Wake up the nine hashtags of digital disruption

Every bit of my life, and the lives of my friends and family, are being changed by technology – whether it’s the endless parade of teenage selfies, the access to just about any song or b

The nine h#shtags of

digital disruption

WAKE

UP DAVID FAGAN

To Jeff Fagan, who taught me to value the future

AUTHOR’S NOTE

My 12-year-old asked recently about what life was like when I was her age She wondered if I thought then (like she does now) that everything had already been invented

I thought for a few seconds and told her certainly not

When I was 12, man had just landed on the moon The future looked rosy for kids who wanted to space travel, and I had no doubt that during my lifetime we would all

be dropping into the moon for a visit We might even live there But it wasn’t just the prospect of flying to the moon that convinced me more was to come It was the boundaries we’d pushed to get to that point If we could fly through space, I believed, we could do just about anything

Indeed, in the 45 years since the Apollo program was abandoned we have achieved a lot Technology has given us

a better understanding of the planet and its place in the universe It’s given us new ways to learn, travel and cure ourselves, and also offers ways, if we choose to use them, to mitigate the demands that our growing population places

on Earth’s finite resources

Advances in technology have changed our lives in ways

I couldn’t possibly have imagined For example, when I was a child, I was herded into a school hall to watch the lunar landing on a black and white TV Recently, my children were captivated by the American presidential elections and watched the progress of the count on their phone screens This may not seem surprising but only because the process that turned our telephones into our personal TV stations, movie theatres and bank terminals has been gradual

I’ve seen firsthand how these incremental changes have impacted on traditional business models and organisations and also the way it has influenced our personal behaviour, affecting our daily habits and lifestyles My perspective on these digital transformations is entirely non-technical

I have spent most of my life as a journalist and editor working on a large metropolitan newspaper and covering stories on the trends that shape society – in the political, business and cultural spheres – and trying to understand the changing needs of consumers who were finding new ways to get their news and entertainment as online media

channels opened up That newspaper, The Courier-Mail,

was one of the world’s most profitable early in the century and moved quickly to embrace digital technology – although not as quickly as the businesses that seemed to come from nowhere to better serve the lives of readers and advertisers who left the traditional broadsheet newspapers,

in some cases after decades of loyal readership

I now work in higher education in a senior position

guiding digital strategy and running programs that educate and advocate change readiness As an executive immersed

in digital change I have gained many insights into emerging technologies and how governments, organisations and businesses are adapting to these changes – for some the possibilities offered by developing technologies are a boon, while others have not been so lucky

And it’s not just in the office Every bit of my life, and the lives of my friends and family, are being changed by technology – whether it’s the endless parade of teenage selfies, the access to just about any song or book ever written or recorded, the ability to discover any piece of trivia that has ever been noted, or the reconnection through social media with friends lost for decades

This is entering a new phase Artificial Intelligence (AI) allows computers to draw from existing patterns to anticipate how you want to behave, and what you might want to do next This already happens when a message on

a phone tells you how far it will take to get to a destination you regularly travel to En masse, the same technology can analyse the data of millions to quickly solve a problem they might not even know they have

All the evidence suggests we are still early in this change process I’m sorry, Siena, you are wrong to think everything that can be has already been invented But you’re entitled to make mistakes at 12, just as I did in thinking I would go to the moon Because the future always holds great promise and it’s the downpayments we make on it today that decide how much of it we can realise

This book is about the future and how to identify those downpayments that will reap tangible benefits for ourselves, those around us and broader society

It has been written and curated from hundreds of sources and dozens of personal experiences of people who are using the technology as a stepladder into the future Just as art curators don’t paint or sculpt but draw together exhibitions, curation has become the buzzword of digital media It acknowledges the breadth of sources readily available online to paint a picture of what’s going on with just about anything

I first heard the term used at a high-level executive meeting early in the decade, when my former employer News Corporation was trying to fashion a digital strategy Ironically, we were in a New York meeting three subway stops from some of the best museums in the world when one of the visiting experts encouraged us to think about how we curated, rather than created, our products I was

sitting beside the then Wall Street Journal editor (now

CEO of News Corporation), Robert Thomson, a Dickensian figure with a huge brain and a mischievous humour He picked up the newspaper I was editor of and started to make little dusting motions over its pages, as if

it was a museum piece that needed tending by its curator

We thought it funny, yet its time as a museum piece was a lot closer than we could have imagined We just weren’t awake to it

