Christensen’s #1 Sign You’re About to be Disrupted

Christensen’s #1 Sign You’re About to be Disrupted

“Disruption [is] driven by the pursuit of profit. That’s the causal mechanism for these things…”

Clayton Christensen at the 2011 Gartner Symposium ITExpo

When I told a client that peak profit was one of the signs that they were about to be disrupted, his jaw fell open. He didn’t believe me because, like any businessperson, achieving record profit is THE reason to celebrate. His company had just doubled revenue in the past five years and was positioned to double again in the next five. AND they supply mission-critical systems to build out data centers.

Business literally could not be better.

Which is exactly what the CEOs of Big Steel thought in 1968.

 

 

It wasn’t too big to fail.

“US Steel posted record profit margins in the years prior to unseating by the minimills; in many ways it was blind to its disruption.”

Clayton Christensen in HBR

Since the mid 1850s, steel was produced in integrated steel mills that performed every function required to produce the material that was building America. The costs to build a mill were high, about $8B in today’s dollars, and, to operate efficiently, mills ran 24/7 to produce at least 2M tons of steel per year.

In 1968, a metallurgist at Nucor invented something called the minimill.  It could only perform half of the functions of an integrated mill and produced only rebar, the lowest quality of steel. But the minimill cost only $6M and could be profitable at just 50,000 tons of production.

Christensen called the minimill “not good enough.”  He was being nice. The minimill was a joke.

Rebar was a joke, too. At just 4% of the steel market, it had the lowest gross margin of any type of steel. Ceding it to minimills freed up integrated mill capacity to produce more high profit steel. By 1977, Nucor was the leading manufacturer of rebar.

It had also spent 7 years improving the minimill.

The pattern continued:

  • 1984: Big steel cedes the angle iron, bars, and rods to Nucor
  • 1989: Bethlehem Steel’s market value jumps to $2.4B, from $175M just 3 years earlier
  • 1993: Minimills directly compete with integrated mills in all segments of the market.
  • 1995: Bethlehem Steel’s primary plant ceases operations
  • 2001: Bethlehem Steel files for Chapter 11
  • 2003: Minimills production exceeds integrated mills while Bethlehem Steel ceases to exist.

By 2017, only 9 integrated mills were still operating in the US, compared to 111 active minimills. The disruption took 35 years to play out.

 

 

You don’t have 35 years

The steel industry isn’t the only example:

Company Time to Disruption Peak Disruption Disruptor
Sears 30 years 1969: World’s largest retailer 1999: Removed from Dow Jones Industrial Average Walmart, Kmart, Target, Amazon
Kodak 16 years 1996: Record $16B revenue 2012: Filed for Chapter 11 bankruptcy protection Digital photography
Blockbuster 6 years 2004: Record revenue: $6B 2010: Filed for Chapter 11 bankruptcy protection Redbox, Netflix
Nokia 7 years 2007: Record Net Profit $51B, 40% of global handset market 2014: Handset business sold to Microsoft for $7.2B iPhone, Android
Intel 3 years 2021: Record revenue $79B 2024: Worst ever stock year as price goes below $18/share TSMC, Nvidia

 

 

 

It’s happening right now.  Are you seeing it?

“Financial results measure how healthy the business was, not how healthy the business is. Financial results are a particularly bad tool to manage disruption, because moving up-market feels good financially.”

Clayton Christensen and Michael E. Raynor, The Innovator’s Solution

 Executives and shareholders may feel good right now because, despite supply chain disruptions and high interest rates, earnings are buoyed by “margin expansion” and “revenue beats.” AI feels like an opportunity, not a threat. And there’s no reason to believe that tomorrow’s results will be worse than today’s numbers.

It’s exactly how the CEOs of Big Steel felt in 1968.

You still have time to find the joke.

3 Signs We’re Waking Up from the AI Fever Dream

3 Signs We’re Waking Up from the AI Fever Dream

You could practically hear the soaring, triumphant anthem playing over a scene of unwashed yet unbowed humans crawling out of hiding as the machines’ ominous hums slowed and the evil tech overlords realized that their reign was ending.

“Ford’s AI Hiccups Lead Carmaker to Rehire ‘Gray Beard” Engineers’ the Bloomberg headline proclaimed.

It was only one company, but the news was received as if winning this battle foretold winning the war.

Sure, other companies, like IBM, Commonwealth Bank of Australia, and Klarna, rehired humans after AI-motivated layoffs. But the Ford decision just hit different because of the honesty that accompanied the announcement: “Mistakenly we thought that by just introducing artificial intelligence and ingesting the design requirements that we had, that that would produce a high-quality product.”

It’s the honesty, more than the action, that signals a new era emerging.

 

 

The fever dream takes hold

Since ChatGPT burst onto the scene in November 2022, companies scrambled to “adopt AI” and cram it down employees’ throats in the most striking demonstration of the Red Queen hypothesis since Lewis Carroll penned the words, “Now here, you see, it takes all the running you can do, to keep in the same place.”

The past three years saw a lot of running (and spending) with not a lot of progress. MIT reported earlier this year that 95% of AI pilots fail and even published an article titled, “What leaders still get wrong about AI” listing the following;

  1. Treating AI as something you do, not a tool to get results
  2. Starting AI projects without a clear path to value
  3. Getting stuck in pilots instead of scaling
  4. Overlooking how AI changes the business itself
  5. Mistaking productivity gains for value

Two months after publication, there are signs that leaders are starting to get things right.

