The Disruption of Innovation

by Pierre G. Villere

As we all know, terms like “disruptive technologies” and “disruptive innovation” have moved into the mainstream business lexicon, and mark the distinction between the way it has always been done, and the opportunity for change as a result of new technologies or processes.

Disruptive technology is an innovation that significantly alters the way that consumers, industries, or businesses operate. A disruptive technology sweeps away the systems or habits it replaces because it has attributes that are recognizably superior. Recent disruptive technology examples include e-commerce, online news sites, ride-sharing apps, and GPS systems. In their own times, the automobile, electricity service, and television were disruptive technologies. A disruptive technology supersedes an older process, product, or habit, and usually has superior attributes that are immediately obvious, at least to early adopters, and upstarts rather than established companies are the usual source of disruptive technologies.

Clayton Christensen was an American academic and business consultant who developed the theory of “disruptive innovation,” and popularized the idea of disruptive technologies in The Innovator’s Dilemma, published in 1997. It has since been adopted as a buzzword in startup businesses that seek to create a product with mass appeal.

Even a startup with limited resources can aim at technology disruption by inventing an entirely new way of getting something done. Established companies tend to focus on what they do best and pursue incremental improvements rather than revolutionary changes. The poster child for current-day disruptive innovation is certainly Elon Musk, whose Tesla automobile company and his other many initiatives, like Space X, are turning the competition on its ear. No one would dispute that Musk held the match that lit the fuse that exploded into the evolution of the electric car, and moved the concept of these fringe vehicles into the mainstream. His efforts have not only created the most valuable car company in the world in terms of market capitalization, but have forced the majors like General Motors to announce that they will phase out all internal combustion model production by 2035; Ford has followed with its own announcement that it will phase out similar production in Europe by 2030, and both will replace that volume with electric-powered vehicles.

Adoption of disruptive technologies has a rich and interesting history; look at the evolution of the automobile. By the 1920s, the development of the mass-production assembly line by Henry Ford brought efficiency to such a high level, with a corresponding drop in costs, that the Model T became affordable to the average American. Yet another disruptive innovation credited to Henry Ford helped spur the sale of automobiles: He lobbied state legislatures across the country to establish the chattel mortgage, the first time that moveable, or personal, property could be mortgaged, rather than just real estate. This allowed lenders to take a mortgage on a car, thus allowing many more Americans the opportunity to own an automobile.

The challenges of the early automobiles were obvious. Gasoline stations had to be built close enough together to allow for their refueling, and a network had to be created that would allow drivers to be conveniently close to the next gas station. Today, the electric car revolution faces the same challenge, as recharging stations need to be close enough to allow vehicles to travel to distant destinations with enough charging points along the way. This is coupled with the need for continued progress in technology that will allow vehicles to be recharged more quickly; the holy grail of electric car innovation is to reduce charging times to those equivalent of the time it takes to fuel a gasoline-powered car.

What does this mean for the concrete industry? A combination of electric power and autonomous driving is clearly in the future for mixer trucks and haul vehicles, as well as loaders and other off-road equipment. The holy grail in electric mixers of the future will be the ability to recharge during the loading process, so the vehicle is ready to go when the next load is in the drum.

I can’t wait for the exciting future that lies ahead.

Pierre G. Villere serves as president and senior managing partner of Allen-Villere Partners, an investment banking firm with a national practice in the construction materials industry that specializes in mergers & acquisitions. He has a career spanning almost five decades, and volunteers his time to educating the industry as a regular columnist in publications and through presentations at numerous industry events. Contact Pierre via email at [email protected]. Follow him on Twitter – @allenvillere.