Overwhelmingly, it seems the big trends in emerging technologies are in place if we want to be alert to them The

surprise factor may turn out to be Blockchain, the secure digital ledger which allows its users to enter and track every transaction behind what they are buying and selling

In the ensuing pages I traverse the worlds of social media, driverless cars, online retailing, travel, education, health and the consequences of the great sin of any age, denying reality

This is not a technology guide It’s a guide for how to think about the world as we head toward the third decade

of the 21st century, and a reminder that the signals for what is to come are already in place if we care to look

David Fagan, October 2017

INTRODUCTION:

A DIGITAL TALE

In 2004, Jesus aparIcIo was an 18-year-old out celebrating the normal teenage rites of passage shared around the planet when disaster threatened his young life Jesus was on the road, away for the weekend from his Seville home, away from the diet of TV, sport, beer and junk food that somehow sustains young men through their growing years, when his friend Juan ran their car off the road Juan and the two other passengers suffered broken limbs Jesus survived, too, but went into a coma that kept him detached from the rest of the world for more than a decade

All the time, though, his family never gave up hope

In a Seville hospital room, Jesus remained on life support The Aparicio family’s medical advice was that their son could come out of his coma at any moment The miracles

of modern medicine meant he could be fed through tubes the vitamins and protein he needed to stay alive What started as a few weeks became a few months, then

a few years

Every day and night Jesus’s mother, Rosaria, would visit and tend her boy She kept his bedroom intact, waiting for him to re-enter it This was where he had done his homework, listened to loud music, read books, strummed an out-of-tune guitar, set up the computer which connected him to the internet and the world, and where pride of place was taken by the iPod portable music player that his friends had bought for his birthday.

Rosaria hand-bathed her son, made sure his clothes and bedding were fresh and every night took out her rosary beads to pray for the day when her son would return

to her, mentally as well as physically Every week, a neighbourhood barber would come to shave the still figure

of Jesus Every month, he would trim his hair, too

But the years passed Jesus turned 19, 20, 21, 22, 23, 24 Every year his family would mark his birthday and include him in their family celebrations But he remained oblivious, turning 25, 26, 27 Some friends had moved away Some married and had children of their own He became an oddity in their lives, a figure from their past sealed in time

by a car accident at the end of a night most of them would otherwise have forgotten

But Rosaria never gave up hope Her rosary beads and the daily tasks of tending her son kept him permanently in her thoughts Her prayers and hopes for what increasingly seemed like a miracle were finally realised in August 2015 She was in the bathroom adjoining his hospital room when she heard a cry from the bedroom of her son ‘Mama,’ the soft voice called ‘Mama, where are you?’

Rosaria dropped everything to run to her son who had woken as if nothing had happened Why was he in this bed? He wanted to know What were all the tubes? Why did his mother look different, aged not just by nature but by the ordeal of caring for a son she thought permanently lost? And, as the minutes of joy became hours, so many more questions The obvious: What had happened to him? Then what about his family? His friends? The world around him?

On one level, it seemed all too familiar Jesus returned home to find his room was as he had left it Computer and

30 centimetre-deep screen in the corner, iPod plugged in

to download music, camera on his desk Photos and posters on the wall Books and compact discs where he had left them Brothers, sisters and cousins at first supportive, then taunting him about what he should know but didn’t

The prosperous Spain he had grown up in was in financial disarray There was a new pope More people than he could remember were looking for work, the shadow of terrorism hung over the whole of Europe As the world looked to the first black American president to show leadership through this time of turmoil some things remained familiar – Jesus’s team, Real Madrid C.F., remained top of the table and one of the great sporting franchises of the world No surprise really, given its success over decades relied on identifying, recruiting and developing the best players to fill its talent pipeline But essentially, Jesus had woken up in a world where so much

of what he did regularly had changed And while his plans

for his future career needed to be reconsidered, what surprised him most was the small things

Ten years earlier, if he wanted to talk to someone he would call them on his mobile phone or send messages For when Jesus went to sleep, there was no social media – no Facebook, Twitter, Snapchat or WhatsApp Previously, he used his computer to send emails and search the internet

