Hello, since I began preparing the videos for Coursera, I continue to study disruptive technologies, transformational technologies, to try to understand how to cope with these when one is confronted with them. And I wanted to share with you some of the ideas that have developed since I began planning and preparing the material for this course. And I think a good question to look at is whether or not leadership is the answer to surviving disruptive technologies. So let's look at some of the industries and organizations that we've talked about and some that we haven't. On the industry side, we know that a lot of this started with music, with peer-to-peer file sharing, and Napster, and all of the services that allowed people to download music, most of it without paying any attention to copyrights or the rights of the artist who created it. And so, the revenue for music studios dropped precipitously during this time period. It actually has started to turn up slightly and I think one of the reasons is going to be subscription radio. So the people are subscribing to services that do pay royalties back to the recording studios and eventually to the artists. So you could say here that we've got a second order disruption. Peer-to-peer file sharing, and the impact it's had on the music industry is now being disrupted by organizations like Spotify who offer a subscription services. Video is a tough area to understand. I confess that I am sometimes baffled by what's going on and confused by trying to figure out what the outcome will be in the video content industry. But, a business that is threatened is network television in the US, because the networks are used to putting on a show at a scheduled time, and getting their revenue from advertising. At first, places like HBO developed their own series and their own shows to show via cable. But these were not terribly disruptive for network TV because all of the cable channels also carried network television. So they were among the choices there. But now you have organizations like Netflix. And Amazon who are creating their own series. And so this means now that the individual does not have to watch them at a specific time or have a digital video recorder. So that they can save them and watch them when they want to. They can stream these series, these shows they would like to watch whenever they would like to. And so network television and its revenue model is now threatened by this disruptive technology. Companies like Garmin and Magellan who make personal navigators, now are in trouble because smartphones with their GPS chips inside, have started to offer apps with turn-by-turn instructions for navigating from point a to point b, something that the personal navigators used to do for you. We have an interesting situation here with the digital camera industry, because we know it displays film, we saw that in talking about Kodak. But now, again, the smartphone is proving disruptive into digital camera, because the cameras in smartphones are gotten so much better. We've looked at the newspaper industry. We've looked at the video rental. Politics is an interesting area that is facing a change. It appears that the Democrats in the recent presidential election used an analysis of big data, lots of data about people, to do something called micro-targeting. They were able to predict that a certain individual would be more likely to vote for re-electing the president. They identified this person and then made an effort to get those individuals to the poll to vote. And as we know, President Obama won re-election. Stock brokers have been impacted by this. Electronic brokerages, where one enters their own trade information, it's forced the unbundling of trades and research. Full service brokers had to respond by doing this unbundling and by offering online trading services themselves. Realtors have been pretty good about confronting a potential disruption. When the Internet came along, many of us thought that you would just simply list the house that you wanted to sell, and buyers could look at it and make an appointment to see it and you would do away with this intermediary of the real estate agent, who in at least where we live, took a 6% commission for their services. However, the realtors have been very good at moving their multiple listing services online. And while there are some companies that offer reduced commissions using the technology by and large, realtors have managed to forestall the kind of dramatic impact that other industries have seen from disruptive technologies. We talked about universities in MOOCS and Coursera eductators. Telecom is also an industry that's undergoing a lot of disruption, because people are moving away from landline, AT&T has suggested they would like to shut down its landline network and have people use voice over internet for their communication. There's a new technology that my class discovered and described to me this spring called Web Real-Time Calling, in which the software for making video calls to another individual is built into the browser. So it does not even require a service like Skype, it's a browser-to-browser communication over the Internet. So, my students' conclusion was in the not-too-distant future, telecom companies, wireless providers are not going to be able to charge for voice anymore, they're only going to be able to charge for data. We've let the book sellers and a publishers, and now we also have to think about web businesses like the incumbents, Google and Facebook. Because now the world seems to be moving to mobile technologies. And these sites have to figure out how to present the same value proposition to the people who visit their site from mobile devices, as they have for desktop and laptop computers. Okay, switching over to organizations. Cisco, which has been a pioneer on the Internet, is trying to reorient itself for the same reason, because of mobile devices. They think that there'll be less