Can the history of the past technological revolutions help us understand Digital disruption?

Updated: Jul 6, 2020

We are living and working in chaotic times. If you have worked in Enterprise IT in the last 5 years, I am sure you have dealt with changes in technology platforms, software vendors, and software development methodology at frantic speed. These phenomenal changes are breaking existing processes across industries and forcing businesses to adopt new means of production. And this is happening at speeds never seen before ….at least in our lifetimes.

This scary and relentless pace of change is being branded as a disruption or more commonly referred to as Digital Disruption. Here are some examples.

Just after 11 years in the market, Tesla by applying Agile software development to Automotive Manufacturing is now the world's second- largest car manufacturer.

The largest video service by the number of subscriptions is a software company - Netflix

On-demand services like Uber in a matter of years has disrupted an entire industry

Facebook has become the largest media company on the planet

Apple is now the biggest watchmaker in the world. Apple watch was only launched in 2015.

So you may ask Why now? Why are we seeing changes at a frenzied pace now?? 

Can the history of the past technological revolutions help us understand the Digital disruption that we are now seeing?

If we study the technological revolutions that took place in the past 3 or 4 centuries does it tell us anything? Based on the book written by Carlota Perez, there have been 5 industrial revolutions

The first technological revolution was the Industrial Revolution that started around 1771 During which machines, factories, and canals transformed the way people lived their day to day lives.

The second technological revolution was the Age of Stream, coal, and railways that started around 1829. The Telegraph was also invented during this age, which was a system to send text messages from point to point.

The third technological revolution which started in 1875 was the Age of Steel and heavy engineering such as electrical, chemical, civil, and naval. This Age is also considered to be the first Age of globalization. Thanks to steam-powered ships in this age that created global markets by connecting the North with the South. This led to the development of the countries which had been left behind such as Australia, New Zealand, South Africa, Germany, the US, and Canada. This progressive era was primarily down to the technological revolution in this age.

The fourth technological revolution which started around 1908 was the Age of the automobile, Oil, plastics, and mass production. Benefiting from the post-war boom people in this age benefited from mass-produced automobiles. This changed how people lived for example they could now afford to buy cheap houses in the suburbs and use mass-produced automobiles to commute.   

Finally, the technological revolution that we are currently in, the Age of Software and Digital, and we are only halfway through it. More on this a bit later.

Each of the technological revolutions has 2 distinct periods with a turning point in the middle.

The first half is the installation period, that is when new technology and financial capital combine to create a Cambrian explosion of startups, disrupting industries from the previous age.

Then there is the turning point which is historically seen as a period of financial crashes and recoveries. Fuelled by innovation and financial backing, these technological changes then start to redefine the means of production so drastically, that it sparks an outburst of new business. Existing businesses that fail to master the new means of production fail and become relics of the last age.

Finally, during the deployment period, the organizations that master the new means of production start to leverage the new technological systems to disrupt and displace other businesses to become industrial giants. It is here the production capital of new industrial giants starts taking over.

So, during the industrial revolution, the implementation period consisted of Canal Mania which was a period of intense canal building in England and Wales, which started to disrupt how goods were shipped. This followed by a small recession, the turning point. Thereafter, merchants and manufacturers who leveraged these canals to ship goods more efficiently benefited, resulting in the Great British leap during the deployment period.

Then during the Age of Railway, there was the Railway Mania. Similar to Canal Mania that resulted in intense development of railways followed by a recession, this started to disrupt existing means of transport. But then in the Victorian boom where Britain mastered railway production and led the world in the designing and construction of railways.

In the age of steel and heavy engineering, there was London funded global boom all over the southern hemisphere primarily financing the railroad but that eventually led to market crashes followed by a long depression. In the deployment period, however, French and American companies that mastered steel and heavy engineering production became industry giants. Progressing these countries up the ranks during the Belle Epoque and US progressive period.

In the age of oil and mass product, the roaring twenties characterized by a period of economic prosperity saw Henry Ford’s model Ts rolling off assembly lines, electricity at homes, etc but lead to the longest, deepest depression due to a speculative boom that had taken hold in late 1920. Bringing hardship across the globe. However in the deployment period businesses that mastered mass production saw record advancements in steel and building production, retail, and automobiles. 

Right now, we are at the age of Software and Digital. It started approximately 52 years ago when NATO held the first conference on software engineering in 1968. As I was mentioning earlier, we are only halfway through. That would indicate that we are somewhere at the turning point.

In the late 1990 and early 2000, we saw the initial bubble prosperity followed by the 2 crashes. The dotcom crash in 2001 and the financial banking crash in 2008. We are possibly going through a 3rd crash, Economic turmoil brought on by COVID-19. 

This would explain the pace of disruption, especially from the venture capitalist fueled new start-ups that we are seeing across all industries. A report in 2016 found that over 1000 fintech new start-ups raised 105 billion dollars, targeting key aspects of a bank’s business. Disrupting product or service which has traditionally been owned and offered by long-established banks.

It is a very similar story in other industries. Companies like Lyft, Uber, and Car2Go are creating disruptions on a much wider scale. They are disrupting both the operating model and business model, which is using software to change consumers' relationships with cars at the ownership level.

At the same time, existing businesses are struggling to deliver software solutions at a much slower rate compared to new start-ups which are further widening the scope for disruption.

Existing businesses are also facing disruption from tech giants who have mastered the new means of software production. For example, Facebook, Apple, Netflix, and Google. For example, Apple Watch was only launched in 2015 and only a few years later it is the biggest watchmaker in the world.

Based on the past 4 revolutions, this period of turmoil would definitely confirm that we are in the Turning point of the Age of Software and Digital. 

So how long will this turning point last or are we at the deployment stage? There are many theories about it, including from Carlota Perez but that is not the point. 

The point is existing businesses have to move away from traditional means of production and delivery methods and start to learn and implement new ways of production. As the historical records state during the turning point businesses that do not master the new means of production fail and become relics of the past.

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