He used his camera to take photos and printed the best of them at the Kodak shop in the shopping mall He read books, magazines and newspapers which he bought from the newsagents He watched movies at the cinema or hired

a DVD from the video shop

In this new world, his mother, who used to drive to the supermarket weekly to buy groceries, now simply ordered them online and had them delivered His father, who had monitored physical activity by wearing a pedometer on his hip, now sported a Fitbit on his wrist to help track his exercise, sleep and weight And if Jesus had wanted to meet a girl, he went to a bar, where he had hoped one day

to find love at first sight Now, his friends suggested he start making a profile and subscribe to dating websites to meet the girl of his dreams

The tale of Jesus is the tale of a modern-day Rip Van Winkle, Washington Irving’s fictitious character who fell asleep for twenty years while the world changed around him Rip Van Winkle’s world was pre-revolutionary America He fell asleep loyal to King George III and awoke finding he needed to be loyal

to George Washington

And there’s another resemblance to Rip Van Winkle Jesus, even though his story has been reported as real on thousands of websites on every continent of the planet, is a complete fiction It was reported just once as the truth on

an obscure Spanish website and then went viral with no further checking through publications as varied as ESPN,

Le Figaro in France, USA Today, The Times of India and the Daily Mirror in London Plus 34,000 mentions on Twitter

The preceding description of what happened to him during those years is the original fiction plus my imagination at work The ensuing description of what happened to the world during those years is not The story of Jesus is very much a digital phenomenon, a product of a fertile imagination dressed up to look real

By 2016, we were referring to this as ‘fake news’ In 2004,

it was just a prank Yet plenty of people who have lived through this time would envy one aspect of what the fake Jesus experienced – the benefit of being able to watch and wait while others confronted digital disruption and made the mistakes which have wiped out reputations, careers and businesses

Indeed, every human interaction in almost every corner of the planet was upended while Jesus (and now the truth is out, let’s keep referring to him as real) was asleep All fuelled by the growth of computing power which came to a head through the widespread availability

of portable high-speed computers now carried in the pockets of more than two billion people As reported on ZME Science (zmescience.com), the smartphone is

hundreds if not thousands of times more powerful than the computers that filled a room where they helped land the first man on the moon in 1969.

To understand the unprecedented development/improvement/enhancements of the smartphone, you have

to understand Moore’s Law – a proposition advanced by computer engineer and Intel co-founder Gordon Moore

in 1965, which by 1970 had progressed from a simple computing term to an unofficial law It contended the processing power, or speed, of a simple circuit would double every two years, fuelling a generation or two of technological and social change

Moore thought his initial observation would span into the next ten years but it has now held true for 50 Ray Kurzweil, inventor, engineer and author of the essay titled

‘The Law of Accelerating Returns’ likens the growth of technology to the folk tale about the invention of the game of chess which so thrilled a Chinese emperor that

he was willing to offer any reward All the inventor asked for was rice to feed his family – one grain in the first square of the chessboard, two on the second, four on the third, eight on the fourth and so on

Halfway through the chessboard, the emperor had agreed to hand over about four billion grains of rice And then the problems began If the doubling had continued, the emperor would have pledged a mountain of rice higher than Mt Everest, more than his whole empire was worth The folk tale has it that the emperor kept his rice – and the game – and the inventor lost his head for impudence

(Kurzweil had the story right in meaning but wrong in detail – the emperor was the Indian Emperor Gupta.)

As Kurzweil reflects, this tale is useful for illustrating the power of doubling, particularly in the second half of the metaphorical chessboard, the point the world had reached in December 2004 when Jesus went into his coma That happened a full two years before Apple took the idea of its iPod and loaded it into the iPhone to create the supercomputer with the power and scale to inspire hundreds of thousands of new uses that simplify so many human interactions, introduce new ones and make our past habits appear quaint and obsolete

Think of the simple act of friendship Before 2004, friendship needed to be accompanied by occasional phone calls to share information and gossip, maybe text messages

to arrange meetings and coordinate diaries, and the exchange of birthday and Christmas cards to acknowledge special events But in the world Jesus awoke to, it required both much more and much less

The need for phone calls had become less frequent, as had text messages But everyday insights about simple family actions were shared with (sometimes monotonous and fanatical) enthusiasm through Facebook and Instagram Indeed, the digital photograph had become the most shared object on the planet – five billion photos

a day were being shared through social media by 2017, most of them friends sharing with each other their own pictures or others they found interesting

