One of the few things we can count on is that “things change”. When I started out as a translator we used typewriters and listened to music on cassette tapes. We got our translations typeset on photographic paper—a revolution that had just displaced the “hot metal” linotype. Typewriters, cassette tapes and phototypesetting have all gone.
So what’s next in the translation world? Can we predict the likely course of events into the future? A certain Clayton Christensen, a professor at Harvard Business School, seems to think so.
Disruptive business models
Christensen studies how “disruptive” ideas and new technologies constantly evolve and displace the old—only to be discarded and replaced by new waves of innovation. His theories have been based on his observations of dozens of disparate industries—from the steel industry and telecommunications to steam shovels and medicine. Could his theories fit the translation industry too?
In Christensen’s view, “disruptive technologies” are innovations that upset the existing “order of things” in a particular industry. The usual process of disruption begins with some innovation that appeals to customers who are either not served by the current market and/or which appeals to customers at the low-quality end of the market.
Over time, as the performance of the innovation improves, it begins to exceed the market’s needs and finally displaces the market incumbents. The former disruptors, in turn, become subject to disruption from new market entrants in a new cycle of innovation and disruption—thus we get what Christensen calls the “innovator’s dilemma” .
An important component of Christensen’s theory is that market incumbents often fail because they generally do not to react to disruptive innovations until it’s too late to recover. This happens because low-end disruptors tackle a market segment that the incumbents consider insufficiently profitable (and so they feel they can safely ignore the emerging low-end competition).
As I see it, Christensen’s view of emerging disruptive forces provides a compelling framework for understanding the current state of the global translation market.
Many incumbent LSPs are struggling with what seem like conflicting signals from the translation marketplace: on the one hand, the demand for translation appears to be increasing worldwide, but on the other, prices appear to be dropping or at least are stagnant . Few industry people would disagree that the translation market is characterised by significant “price compression” and many established brick and mortar translation companies feel trapped in a downward spiral of price competition that is potentially severe enough to undermine the very foundations of the existing system.
Reducing internal staff to lower operating costs is often impractical for companies in an industry almost entirely based on outsourcing and freelancing. Price competition can only be sustained by cutting direct costs—generally by lowering the rates paid to translators. This has a demoralising effect on the primary workforce and encourages the most qualified and skilled translators to leave the profession in search for a more remunerative income .
Here come the disruptors…
On the other hand an entirely new breed of translation business models have sprung up in recent years. They are growing rapidly and appear to be thriving—industry news often seems to be awash with translation-related Internet start-ups that have successfully raised millions of dollars from venture capital firms.
The new models appear to draw their vigour from new-fangled innovations that include crowdsourcing, machine translation, or highly automated, web-based job management systems that allocate jobs to freelancers with little human intervention. Characteristic of all these new business models is the promise of faster turnaround and lower pricing—but typically at a quality lower than the established brick and mortar companies tend to provide. Is this what Christensen terms “low-end disruption”? A situation where new market entrants—armed with lower-cost innovations—can find a segment of customers who are willing to accept a lower quality product in order to benefit from the lower pricing? Or customers who previously weren’t able to afford the sort of quality language services provided by the traditional translation providers.
According to Christensen, the performance provided by such low-end disruptors is typically “good enough along the traditional metrics of performance at the low end of the mainstream market” . Low-end disruptors achieve early market success by targeting “overserved customers in the low end of the main stream market” .
How might we interpret “overserved customers” in the context of the translation industry? The very existence of such a category might well be an anathema to the majority of professional translators who generally believe that competent translation is a minimum standard. Nevertheless, it cannot be denied that there are willing buyers who consider that translation work to EN15038 standard, or similar, is simply expensive overkill. They are happy to purchase work completed to less rigorous standards, which, in their opinion, is still “good enough” for their needs. The important consideration for these customers is that it is available at a lower price.
Customers who fit into this category are those who flock to on-line translation businesses promising “one hour”, “same day” or “overnight” delivery, which outsource relatively small jobs to translators who are willing to accept relatively low rates. Some of these businesses often utilise some form of machine translation to speed up the production process and then outsource the output to human post-editors.
No resistance from the big, established LSPs?