need in companies for the kinds of switches and routers that they sell for internal networks. So Cisco, with leadership from its CEO, John Chambers, is trying to move more towards services and sensors and what they're called, software-defined networks. It will provide solutions to telecom providers who are building out the mobile networks that people will use. We've talked about most of these other companies in individual videos, so I'll go on. Kroll Ontrack was another company that my students found. They have provided secure backup services for companies, and they're being disrupted by cloud computing, because the companies, their clients can backup their data and files, and the cloud very inexpensively. Dell is another company that has suffered because of new technology, even though it is a technology company at heart. And the new technology affecting Dell are smartphones and tablets which have been reducing the need for desktop computers. And the founder of Dell, Michael Dell, is making an effort now to take the company private, so that he has more flexibility in responding to this disruptive technology, okay? Penguin and Random House, okay, merging, or at least proposing the merger because of e-books on Amazon's pricing power. We could have had an entire session on the New York Stock Exchange. For 200 years or more, it's been the dominance place to trade stocks. But electronic markets and high-frequency traders have driven people to the alternative markets and the market share of the New York Stock Exchange has dropped so precipitously that the number of traders on the floor has dropped from, let's say, 3,000 to more like 300. And in fact, the Internet Continental Exchange in Atlanta, which was found in around 2000 as an all electronic exchange, is buying and merging with the New York Stock Exchange. So again, a decline created by an organization that did not recognize disruptive technology and do something about it. On a positive note, General Electric with the CEO Jeff Immelt has started a research lab to create what it calls an industrial internet of things. So that some of the industrial equipment that it manufactures will be enabled by the Internet in different ways. So it sees this technology moving into products that in the past might not have been considered good candidates for this kind of technology. So I guess the question from all of this, if I look at the organizations particularly, and I look at the CEOs in those organizations, is this it really depend on the CEOs. Is this the key person in responding to a disruptive technology? There's a theory in management that might help us here about what are called transformational leaders who exhibit first charisma. They have a great deal of individual consideration for people and they provide intellectual stimulation to the organization. And if you're interested in following up on this, here are some references from scholars who have done research and proposed and extended this theory. So I've taken the characteristics of a transformational leader and array them against what I think the steps are that an organization or a group of individuals have to go through in recognizing and responding to a disruptive technology. The first step, of course is what we just said, you have to recognize it. And that involves creating a culture of innovation in the organization and not being afraid to look at and try new things. The leader has to create intellectual stimulation to get people to scan the environment, allocate resources, to investigate emerging technologies. And then you have to assess the potential for disruption. And that really involves critical thinking, thinking in depth about both sides of the issue about what might happen. And that's something that routine operational activities in an organization sometimes drives out. I like to think about scenarios and scenario planning here, where you develop the best case and the worst case of what you actually expect to have happened and then formulate a response to those. If this technology proves as disruptive as our scenario suggests, what do we do? And then you have to motivate people and that's also a difficult thing to do. In essence, the charismatic leader is going to rally the troops. He's going to get people motivated to do something. That leader will help develop a strategic response. And by participating in that effort, we'll send the message that a response is important. And to do that, you're going to want to encourage widespread brainstorming in the organization to identify particularly the resources you have. Things that we sometimes call dynamic capabilities. What do you have that enables you to change? And what are the things in your organization are, what we would call, core rigidities, the things that prevent you from changing? Investment sends a message. It says, we're willing to allocate resources. It says, hey, we're serious about this. We're going to put money into a response to this technology. And I'm going to provide resource to people who bring about those changes. Execute, as you know is one of my favorite stages, because I pointed out many of the organizations that we've looked at, had not been able to execute, once they decided on a strategy to confront a disruptive technology. So our transformational leader is actually going to lead that effort himself or herself. He or she will motivate individuals and convince other people to act by creating the intellectual argument for why it's necessary to make the these clients have changes. And if this works, then the leader and others will succeed in changing the organization by tailoring a program to motivate people and creating a shared understanding of the need to change. So this may be a possible solution. If it is the answer, then organizations really depend now on their senior management team to respond to a disruptive technology. And so the second question is, is the senior management team up to that challenge?