 

Signs we’re waking up

After spending $2.5-$3T between 2022 and 2025, companies’ approach to AI isn’t going to change overnight. But there are indications that leaders are learning and adopting new strategies for AI adoption and implementation.

Executives are admitting mistakes.

After boldly committing to AI and promising step-changes in efficiency, innovation, and earnings, executives are moderating their tone and even admitting their mistakes:

  • “Artificial intelligence is a fantastic tool, but it’s only as good as the information you use to train it.” Charles Poon, VP Vehicle Hardware Engineering , Ford
  • We “did not adequately consider all relevant business considerations…we should have been more thorough in our assessment of the roles required.” CBA announcing its reversal of AI-related job cuts
  • “Really, investing in the quality of human support is the way of the future for us,” Sebastian Siemiatkowski, CEO of Klarna, when rehiring 700 customer service agents

Managers are changing who they hire

After years of layoffs, recent analysis indicates that technical jobs aren’t going away. They’re changing what’s required for success.

In a review of 2.85 million job descriptions posted between June 2025 and June 2026, researchers found a dramatic increase in skills related to “judgment, design, and accountability,” and a decrease in skills related to routine work like “boilerplate coding” and manual testing.

Companies are engaging employees

With 70% of large companies monitoring employee AI activity, it’s no surprise that fatigue and anxiety are increasing, trust is plummeting, and employees are resisting.

But in a switch from the authoritarian, top-down, “because I said so” AI implementation model of the past, companies are starting to engage employees as advocates and trainers. Some are going a step further and shifting their approach from “use AI” to “what tools, including AI, do you need to become the professional you aspire to be.”

 

 

Slow then fast

Just like waking up from a dream or crawling out of hiding after the apocalypse, the shift from “AI IS EVERYTHING!” to “AI is a tool” will take time. But the process is beginning.

Emotional Contagion is the Real Driver of Change’s Success

Emotional Contagion is the Real Driver of Change’s Success

For eight days, the Tartan Army filled Boston’s streets with kilts, bagpipes, and the constant refrain of “No Scotland. No Party.”  Bars ran out of beer, traffic cones adorned statues, and resident’s souls were healed.

Now, some are saying corporate managers should have the same effect on the people around them (presumably without consuming all the beer in the office).

The possibility of collective effervescence

Collective effervescence is everywhere right now: in New York at the Knicks’ championship parade, the Tarps Off shirtless section at baseball games, at every unexpected draw or win at the World Cup.

It’s the “emotional electricity or excitement that lifts people outside of themselves and makes them feel like they’re connecting to something transcendent,” explains Christina Simko, and associate professor of sociology at William College. “They (members of a crowd) have to have a common focus and a common mood, and through that physical interaction, they generate something … greater than the sum of its parts.”

Greater than the sum of its parts.

Where have a I heard that before?

Could it be in every press release announcing an acquisition, all-hands meeting kicking of a transformation, and email confirming a re-org?

Which explains why I’m reading about the need for executives to create collective effervescence to ensure the success of transformational initiatives.

Seventy percent of transformations fail and one of the leading causes of failure is insufficiently high aspirations. Collective effervescence is sufficiently high but setting that as a metric of success will only drive up the failure rate.

The probability of emotional contagion

Emotional contagion is also everywhere: in the laugh that spreads through a room, the frown that moves around a conference table, the yawns that can’t be suppressed in meetings.

It’s the “phenomenon in which a person unconsciously mirrors or mimics the emotions of those around them” through nonverbal, conversational, or behavioral cues. It can be positive, like smiles and laughs, or negative like frowns or the tension from a tough conversation.

That’s good news for executives.

Leaders are “emotional amplifiers” because team members are more likely to mirror the leader’s tone than their peers. Research out of USC also indicates that, historically, positive emotions are more contagious than negative ones.

It’s also bad news for executives.

The emotional amplifier role cuts both ways and research shows that people tend to “overperceive” negative cues from leaders, even magnifying small emotional cues well beyond what a leader intended.

That means the frown everyone on the company-wide Zoom was most likely interpreted as disagreement, even opposition, to what was being discussed. And not that your shoes are too tight.

 The reality of leading humans through change

Leading people through change is hard. It’s even harder when you’re under a microscope and every smile, frown, sigh, cough, and eye roll is scrutinized and interpreted as if it were a secret code foretelling the future of thousands.

It’s not. But your team believes it is.

And perception is reality.

Here’s how to start shaping reality to make the changes happen:

  • Start with self-awareness. What is your mood right now? If it’s useful to the team, spend time with them. If it’s not, reschedule the meeting or send a proxy.
  • Make direct eye contact with people. According to the research, eye contact during verbal communication activates brain regions that help us understand what someone is saying and what they mean. Just don’t stare. That’s creepy.
  • Neutralize the negativity publicly. A bit of skepticism can be healthy for teams going through change but too much easily crosses over into pessimism and even hostility that spreads throughout the team. So stop the spread by publicly and patiently calling out the behavior and seeking to understand the root cause.

You don’t need collective effervescence to successfully lead change.

You do need spread the belief that change is possible and beneficial.

And you can do that without wearing a kilt.