Thus the very nature of friendship has been redefined

for a whole generation of millennials who have never lived

without a smartphone Hanging out in a bar is still as

popular as it ever was but is now incomplete for many if the experience is not documented with photos of the group, the bar, the food, the drinks, the entertainment and any other random information which is then shared with

a friendship group that sometimes numbers thousands – more the size of a small city than the intimate group Jesus once regarded as his friendship circle

The presumption about the digital revolution is that we are living through a period of unprecedented change with

no end in sight Every day new uses emerge for digital technology in leisure, health, education, land use, manufacturing, mobility, information management and government To use the chessboard analogy, we are in the second half of the board and the continual doubling of capacity keeps stacking the odds in favour of a revolution

in human affairs like no other It is certainly true that technology has been responsible for much of the dramatic change and improvements to the economy over centuries But perspective matters

Imagine for a moment that Jesus had entered his year coma in 3500bc Mesopotamia, the place and time most commonly cited as the birthplace of the wheel He would have temporarily departed a society where men and mules tediously carried heavy loads and woken to a world where mules pulled carts with wheels that moved smoothly across the land The laws of physics meant the mules could pull a cart load 40 times greater than on their

ten-own backs This was a monumental transformation – first for the humans and mules whose loads were lightened but then for the ability of farmers and merchants to trade across regions and borders.

Or imagine that Jesus had entered his coma in 1440 Strasbourg, the place and time where Gutenberg invented the first printing press He would have temporarily departed

a world where men laboriously transcribed books (mainly the Bible; each one took a year to transcribe) which were then used only by the elite He would have woken to a world where Bibles were printed at a rate of a dozen per week, an action that opened the door to literacy and education and led to a multitude of further transformations

Or imagine Jesus entering his coma in 18th century England where James Watt invented the steam engine, stimulating the rise of mass manufacturing and the shift

of the rural population to cities, where factories created consumer goods and the jobs associated with the Industrial Revolution This technology, too, brought an influx of unprecedented change

The benefit of perspective allows us to reflect on these sweeping movements through history that have brought us

to the period we now live in, which has been described as the Fourth Industrial Revolution Indeed, this was the theme at the 2016 World Economic Forum The steam revolution was the first, mechanisation the second and digitisation the third The coalition of everything is the fourth Or, as Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, states in his

book The Fourth Industrial Revolution: ‘It is characterised by

a range of new technologies that are fusing the physical, digital and biological worlds, impacting all disciplines, economies and industries, and even challenging ideas about what it means to be human.’

The questions are: How far have we come into this revolution? Are we really in the second half of the chessboard? And what are the consequences?

Without a doubt, this period has one major difference from the earlier revolutions And that is visibility The earlier revolutions happened slowly and with imperfect knowledge Now we all know every step of what is happening around us, as near as possible to immediately

We should never be surprised but so often we are

No doubt Jesus was shocked when he woke from his coma to discover his computer and iPod were redundant, that he could buy almost anything and have it delivered from his bedroom, that he could glean any fact by just asking a chatbot installed in his iPhone, that he might not need to go to a lecture theatre to get a university degree or that he could know what all his friends (and friends he didn’t know) were doing by simply following them on social media

If he thought about business models, he would be surprised to ponder the oft-quoted truism that the world’s biggest accommodation provider (Airbnb) doesn’t own one hotel room; that the world’s biggest transporter (Uber) doesn’t own one car; or that the world’s biggest news source (Google) doesn’t employ one journalist

If he worried about his prospects, he would be concerned that statisticians using disruptive machine learning have been able to calculate that close to 50 per cent of all current jobs will be wiped out by technological innovation over the next quarter of a century These aren’t just traditional process jobs but include white-collar workers such as accountants, lawyers, architects and those working in the medical and health industries.

When he played with his young nephews, he would have been surprised to discover they were more adept on

a computer tablet than at most things physical He might

be equally surprised to discover that the cost of data theft

is now estimated to exceed the cost of drug crime

If Jesus really wanted to know more he could go to almost any large city in the world on any day and find a conference on digital disruption – where speakers were able to command $50,000 to $100,000 apiece to make a screen appearance for audiences who want and need to know more about what is happening to their lives and businesses Once there, he would discover how the technology that threatened a handful of industries has spread its way through government, business and society, giving most of us instant access to what we want to know, buy, read, see or hear when we want it and at lower prices than we used to pay Along the way, jobs have been wiped out, some new jobs created and we have begun to live more of our lives through devices permanently connected

to the internet Jesus would be right to ponder whether he had woken to a good or bad dream

Now, let’s go back to what was reported about Jesus in the news, what revelation made his story go viral It was this – what really surprised Jesus and absolutely pulled him up was that his favourite tennis player, his boyhood hero Roger Federer, was still playing Grand Slam tennis That’s right The whole world had changed but ‘Fed’ was still winning after more than a decade at the top Jesus was surprised by something physical and human

‘I thought he would be retired,’ Jesus reportedly told the Spanish tennis news service, Puntodebreak.com where this story started ‘When I was told that at 34, he was still playing, being the number two in the world and coming

to the Grand Slam finals, I thought I was being kidnapped

I could not believe it.’

