INNOBLOG

Anyone wanting to send Bill Cower a telegram congratulating him for winning the Super Bowl would have found the following statement on the Western Union Website:

"Effective January 27, 2006, Western Union will discontinue all Telegram and Commercial Messaging services. We regret any inconvenience this may cause you, and we thank you for your loyal patronage."

And so the product that helped start Western Union is now gone. The disruption of the telegram is complete. Of course, Western Union, primarily a money transfer service, lives on - in the shadow of companies such as Verizon and SBC. It might have been different.

In 1876, Western Union was given the opportunity to evaluate a recently developed invention called the telephone. After a short review, the company concluded that "The telephone has too many short-comings to be seriously considered as a means of communication. The device is inherently of no value to us." Consequently, AT&T was formed to commercialize the telephone, and by the time Western Union realized the potential of the telephone, it was too late. AT&T had built up specific expertise that Western Union couldn't replicate. AT&T ended up purchasing Western Union.

Disruption is hard. That's why so many companies fall victim to the forces of disruption. The case of Western Union demonstrates just one reason why. When evaluating new and unknown markets, traditional methods of analysis fall short. Western Union's evaluation of the telephone was perfectly logical. Their business model was built around long distance communication - reporting news and conducting business. In that model, there was no need for a technology that transmitted a very low quality voice signal over short distances. Even assuming some technological advances, the managers at Western Union could not envision business uses of the telephone.

Traditional analysis failed. An approach built around low risk market tests - planning to learn - was required. Such an approach allows for strategies to be developed and business models to be adjusted as more is learned about the market. When the market is unknown, the only guarantee is that initial models will be wrong. Adopting a process that recognizes this fact is one of the keys to being a good disruptor.