In Christensen’s observation, low-end disruptors find little resistance from the high-end incumbents because the disruptors typically target work that the established companies are motivated to ignore. Short jobs, for example, often fit the low-end in terms of profitability—they often require a high level of human project management. They are expensive to produce but return little revenue. There must be few translation companies who don’t dread the annual request from customers who would like “Merry Xmas and a Happy New Year” translated into a dozen or more languages.
While the bigger LSPs may feel safe in ignoring the incursions of the “low-end disruptors”, the smaller translation providers, whose bread and butter often depends on a constant turnover of short work, will be feeling the heat.
“New market” disruption
In addition to “low-end disruption”, Christensen identifies a second type of disruption: “new-market disruption”. The targeted performance here is of “lower performance in traditional attributes, but improved performance in new attributes—typically simplicity and convenience” . This segment targets what Christensen calls “non-consumption”, i.e. “customers who historically lacked the money or the skill to buy and the use the product” .
To understand this category, Christensen describes the introduction of the world first battery-powered, pocket transistor radio in 1955:
“Compared with the tabletop radios made by RCA, the sound from the Sony pocket radio was tinny and static-laced. But Sony thrived because it chose to compete against non-consumption in a new value network. Rather than marketing its radio to consumers who owned tabletop devices, Sony targeted […] teenagers, few of whom could afford big vacuum tube radios. The portable transistor radio offered them a rare treat: the chance to listen to rock and roll music with their friends in new places out of the earshot of their parents. The teenagers were thrilled to buy a product that wasn’t very good, because the alternative was no radio at all.” 
A parallel to Sony’s dramatic success with its transistor radio in the translation industry is all too evident: on the 6th anniversary of the launch of Google Translate in 2012, Google made this rather startling claim:
“In a given day we translate roughly as much text as you’d find in 1 million books. To put it another way: what all the professional human translators in the world produce in a year, our system translates in roughly a single day. By this estimate, most of the translation on the planet is now done by Google Translate.” 
We might perhaps adapt Christensen’s original words and say: “Users of Google Translate were thrilled to use a product that wasn’t very good, because the alternative was no translation at all”.
In Christensen’s analysis, the performance of the disruptive innovators gradually improves over time. As performance improves, the disruptors gradually begin to acquire customers higher up the “quality” ladder. Google Translate acknowledges that when their free service was launched in 2001:
“… [it] started providing a service that could translate eight languages to and from English. It used what was then state-of-the-art commercial machine translation (MT), but the translation quality wasn’t very good, and it didn’t improve much in those first few years. In 2003, a few Google engineers decided to ramp up the translation quality and tackle more languages…”
While the service was still free, there is no doubt that by 2012, with more than 200 million monthly active users, the quality of the machine-translated output had greatly improved. Panning Google Translate by professional translators (including me!) and citing its often-funny output became a popular sport in social media. Nevertheless, in 2012, Google withdrew the free use of its translation API and began to charge a fee for its use in third-party applications.
This might illustrate a classic scenario described by Christensen in the evolution of disruptive innovation—a gradual, but inexorable move up-market by an initially imperfect product. Few translation industry players really felt seriously threatened by Google, which was seen as a sort of free “toy” which could safely be ignored. Needless to say, it pretty much wiped out the professional “gisting” market that had previously been at the low-value end of many professional translators’ range of services.
I would venture to suggest that few of the top localization companies—those who service the top end of this complex market—are concerned at any potential threat from Google. Nevertheless, in 2013, Google launched a new fee-based localization service targeted at developers producing apps for mobile devices . We might interpret Google’s move as a disruption in an overserved segment of customers at the low end of the localisation market. The addition of fee-based services could be interpreted as an attempt to “extend the lower-cost business model up towards products that more profitable customers are trying to get done” . Are we witnessing the beginnings of this very process in the translation industry?
How will the incumbents respond to the new challenges?
Christensen shows that despite the challenges of new entrants, many market incumbents continue to innovate and maintain their market position. They succeed by introducing what Christensen calls “sustaining innovations”. Such innovations are characterised by “[p]erformance improvement in attributes most valued by the industry’s most demanding customers. These improvements may be incremental or breakthrough in character” . Successful incumbents, who are able to continue growing their companies from the introduction of such “sustaining innovations”, target “the most attractive (i.e. profitable) customers in the mainstream markets who are willing to pay for improved performance” . These firms are able to improve or maintain their profit margins using their existing processes (and cost structure) and thus improve their competitive situation.