For Jesus, who was coming to understand the ways in which digital technologies were being adapted, he was surprised not only by the fact that Federer’s body had not succumbed to the forces of nature but that contenders to his crown were now coming onto the circuit with digital tools that would have once been beyond imagination The growth of sensor technology potentially fits every piece of sporting equipment with devices that record the angle and impact of surface meeting ball while offering instant feedback to coaches and players who had once honed their skill by the equivalent of years of practice Just as Federer plays with racquets made of material half the weight and twice the power of his predecessors, the coming generation will come equipped with instant analysis of their game (Watch out for Milos Raonic, the Canadian likely to be a

regular Grand Slam contender in 2017–18 with the help

of the 10 gigabyte data-generating sensor secured to the butt of his racquet He’s good, but still couldn’t beat Federer in the 2017 Wimbledon quarter-finals.)

Whether the fake Jesus’s claimed surprise was true or false is perhaps immaterial But it got me thinking about the themes in this book In hindsight, we should not be too surprised by any of the very profound events that happened during the past decade

In 2004, many of the elements of what were to come were already in place – even if they had not formed anything like their current shape The world wide web (www.), created by the US military to retain communication

in the event of a nuclear attack, was ubiquitous – not just

in offices but in homes Wireless access to the internet was

in place, albeit slow and inconsistent Consumers had begun to buy online Indeed, Amazon was already the world’s largest bookseller Online banking was common Mobile phone ownership outstripped the population of the advanced world Social media existed in an early form through weblogs (blogs) allowing non-traditional sources

to compete with mainstream media Music was recorded and sold digitally So were movies

The ability to be able to do all these things through one device and from just about any place, however, changed the game The age-old human behaviours of buying, selling, entertaining, being entertained and interacting with each other were already in place and were already happening digitally (mainly through desktop

or portable laptop computers) The smartphone meant they could all be done through one very portable device that would become not just a powerful computer but an essential tool for almost every aspect of life No more finding a PC, logging in and sitting down to do what you wanted The answer was simply in your pocket or handbag Anyone whose business or life relied on old selling, ordering or delivery mechanisms was staring at change The warning signs of what was coming were in place (and they still are) and are ready to be used for benefit or detriment by anyone.

As with any sweeping transformational change there are winners and losers at individual, group and societal levels Decaying business models are offset by new business models Lost jobs are offset (not replaced) by new jobs And the pace of change is frightening to many who either don’t understand it or don’t see how they can be winners The result of that is economic and political alienation encouraging governments to make bandaid responses instead of the strategic view we should expect of them.While governments and businesses struggle to keep up with the demand created by ever-emerging uses for the technology, citizens worry about the personal issues – their livelihood, their privacy and the security of information they share digitally And why wouldn’t they? The inner workings of one of the world’s great security operations, the Central Intelligence Agency, have been leaked, so where does that leave our privacy and security? And every private and public analysis is clear that there will be net

job losses as robots move from factory floors to doing the functions of office and service workers.

In the following chapters I will use one of the best known techniques of social media to look at those signs – what they have meant, what they might mean and what to do about them

That technique is the hashtag, a label or metadata tag invented (ironically) by users of Twitter, the social media tool that emerged in 2008 (Incidentally, the invention

of the Twitter hashtag is credited to former Google designer Chris Messina who suggested the uptake of the hashtag as a way of creating ‘groups’ and sorting feeds.) Twitter users can choose what they read in two ways – either by listing the people they want to follow by their designated names, which are preceded by the

@ symbol (I’m @brizfagan, I tweet about disruption from

@wakeup_book) Users can also use hashtags to nominate subjects of interest – #nfl for the National Football League; #Oscars; #USvotes; #auspol

