that are occurring at an ever-increasing pace. The corporate world’s answer cannot be a “transformation”, but must represent a fundamental re-definition of the business model. Change is the new constant.”
What is new is that this change is occurring on numerous occasions during one lifetime. The agility that is needed is not yet being practiced in the companies. Today’s organizations are far too rigid to quickly develop products and services based on these new technologies.
What is necessary is that companies forearm themselves for constant transformation and create an environment in which they are capable of extreme changes. In this way we can reduce social harm that creative destruction de facto wreaks. The same applies to politics and legislation.
One solution would be to reduce socioeconomic inertia and the socioeconomic effort per cycle.
The effect would be to reduce the harm, for instance mass unemployment, caused by that structural changes and distribute that damage over a longer period. Damages to a person are always the most severe when they occur unexpectedly or over a short period of time (or both). If the changes are negative and happen in small, foreseeable steps, then they can be dealt with far more easily. This applies to individuals in their private lives as well as to entire societies.
To assume that the current changes only require digital transformation and/or that what is generally happening is the 4th industrial revolution is fatal for businesses. Simply because whenever, in the historic perception, a period of consolidation should occur, what actually happens is the next upheaval. In that case, companies would simply not be prepared to deal with the situation.
The impact of unshaped changes can be observed extensively throughout history. The damage (i.e. human suffering) was considerable in every instance. Today’s changes don’t really come as such a big surprise. Nevertheless, no serious, comprehensive examination of the topic is taking place.
Through examining a general paradigm shift to constant change in a timely fashion (in other words, now), society and, with it, the economy could thus secure their future. To be aware of a “Perpetual Disruption” can only be helpful to the process.