Such “sustaining innovations” are almost always best utilized by firms that already have the best position in an industry. Christensen points out that when new market entrants attempt to compete by means of these sorts of “sustaining innovations” they often fail because the established firms nearly always have more financial resources, stronger relationships with established clients, a better reputation, and access to better technology.
In the translation industry, we may well see some incumbents who introduce their own “sustaining innovations” and are able to maintain their market position in spite of the rapid growth of the more disruptive business models. We can be fairly confident that such innovations are likely to utilise technology in order to respond more quickly to buyers and/or which increase translator productivity.
However without any innovations of their own, incumbent LSPs may take some predictable paths:
- Some will ignore the incursions of the disruptors and do nothing—this could be a fatal mistake for some.
- Many LSPs will attempt to counter the lower-priced competitors by attempting to match their pricing. However, Christensen points out that when established companies try to take their higher-cost business down-market to increase market share (by selling at lower price points), almost none of the increased revenue goes to the bottom line. In contrast, as the lower-cost businesses improve their performance and begin to move up-market selling at higher price points, the increase is likely to go straight to the bottom line. In such contests, it is easy to see which firms are most likely to grow and prosper.
- The other common (and predictable) alternative for incumbents is to abandon the low-end of the market to the new entrants and attempt to move up-market to recover market share. This implies intensified competition between incumbents who are now competing for the lucrative (but smaller) higher end of the market.
Intensified competition at the higher end of the market implies increasing competition between LSPs for scarce resources (i.e. for human translators who are able to deliver quickly with low error rates and who have strong writing skills). The work of highly skilled human translators requires less revision and rework. Translators who have specialised domain knowledge not only produce better work, but they are typically able to produce it more quickly. The use of more highly skilled human translators (whether as translators, post-editors or in other editorial roles) not only increases efficiency and reduces cost, but also increases profitability and competitiveness.
There is already evidence for significant competition between LSPs for the best and most talented translators, who must be considered an increasingly scarce resource. According to Don DePalma of CSA, the supply of good quality translators is shrinking:
“Executives at language service providers (LSPs) regularly tell us they cannot find enough qualified language specialists to meet their needs. In every quarter of the six-year duration of our Global Business Confidence Survey, LSP respondents complained about not being able to find enough staff to do the job.” 
If Christensen’s theories fit the translation industry as well as they seem to fit dozens of others, then there are some reasonably predictable scenarios ahead. The disruptive players, with their lower-cost business models, will ultimately dominate the “low end” of the market and as their performance improves, they will continue to move up market.
With the lower ground gone, the traditional LSPs will have to scramble to find a niche higher up the “quality” ladder where they can serve customers who are prepared to pay higher prices. But delivering the goods to the industry’s most demanding customers is no easy matter—access to quality resources becomes a critical factor and a matter of survival. This implies intensified competition to attract and retain human resources that are already in short supply—the best and most talented translators.
Time to put your prices up, guys?
 Clayton M. Christensen, (1997), The innovator’s dilemma: when new technologies cause great firms to fail, Boston, Massachusetts, USA: Harvard Business School Press
 Donald A. DePalma (July, 2012), Translation Prices – Up, Down, or Unchanged? Common Sense Advisory. See http://bit.ly/McUPnj
 For more on this theme, see my blog piece with Luigi Muzii “Are bad translators driving out the good?” at http://wp.me/p1ptPs-Ag
[4[ Clayton M. Christensen & Michael E. Raynor, (2003), The innovator’s Solution—Creating and sustaining successful growth, Boston, Massachusetts, USA: Harvard Business School Press, p 51.
 Ibid., p 51.
 Ibid., p 51.
 Ibid., p 51.
 Ibid., p. 105
 Google’s new localization service also relies on the intervention of selected market incumbents who do not rely exclusively on machine translation.
 Christensen & Raynor, (2003), p 81.
 Ibid., p 51.
 Donald A. DePalma, (2012), Translation Demand-Supply Mismatch, Common Sense Advisory. See http://bit.ly/R6SgrP