In this book I have used the hashtag as a neat device for storytelling – one that appeals to the journalist in me and is a way to share insights on some of the warning signs of disruption Because nothing stays the same in the

‘second half of the chessboard’, these hashtags will have digital as well as physical life Follow them on Twitter and you need never be surprised again

These nine hashtags cover most of what we know about the digital revolution, about what happened during the interminable decade one Madrid mother spent carefully

tending the needs of her son Some of them are positive, some negative depending on whether you are a disruptor, disrupted or an adaptor But there is a moral to the story – mainly that we need to be equipped to start asking the big questions posed by this shift in human behaviour How you use this knowledge, what questions you ask and what answers you get to serve you, will determine how much you will be a #survivor

#REALITYBITES

History is littered with the corpses of deniers – those who thought they were safe from the ravages of weather, the madness of invading armies or the forces of technological change that reshape businesses Denial is convenient and easy (just ask any seven-year-old) Change

is hard But in the business world extinction is worse because that’s when #RealityBites

Just ask Kodak Or the video rental industry Or the newspaper magnates Or anyone else who thinks that longevity and loyalty will keep their customers away from

sexy, low-cost alternatives There is no bigger pain in the

digital age than being bitten by reality

I’ve already shown my hand as a refugee from the newspaper industry, large parts of which spent (and still spend) too much effort in denial of the fate that awaits if

it doesn’t start behaving more like its new competitors, who are entirely digital, don’t carry the costs of printing presses, trucks and big newsrooms and have an instant reach to readers who double up as distributors of their

content So, I won’t be predictable and start with media Instead, I’ll start with my take on the most famed and one

of the earliest casualties of disruption

Look back into the late 19th century and you’ll find another period of disruption, now described as the Second Industrial Revolution Through that period the population shift from agricultural communities to city-based manufacturing produced new lows and highs of wealth Like now, there were victims of change who struggled through the transformation and proponents who prospered Giant trust companies dominated key parts of the economy – particularly in North America where vast plains remained open to the big transporters, their financiers and employees

Among the technology to emerge was the early version

of the photograph Indeed, the first known photograph was taken and developed by Joseph Nicéphore Niépce in France in the mid-1820s and within 20 years, professional photographers were roaming the western continents recording the lives of families, their communities and, in some cases, the historic events that would shape them (In case you were wondering, the photograph of the view from Niépce’s window is held at the Harry Ransom Center at the University of Texas at Austin.)

By the 1860s, professional photographs were common, although they still required expensive and cumbersome equipment The picture had to be taken in one shot and would take days to develop and then be treated like the family masterpiece it deserved to be Think of Ken Burns’

remarkable TV series The Civil War, which was beautifully

illustrated with photographs of the time, and you have a sense of how widespread photographs had become

But the expense and the inconvenience of photography put it out of reach of all but the wealthy Then along came George Eastman who invented the machine in 1880 that mass-produced photographic plates, spreading the art of photography Right at the birth of the 20th century, his company Kodak launched the Box Brownie, a mass-produced leather-covered cardboard box with a lens shutter and wooden film carrier It sold for US$2 and the six-shot rolls of film cost 15 cents to buy and 50 cents to process Eastman initially marketed the Brownie at children because of its ease of use but its real buyers were their parents, who bought the camera – and the film – in their millions over the following decades

By the early 20th century the Brownie had become a common item in middle-class households Primitive by today’s standards, it still allowed families to record their important occasions and preserve them on film negative and tiny prints

Post-World War I, the United States went through an economic boom which saw more consumer items come into households – heating, washing machines, wireless radios and phonographs And their arrival was chronicled

on the Box Brownies, the disruptive consumable developed two decades earlier by Kodak

The Brownie retained its place in the market over the following decades until Kodak used its market

knowledge and industrial skills to create a new, more compact device in the 1960s The Kodak Instamatic was

a more portable version of the Brownie that shot in both colour and black and white It was briefly troubled in the 1970s by the Polaroid and its ability to instantly develop photos, but the Kodak brand held strong So much so, that its promise of sharing a ‘Kodak moment’ became part of the language

Kodak’s developers prided themselves on keeping track

of what was emerging that might offer opportunities or create threats and in 1975 one developer, Steven Sasson, found the technology that did both He took the zeroes and ones of computer programming and developed the first digital camera, presented with pride through the corporation as the means to have another century’s domination of the market for photography

