In the book “The Innovator’s Dilemma”, Clayton very well describes the S curve of successful firms and how incumbents disrupts their business model through innovation. In most of those cases incumbent focuses on delighting your under-served customers with innovative solutions specifically addressing their needs. These are customer who were either not happy with the offerings available in the market or they couldn’t afford the products previously available. This is demand side disruption, a visionary leader can see the upcoming invasion in his market share. A typical response in those cases is acquiring the entrants or doubling down your own innovation effort to compete with the upcoming threat.

One real world example of supply side disruption is the rise of public cloud – Amazon AWS, Microsoft Azure, Google GCP etc. This is ongoing evolution in action that is evolving the competitive landscape for the companies who are in business of delivering the software as a service. Before the rise of public cloud, delivering a web based application requires companies to build either their own infrastructure or find a hosting company where they can rent space and hardware. Some large firms even invested in building their own data centers to take the advantage of their large scale. These companies develop great skills to operate efficiently in managing their infrastructure, they have army of expert operational and network engineers to manage and operate their data centers and applications delivery. Having this expertise in effective management of infrastructure at scale was a great competitive advantage. Once the mature public cloud became available, with the power of elastic compute and storage, and virtualised network infrastructure any firm has the power to quickly scale and serve large customer base. Incumbents can also take advantage of several platform components to innovate their applications; they can also do this with very small number of operations and engineering teams, their engineers can fully focus on developing solutions and serving customers directly instead of managing infrastructure.

Supply side disruption can be a silent killer, you may not realize the shifting competitive landscape early in the game.

So the companies, who were enjoying the competitive edge build around your operational excellence now losing their advantage. Of they don’t see this supply chain disruption, they probably will continue their investment in innovating their application features and performance and continue enhancing their operational excellence. Later they have to play the catch up game to maintain the pace with competition by migrating their application to take the advantage of cloud technologies. They have to revamp their high performant operators, network engineers workforce for this new world.

Where demand side disruption can be signaled by customer’s interest and change in their behavior, supply side disruption could be a silent killer, you may not realize the shifting competitive landscape early in the game. Direct product comparison in early cycles may not signal the upcoming competition. Later it may become too costly and stressful to play the catch-up game with the competition.