INSIGHTS
Paradigm and Disruption

I am fond of Paul Greenberg because he's smart and knows a heck of a lot about CRM -- most importantly, he's a good judge of whether a company is for real or just playing around. I am also grateful to him for pointing out that I was the fortunate one to identify on-demand technology as a disruptive innovation.

Paul is busy writing the fourth edition of CRM at the Speed of Light, and if it's like the last one, it will be a big book. Sometimes I kid him that he's become the Walt Whitman of CRM.

As I recall, my disruptive innovation comment came from doing a lot of market research on the phenomenon. It was new, like nothing we'd seen before, and none of us were very sure if the disruption would last and create its own paradigm or if it would evaporate.

A New Way of Thinking

Many early on-demand companies did not last as long as the revolution they helped spawn, but I think it's safe to say that we've gone from simple disruption to establishing a new way of thinking. On-demand is such a firmly established idea today that it really is its own paradigm, and it has made it easier for others to establish follow-on paradigms.

Zipcar established a different paradigm for car rental, Netflix (Nasdaq: NFLX) did the same for movie rental -- just to name a couple that have almost nothing to do with software or SaaSware. You can say the same about the cell phone business. Today, unless you are buying one of those high-end, do-anything gadgets, you can get the hardware embedded in the cost of the service.

Closer to home, Zuora went deep into on-demand computing and established a new paradigm for on-demand billing. Companies that sell their wares as a service now have billing and payments solutions that work the same way they do.

Diminishing Drama

To be sure, there are still disruptions going on, but as each one takes hold in the market, we realize that the disruptive value is decreasing because the paradigm is now well-established. We will see more disruptive ideas and companies, and I think this recession is an ideal breeding ground, but each disruption will seem less dramatic because the paradigm is now so well-established.

Nonetheless, there will be more to watch and wonder about, especially as the old paradigm sputters and crashes. If you want to see an old paradigm in its death throes, you can look at GM fighting with a business model of building big, fuel-inefficient cars. The news is full of stories about impending bankruptcy.

Speaking of news, is there anything sadder than the long list of American newspapers that can't make a profit? Papers are a classic example of the entrenched leader not wanting anything to do with new ideas for fear that implementing them might erode profitability. The Boston Globe, in my hometown, is the latest example. Newspapers in general have been slow to adopt the Internet or to develop pricing schemes that allow them to charge for their content. Their business model is broken, but no one has the ability to ask a different question. Instead, they cut costs, cheapening product in the process only to drive away customers.

'Gradually. Then All at Once'

A reporter once asked Ernest Hemingway how he went broke. His answer, in addition to being a great example of his laconic style, perfectly encapsulates the shifting paradigms that are all around us. Papa said, "Gradually. Then all at once." That's how paradigms shift -- gradually, then boom!

Whether you have a hedge fund, a newspaper, a manufacturing operation or even a software company, the nature of business is making progress, and that means finding ways to deliver better products and services at more competitive prices. Failure to understand this basic tenet of business leads inevitably to a fall off a cliff.

Other than the few pages I contributed, I have not seen any of Greenberg's book, but I look forward to it. When it comes out, about five years after the last edition, it will have much that is new, and in a side-by-side comparison, it will be interesting to see which companies leveraged the paradigm five years ago, and which are absent.