Yes, it was clunky In original form, it was big and could only display its pictures on a TV screen However, Kodak’s problem was, that while it sold cameras and marketed memories, it really made its money from selling canisters

of film and then developing them The average roll of film cost a few cents to create and not much more to develop but the real profit to Kodak was hundreds of times that, turning ‘Kodak moments’ into tangible ‘Kodak memories’

In fact, the profit margins on selling film ran to 70 per cent, a figure rare in the accounting stratosphere

The company’s executives saw the risk to their revenue and decided to park the technology They understood the threat it constituted to a business then earning US$2.5 billion

a year At its peak, Kodak employed 145,000 people, made profits of US$2.5 billion and its stock price ended the century at $80 In just a decade it would become worthless.Kodak’s mistake was to believe that the decision to shelve the technology would ward off competitors Meanwhile, over in Japan, other developers were playing with the same idea They had nothing to lose by usurping film and understood what Moore’s Law would do to the technology (doubling its capability every two years) Within 15 years Fuji and Sony had begun mass production of the world’s first digital cameras, allowing amateur photographers to make hundreds of attempts at the perfect shot, allowing them to instantly assess if the light was wrong, if they were out of focus or had accidentally chopped off a head.

By the end of the century, Kodak was near enough to out of the photographic business First, film sales declined Then camera sales And before long, the stores that printed photographs or framed them were disappearing from shopping malls Kodak sheltered in bankruptcy and emerged as a supplier of high-end office supplies

It’s possible to wonder what else Kodak could have done, given the risk to its core business One option would have been to absorb the consequences of what was coming

It could have grabbed the technology, exploited the convenience that had always been at the core of its products and used its brand power to help give consumers new ways of capturing Kodak moments Or it could have grabbed firstmover advantage on the digital cameras and

shifted its business sooner, adding value through printing and displaying photographs and targeting the business market it later claimed Profits and margins would have been lower but survival might have been possible What stopped it was denial Kodak executives were seduced by the profits the company was enjoying and believed that shelving its technology would somehow prevent it from emerging elsewhere.

There is no doubting the technical or marketing excellence of Kodak A century’s evidence tells the story But the experience of inhouse researcher David Glocker is illustrative of how embracing new technology can be successful In the mid-1990s his research discovered new ways of coating photographs The innovation was rejected

by Kodak, and Glocker asked his bosses if he could commercialise the technology for other uses

The result was his company Isoflux, which produces coating for hundreds of devices and continues to grow Glocker credits Kodak with his success, first for its willingness to invest in the research at the base of his business but, second, for its failure to diversify: ‘Don’t assume that just because you’re not willing to do it, somebody else won’t,’ he told Wharton Business College’s

online publication Knowledge@Wharton

Wharton marketing professor George S Day is even more pointed about Kodak’s addiction to film revenues and margins ‘Long-run strategies work better if you stand in the shoes of your customers and think how you are going to solve their problems Kodak never really embraced that.’

While Kodak is the most oft-cited casualty of disruption, I like that it had also started out as a disruptor but had become so comfortable it couldn’t see the risks of doing nothing.

It wasn’t alone In the 1990s the video rental industry faced its own challenges in the face of emerging technology.I’m young enough to run a half marathon but old enough to remember when movies were something we went to see at a cinema, watched on TV when scheduled

or (in unusual circumstances) saw projected onto a sheet

in the backyard of someone wealthy and wily enough to own a projector and to know how to hire a 16mm version

of a movie

In Australia, that was the case until the early 1980s when the home video recorder emerged In many homes,

it preceded the remote control but it changed the nature

of movies Suddenly, we could buy movies we wanted to see Or, more logically, hire them from shops that popped

up everywhere with a selection of classic and new video cassettes

By the end of the decade, every home had a video recorder, a library of movies, accounts at multiple video stores and the ability to watch what they wanted when they wanted – so long as it was in stock, the tape hadn’t broken and the VCR (which operated on analogue technology) was working

Over time, videos became cheaper to hire but the stores continued to propagate, making their money from new releases and complementing movie hire with higher-

margin snack purchases Then the competition for movies intensified Cinemas dropped their prices, became the entertainment arm of retail malls and made themselves more comfortable for families wanting an outing, not just another night on the couch And cable TV included complete movie channels (advertisement-free) in their offering for those who wanted to stay home.

