Disruptive innovation – Part 2

Background
I am busy discussing the phenomenon of disruptive innovation, the occurrence where industries are basically made obsolete through an innovation that creates a new market and value network, displacing an earlier technology.  In the previous discussion, I defined the spectrum of “newness” related to innovation (incremental to radical) and looked at some examples of disruptive innovation.  In this article I want to  review some strategies organisations can deploy to counter disruptive innovation.  

Defending disruptive innovation
Organisations today, face a big challenge when it comes to disruptive innovation.  Many executives rise through the ranks of management, where predictability and control are valued and rewarded.  Unlike operations management, disruptive innovation – whether creating it or responding to it – involves extreme uncertainty.  Unexpected events, inevitable failures, and a fundamental lack of control are inherent to the process.  But few leaders are formally prepared to deal with the realities of leading or responding to disruption.
I agree with Soren Kaplan’s view that perhaps the most defining characteristic of disruptive innovation is the great uncertainty that it creates for leaders, organisations, and entire industries.  The music, entertainment, computing, mobile phone, book publishing, photography, and healthcare industries have all experienced dramatic change due to new technologies, business models, distribution channels, government regulations, and market expectations.  Companies in these industries have been forced to experiment and introduce new technologies and business models, not just to compete, but to survive. But what can an organisation do about disruptive innovation?  Jeffrey Baumgartner gives some good advice in this regard, which I am sharing here with his permission.  

Read the business press on-line and off-line widely. Pay attention to start ups and think about the threat they might pose to your business one day. Learn to identify and cast aside the underlying assumptions of your industry and see what your customers really value. As Theodore Levitt famously said, “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole”! Companies like Kodak felt that digital photography was not a threat because digital cameras could not produce prints of high quality. Yet it was not prints customers valued. It was – and remains – the ability to capture and share memories that mattered. Establish an innovation facility, such as a skunkworks (a small business unit, free of most corporate bureaucracy and free to experiment with crazy, innovative ideas) or time to innovate, and give your people the opportunity to build the next disruptively innovative product. But be sure to watch what they are doing and exploit their ideas. Acknowledge potential threats early on and watch them closely, even if you do not believe that they are real threats. Reading the business press helps here. Come up with your own imaginary disruptive innovation and devise and explore actions your business might take to counter the disruption. Similarly, look at new technologies – such as 3D printing and robotics – and use creativity techniques to come up with possible threats from these industries. Do not look only at the current state of the art, but also at where those technologies might go in a decade’s time. You cannot stop progress. Rather, you need to exploit it. Your competitors are not businesses like yours. But, if you can adopt the disruptive innovation that threatens your sector, you hope to survive the onslaught better than those other businesses. Better still, if you can create the disruptive innovation you can grab a massive market. But to do that requires an incredible commitment to innovation.

Next Time
One of the most heated debates involving innovation revolves around how to best incentivise people to develop and implement new ideas. Research on this issue offers a wide range of conclusions and next time I want to dwell more into this topic.  I conclude with a quote from Sir Francis Bacon: “He that will not apply new remedies must expect new evils; for time is the greatest innovator”.
Sources:
Kaplan S. 2012. Leading disruptive innovation. Ivey Business Journal. Online: http://iveybusinessjournal.com/
Baumgartner J. Report 103.  Online: http://www.jpb.com/report103