Disruptive innovation is a double-edged sword

Healthcare, chip makers, retailers and manufacturers stand to gain – or lose – the most

Mike Bomar with Disruptive Tablet

Disruptive technology, more accurately termed “disruptive innovation,” is defined as an innovation that doesn’t just change a product, but an entire market. Classic examples include the automobile assembly line that made cars affordable commodities, and more recently, e-books and online music sharing that are ushering out traditional publishers and stifling the market for CD players.

Such innovation, said Mike Bomar, executive director of the Columbia River Economic Development Council, is a two-edged sword.

“We see disruptive technologies in two ways,” said Bomar. “They can represent major shifts that could shut down industries or make them move elsewhere. But they can also represent an opportunity if we can position ourselves to capture high-growth companies or sectors that could evolve out of the disruptive technology.”

The secret to catching the disruptive wave as opposed to being drowned by it, said Thomas Thurston, is to not focus on creating better performing gear (otherwise known as sustaining innovation), but on doing something more cheaply, more simply and “good enough” – thereby creating new market opportunities.

Thurston, chief investment officer for Ironstone Group, a venture capital firm that invests solely in disruptive businesses, said 90 percent of startup companies that concentrate on sustaining innovation fail. However, he said those who find ways to provide lower cost, more accessible, easier to use goods and services increase their survival chances to 66 percent.

“It’s important to understand the concept,” said Scott Keeney, CEO of Vancouver-based nLIGHT, which manufactures high-power semiconductor diode lasers . “It’s not about technology alone, and it’s not about ‘better.’ Goals driven by performance metrics don’t show it up.”

Opportunity knocks

Jon Roberts, managing director of TIP Strategies Inc., an economic development consulting firm that worked with the CREDC to prepare the Clark County Economic Development Plan, identified four main industry sectors in our region that will be affected by disruptive innovation – positively or negatively. These sectors are healthcare, retail, manufacturing, and the silicon chip industry.

Roberts said the healthcare sector is going through massive disruptions from all angles, including electronic records, remote patient monitoring and remote surgery.

“The very nature of hospitals will change,” said Thurston, adding that this will require hospitals such as Vancouver-headquartered PeaceHealth to change how they interact with patients and service providers.

Thurston characterized the disruptive innovations in healthcare as shifting the point of care from a high-skill environment to a low-skill one. Examples include a procedure that once required hospitalization becoming possible in a doctor’s office, or a test that a nurse practitioner could perform becoming available to consumers over the counter.

Similar changes await chip manufacturers, who have long counted on Moore’s Law (smaller chip, better performance). Roberts said the demand for “good enough” chips for specialized uses such as smart cars that interact with red lights and the cars around them could “dramatically increase the workforce, or undermine it.”

In the retail sector, said Roberts, the Internet is forcing major changes to the traditional brick and mortar business model. Consumers now have easy access to price comparisons and same-day delivery. Mass customization is another innovation that Sean Robbins, president of Greater Portland Inc. sees as disruptive for retailers. For example, stores can stock a limited number of smart phones, but online, consumers can now order a customized phone (color, sounds, features) and have it shipped to their door.

“People will come to expect companies to design, fabricate, produce and ship small batches of customized product,” said Robbins, although he admitted “there’s a lot of work still to do to make it happen.”

Still in its infancy, industrial 3D printing (also called additive manufacturing) has the potential to be significantly disruptive in the manufacturing sector. For example, Thurston said that a prototype created by a 3D printer may be “good enough” – enabling people to do their own prototyping instead of hiring a product engineering firm.

Both mass customization and 3D printing rely on automation. Roberts said that many regional manufacturers are well positioned to take advantage of these disruptive technologies because they are “a little more upstream than most” – they make the automation equipment themselves (US Digital and Columbia Machine, for example).

Opening the door

Robbins identified yet another “disruptive” trend that has the potential to create new markets for local companies – the convergence of advances in hardware, software and chips. Robbins cited Nike’s metamorphosis from a shoe company to a multidisciplinary digital athletic company.

“Our region has a whole basket of legacy manufacturing companies,” said Robbins. “Mix that with the region’s strengths in software, electronics and chips, and you have an interesting stew – we need to figure out ways to connect all this intelligent engineering.”

To that end, said Robbins, companies who want to thrive on disruption need to “be aggressive” about breaking down barriers between industries and collaborating with “radically different” sectors. Robbins added that companies also need to proactively recruit talent with a “diversity of thought and experience.”

Keeney advised managers to “step back from standard metrics, and ask more fundamental questions. Figure out if there is something different that is ‘good enough.’”

And no one should be complacent about the potential effects of disruptive technology.

“Disruptive technology is relevant to every business,” said Keeney.

And, added Roberts, “Nothing about disruptive technologies should be thought of as futuristic. They are already being implemented and are already affecting economic development.”

Jodie Gilmore’s journalistic background includes more than 15 years of writing for the Vancouver Business Journal as well as other publications such as Northwest Women’s Journal, North Bank Magazine, American Builders Quarterly and The New American. A Master’s in Technical & Professional Writing and 20+ years in the trenches as a technical writer and online help developer round out her writing background. When not writing, she enjoys gardening and working on her small farm in the Cascade foothills.