The businesses began to struggle but technology again saved them TV screens got bigger and the product was delivered on DVD, a disk containing a digital signal that produced better pictures, better sound and a whole new way of looking at movies at home The video store was back in business But, as in most downturns, big operators had swept the market to become dominant The main one was Blockbuster, founded to take advantage of disruptive technology by David Cook Interestingly, his background was in the energy and property industries which had also been disrupted by the rise of the OPEC powers Cook borrowed his approach from the lessons learnt in that industry when he opened the first of his chain in Dallas in

1985 His intention was to build volume and take business from the family operators that had gone into the video rental business Central to his strategy was a real estate play – Blockbuster Video outlets would be in stand-out sites, with plenty of parking and they would cater for the whole family

Cash rained on the business and it took only two years for Cook to sell out to an investor Wayne Huizenga who wanted to diversify the fortune he had made from waste

management into growth businesses with big customer bases Blockbuster fitted the bill By offering a service (movie hire) that hadn’t existed a decade earlier, it grew to

3700 stores with US$2.2 billion revenue by 1995

Then it was time for Huizenga to exit to make way for the media investor Sumner Redstone, whose company Viacom paid $8 billion for what he later called the ‘deal from hell’ Redstone had his eye on the cashflow as a means

to fund other media deals, trading up from TV stations to film studios

The business had its challenges but served its primary purpose With CEO John Antioco, formerly of Taco Bell, Redstone built cashflows by focusing on deals that built customer loyalty and reduced costs through a revenue-sharing arrangement with the big movie studios This bought him time but missed the scale of disruption happening around Blockbuster At one level, this disruption came via intense competition from retailers who were discounting movies as a loss leader to win other business in the fast-growing home entertainment sector And at the emerging level, disruption came from the uptake of cable and internet, which paved the way for streaming of movies into every home – often illegally with no profit for anyone

The emergence of the DVD to replace the video cassette offered relief but Blockbuster misread the market and believed consumers would prefer to rent rather than buy discs Blockbuster refused to enter the same sort of partnerships it already had with the movie studios

And then along came Netflix – at first a service that allowed movie lovers to order a rental movie online and then receive it in the post, and then a service that delivered movies straight down the broadband to subscribers paying low-cost subscriptions Before then Netflix founder, Reed Hastings, offered to sell the business to Blockbuster for $50 million, but the Netflix potential was not just about convenience, it was also about the powerful algorithms it uses to offer viewers more of what they want (This is explored in Chapter 8:

#AlgorithmsOfLife.)

Blockbuster declined the deal and continued to believe

in the basis of its original strategy (borrowed from the Texas oil and property industries): that the best locations would guarantee a continuing stream of quality customers Instead, it diversified its stores – games and music as well

as movies – and built loyalty programs Ultimately, it experimented with mail order and webstreaming services but it had lost what David Cook had given it 25 years earlier – firstmover advantage

By 2010, Blockbuster was bankrupt Its distinctly branded yellow and blue stores were closed one by one around the world but not before Carl Icahn, a corporate vulture from the 1980s, had a final go at picking over the carcass Icahn concluded his late buy-in to the business was the worst deal he had ever done

Henry Lucas, a University of Maryland professor and

author of The Search for Survival: Lessons from Disruptive

Technologies, uses disruptive technology to teach about

disruptive technology In his book he cites Blockbuster as the classic case of a business in denial ‘Blockbuster tried

to regroup but it failed to execute If you deny and then fail to execute, there’s not much left.’

And so the story goes, although I think it’s more complex than a simple case of denial In some cases, businesses have seen the risk and taken the decision to harvest their profits for as long as possible Others have just not seen the risk And some have seen it but been confounded by which choices to make to survive

Whole industries and professions have disappeared or been decimated by disruptive technology Big book retailers are in the same category The iconic chains of Borders and Barnes & Noble, which shared prime spots in the main streets and malls of Australia and the US have now gone thanks to the algorithms, pricing and delivery systems of Amazon Iconic music chains like Tower Records and HMV have also gone thanks to the convenience and algorithms of the iTunes stores and, more recently, the music streaming services of Spotify and Apple

Many travel agents are in trouble Real estate agents are vulnerable to online listing sites and all manner of professions are at risk from either cheap or mechanised labour Yet many continue to talk up their value and longevity Or, like the taxi industry, they hide behind regulation and ignore the risk until ride-sharing companies like Uber take their business (more of that in Chapter 6:

#CustomerFirst) Or, like lawyers, who stick to traditions and charge customers for the privilege of serving them