What Leaders Get Wrong About Disruption: Cole's Lessons

Why Leaders Miss Disruption

Cole argues that the best approach is to expect to be disrupted. Rather than obsessing only about known competitors, leaders should examine weaknesses in their own products and services and “constantly do an audit or assessment of vitality.” That mindset matters because the cadence of disruption itself has accelerated: transformations that once seemed generational now arrive in succession.

The internet, Covid and artificial intelligence have each altered fundamental assumptions about how people work, communicate and conduct business, while quantum computing may bring another upheaval. Planning for that environment requires something more demanding than forecasting. It requires leaders to become less attached to the future they expect.

Innovation Is Not Disruption

One of the most consequential distinctions Cole makes is between innovation and disruption. “Innovation,” he said, “improves what you already do.” Disruption does something fundamentally different: “It is about transforming the marketplace.”

Kodak developing a better film would have been innovation. Digital photography eventually making film largely irrelevant was disruption. The distinction helps explain why excellent companies can still be blindsided. Established organizations are often highly competent at making existing products better, with teams, budgets, performance metrics and customer research designed precisely for incremental improvement. What they are less comfortable doing is questioning whether the underlying business should continue to exist in its present form.

That difficulty is psychological as much as strategic. Leaders are rewarded for improving profitable businesses, not for proposing scenarios in which those businesses become obsolete. Yet history offers little protection for incumbents. Cole points to Kodak and Xerox, two enormously successful companies that helped make Rochester, New York, a center of innovation. Kodak developed digital-camera technology decades before digital photography ultimately transformed its industry. Success, however, helped create the conditions for resistance.

“It was arrogance and complacency,” Cole said.

Scarcity, Failure and Good-Times Blindness

Massive corporate budgets, Cole argues, are "more of a hindrance than a help." Large organizations have systems and investments built around protecting what already works, while a tiny group has far less to defend. The classic "two guys in a garage" can experiment freely, and the spartan environment "adds to the urgency."

Breakthroughs rarely arrive as planned. Google's founders were mapping web links; Novo Nordisk was pursuing diabetes treatment when researchers discovered Ozempic's weight-loss effects. Capturing such accidents requires "wearing failure as a badge of honor" and studying missteps through a "failure audit."

Most treacherous is timing. "Disruption frequently comes when things are booming," Cole says, noting 1999 was the music industry's best year ever. Warning signs can be behavioral rather than financial. Netflix's Reed Hastings pursued streaming while DVD-by-mail thrived, risking the entire company with no guarantee of winning.

Rewriting the Business for AI and Beyond

Best Buy offers another version of the lesson. Amazon’s rise posed a potentially existential challenge to consumer-electronics retailers, and Circuit City disappeared. Best Buy survived. Under CEO Hubert Joly, Cole explains, the company abandoned assumptions that had once seemed fundamental. It matched Amazon on price, exploited customers’ desire for immediate availability, divided stores into branded sections and found ways for major manufacturers to help absorb expenses. “This was radical, but it worked,” Cole said. The larger lesson, he argues, is that when disruption threatens an organization, “everything—the things that work and those that do not—must be rethought.”

Covid offered businesses a dramatic demonstration of that reality. Cole calls the pandemic “a laboratory for experimentation.” Strong leaders recognized that previously immovable behaviors could move very quickly when circumstances changed.

Artificial intelligence now presents leaders with another disruption whose ultimate shape remains unclear. Cole sees the public discussion as unusually weighted toward risk, and warns that an almost exclusive focus on danger can obscure the technology’s extraordinary potential. He argues that society should not repeat an error made with social media, where difficult conversations about its proper role came years after widespread adoption. Questions involving chatbots, machine advice, education, cheating and human dependence should be addressed while the technology is still taking shape.