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It’s identity, not technology: Why most existing firms fail the test of disruption
Kenyan businesses face a new challenge: understanding how disruptive technologies like AI threaten not just revenue, but their very identity.”
Photo credit: Shutterstock
Many of us can remember when mobile money first got introduced here in Kenya. Established banks seemed not to panic immediately. They watched. Was it a fad? Would customers trust it? Could people really store monetary value on their phones?
The banks debated internally. The banks pondered whether or not the technology would have a truly threatening impact on their core business models or, on the other hand, would mobile money just serve a unique niche for regionally traveling business people.
Interestingly, business history is littered with existing businesses that rarely collapse immediately when disruptive technologies and external shocks emerge.
Such original businesses hesitate, reinterpret data and trends, experiment with different options of which they could have the current competitive advantage, and sometimes completely misjudge the technological shift that is staring them plainly in the face.
In today’s business climate across East Africa, many boardrooms are going through similar discussions but this time the disruptive technology is artificial intelligence (AI).
Experts predict massive job losses as AI reshapes not just how students research assignments, but also our finance sectors to agriculture, logistics, media and everything in-between.
Some commentators dismiss all the disruption as just hype that will have minimal effects like what calculators had decades ago. On the other hand, others overreact with vigour pouring mounds of resources into barely understood pilot programmes to have unique AI options.
However, in the middle between the extremes lies a much more quiet voice outlining complicated processes that few external people ever see.
It is highlighted in a new qualitative study by Juan Rivera- Prieto, Friederike Hawighorst, Andreas König, and Markus Rauch published this month that peers into how incumbent companies respond when disruptive technologies can threaten existing business models.
In such situations, executives face identity crises within firms, cognition of really understanding the new technology, and massive internal politics when factions are more concerned with keeping their own status quo instead of protecting the firm at large.
All this panic subsides much deeper than a simple story of a clear choice between resisting the new technology or embracing it running forward through adaptation. Not all new technologies can or should be embraced. The decision is much deeper.
Let us break down what the study found over the decades. Existing firms do not just respond based on their own objective threat estimates but rather they first try hard to interpret whether the new technology actually fits within their own perceived existing organisational identity.
If the leaders perceive there is a degree of alignment then they start to proceed cautiously and start to integrate the new technology as much as resources allow.
However, if they view the tech as a misalignment then they actively distance themselves and try to defend what the researchers consider legacy competencies.
If the disruptive technology ends up being useful and starts to dominate, then the firm may try to jump too late on the strategic realignment bandwagon and lose its competitive advantage.
In more poetic terms, perception often precedes company action while firm identity frequently precedes strategy. Really backward thinking.
Then within organisations, responses to the disruption can spudder unevenly. While some departments may champion the idea of experimenting with the new technology, others may fiercely hold out and cling to old ways of doing things. Therefore, executives would send mixed messages depending on which team they oversee.
Mid-level managers, on the other hand, typically see and interpret the corporate direction in terms of their own incentives and uncertainty avoidance.
When those of us external to the company look and see the semblance of a coordinated direction, we fail to see the hidden chaos and competing visions being acted out inside just like we do not see a swan’s feet kicking frantically underwater as we notice it gliding effortlessly across the water.
Here in Kenya, we are increasingly becoming aware that discontinuous technologies such as AI-driven analytics, blockchain logistics, self-driving vehicles, renewable energy storage, and digital health platforms do not simply threaten tried and tested revenue streams but instead challenge firms’ identities.
So, let us keep in mind the new research and stay away from the two extremes. Denial can kill our companies. Blind enthusiasm can destabilise and waste resources too soon. Let us instead approach with deliberate sensemaking with clear costs, benefits, and predictive analytics.
In the end, incumbents rarely fail because technology pops up and appears on the horizon. But rather they falter when they misunderstand what that technology means for who they are, and they cannot reimagine their own self-image as a company.
Have a management or leadership issue, question, or challenge? Reach out to Dr. Scott through @ScottProfessor on Twitter or on email [email protected].
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