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Corporate strategy and development

The Conversation: Leading through disruption

Exchange spoke with Terence Mauri, author of The Leader’s Mindset: How to Win in the Age of Disruption, about what disruption means and how leaders can help their organizations master large-scale, unpredictable change.

Exchange: How do you define disruption, and what is “VUCA”?

Terence Mauri: The age of disruption is about large-scale, unpredictable change defined by four things: volatility, uncertainty, complexity and ambiguity. These disruptive forces, known as VUCA, present tremendous risk but also tremendous opportunity. For example, it took the telephone 75 years to reach 100 million users and the messenger app company What’s App less than three years. It’s humbling to appreciate that the speed of change today is the slowest it will be in our lifetime.

Exchange: Disruption has become something of a buzzword in business circles but do leaders understand the difference between innovation and disruption?

Mauri: In simple terms, innovation is about improving a product or service and making it faster, better or cheaper. It’s probably a 10% or 20% improvement and typically more rational in nature. Every industry — including banking — is engaged in innovation but that’s no longer enough to survive in the age of disruption. It’s now easier than ever before to fall behind … and never catch up.

Think about Apple® versus BlackBerry® or Uber versus Hailo. I use a recent visit to Facebook® in Silicon Valley to illustrate this phenomenon. Its headquarters is built on the former site of technology giant Sun Microsystems, which was sold to Oracle in 2009 for $7.4 billion. When you arrive, there’s a giant poster of the iconic Facebook thumbs-up that is actually on the back of the Sun Microsystems logo. Sun was once a $200 billion company with some of the most talented minds in business. Every big company is potentially the next Sun Microsystems waiting to happen — unless it changes before it needs to.

Exchange: And disruption?

Mauri: Compared to innovation, disruption is like a rebellious cousin and involves upending a whole business model or way of doing things. Companies such as Apple, Uber and Airbnb have completely reinvented how people choose to listen to music, hail a cab or take a vacation. Harvard Business School’s Clayton Christensen first coined the term “disruptive innovation” and it didn’t take long for it to spread. According to Christensen’s theory, new entrants start with a simple offering and then move upwards, eventually displacing the incumbent. I’d say all disruption is innovative but not all innovations are disruptive.

Exchange: Whom do you admire for leading disruption in their industry?

Mauri: Reed Hastings at Netflix is a good example of a disruptor-in-chief. He’s changed his business model at least three times — DVD mail delivery, film streaming, film production — and continues to anticipate change. Or Jeff Bezos at Amazon® for evolving from e-commerce to cloud services. And the smart thinking of Larry Page and Sergey Brin at Alphabet not to let size get in the way of thinking (and acting) like a 10,000 person start-up.

Exchange: Can you draw any lessons from companies like Kodak and Nokia?

Mauri: Kodak and Nokia both missed out on learning, on changing and on opportunities. In simple language, they lost their chance at survival. There’s a paradox for the biggest companies as they spend too much time looking inward to protect their past success rather than changing before they need to – to stay ahead of the competition. A key message is that you will need to change your business model multiple times in order to win in the age of disruption.

Exchange: So how can you future-proof your company for the age of disruption?

Mauri: The twin forces of cloud computing and mobile connectivity will create massive yet hard-to-predict opportunities where there will be winners and losers. Future-proofing companies will require significant mindset shifts from profit to purpose, hierarchies to networks, controlling to collaborating, planning to experimentation and privacy to transparency.

The best leaders shake up the status quo, learn from failure and make tough decisions fast. Every big company wants to think like a start-up: Small companies have “can do” cultures, habits and ways of working that give them an edge over their much larger and cumbersome rivals. The leaders of tomorrow will have to find the intellectual courage to change their business models two or even three times in order to remain viable.

Exchange: Why is 10x central to disruptive thinking?

Mauri: Astro Teller is a British entrepreneur, scientist and thinker widely credited as one of the pioneers of 10x. He heads up “X,” a futuristic lab responsible for hyper-ambitious projects such as Google® Glass, Project Loon – a balloon-powered Wi-Fi network – and the Google self-driving car. According to legend, his business card describes him as “Captain of Moon Shots.”

A 10x goal stops you from thinking too small and in incremental ways. Let’s face it, most companies focus on 10% improvements rather than thinking what others aren’t thinking and doing what others aren’t doing. Imagine that you have a process that takes 10 days to complete. A 10% improvement might save a day of time. A 10x goal forces you to think 10x bigger so you approach the problem more creatively. The entrepreneur Elon Musk is a 10x thinker, pushing his team to think bigger and bolder about the future with projects such as Tesla and SpaceX. Sir Richard Branson’s “screw it, let’s do it” mindset has inspired a generation of people to take more risks, say yes to change and jump into the unknown.

Exchange: How can leaders train themselves (and their organizations) to recognize disruption?

Mauri: I point to three strategies:

Incentivise risk and experimentation.

Adobe’s Chief Strategist Mark Randall got rid of the innovation department and decided to build a company of innovators by introducing a program called Adobe® Kickbox. Teams must embrace the belief that disruption isn’t a buzzword, a department or a person. It’s a set of winning behaviours that the whole company lives by.

Fail wisely and avoid the status quo.

FailCon is one of the most popular conferences in Silicon Valley. Some of the best leaders on the planet get to share failures that hurt the most and what they learned from them. This reminds you that if you’re not failing sometimes, you’re probably not trying hard enough. Never waste a good mistake. Now more than ever, leaders must think and act like a disruptor. The death of so many iconic companies offers a timely reminder: Start before you are ready and know that the best way to disrupt is to do.

Focus on “three-box” leadership.

Attributed to the strategist Vijay Govindarajan, threebox leadership is a clever way not to just survive but thrive in the age of disruption. Box One (preservation) is about managing the present and sustaining what’s great about your company. Industries with high barriers to entry and where the speed of unpredictable change is lower are more likely to remain in Box One. It’s easy to spend too much time directing resources and talent in Box One at the expense of Box Two and Box Three.

Box Two (destruction) is about selectively letting go of outdated ways of operating before it’s too late. This is the most difficult box to manage — or get trapped by a culture of willful blindness. I call it the “Kodak moment” in reference to the fact that Kodak made the assumption that people would never use their mobiles as cameras. What false assumptions is your business a prisoner to?

Box Three (creation) is about building the future. It requires big picture thinking, imagination and of course, fast execution skills. Steve Jobs, Elon Musk and Jeff Bezos are all Box Three leaders.

The best way to use three-box leadership is to make it an active part of your culture. The challenge is how to manage it on a daily basis.

Exchange: What’s your number one takeaway?

Mauri: In the age of disruption, you can be a leader, a follower or out of business. No company wants to become a footnote in corporate history. The simple truth is that if you don’t disrupt the status quo, you might just become it.

About the interviewee

Terence MauriTerence Mauri is a global expert who helps leaders build the future. He serves as Entrepreneur Mentor in Residence (EMiR) at the London Business School, is a chair at 9others and is the author of the global best seller The Leader’s Mindset: How to Win in the Age of Disruption. Prior to his current role, Mauri was a senior consultant at Informa plc, an FTSE 100 company. He has spoken at high-performing organizations such as McLaren F1, NATO, Airbus and Google.

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