If you work in the corporate sector, you’ll surely have heard of the current buzzwords du jour – disruption and innovation. These have been used to describe the process of developing new business models/ideas, doing the same things better, entering new markets – you name it. Many companies now also have titles of “Chief Innovation Officer” or “Chief Disruption Officer”.
But what is it really? Industries have been getting disrupted and innovated-in since time 0 – it’s only recently that these terms have been used so frequently, and so casually. What follows is my take – you may not agree, but it’s backed by my experience in big corporate, small firms, the startup scene (as a mentor, consultant and founder), and from discussions with others.
How did these terms come about?
Both disruption and innovation are byproducts of the startup ecosystem becoming more prevalent in the media, and gaining more slice of mind. While disruptions are examples of innovation, not all innovations are disruptive. This distinction is important when trying to understand whether a company which is doing something differently is merely innovative, or actually disruptive.
But what are they?
One of the seminal texts covering this topic is Clayton Christensen’s The Innovator’s Dilemma, trying to understand what has caused some of the largest companies in our time to fail in the face of under-resourced, albeit agile competitors. Christensen defines disruption as being either new-market disruption (a product serving a market which couldn’t be served before), or low-end disruption (a product offering a simpler, cheaper or more convenient alternative to an existing product). Innovation, on the other hand, is the process of taking an existing product or service, and doing it better.
Some of the largest companies in our time failed in the face of under-resourced, albeit agile competitors.
What makes something ‘disruptive’?
Disruptions are examples of activities of companies doing something sufficiently different than what’s happening in the general market – and having a profound impact on the landscape of their sector. While most sectors are price-sensitive, that is not always the case – after all, we know that customers will pay a premium for the experience (as research from Oracle and Salesforce shows). Accordingly, companies able to streamline an existing process will reap the benefit of customer retention and growth – and be classed as disruptors – even if they’re not cheaper than their incumbent competitors.
By definition, disruption requires an impact on a wide range of customers – until then, it’s merely an example of innovation done right (which isn’t easy, either, by the way). Disruptors follow the company lifecycle at a far more accelerated pace than their incumbent counterparts – and accordingly need different metrics to measure their growth. The classic disruptors of our time are Uber (transportation), Airbnb (accommodation), Netflix (entertainment), Dropbox (storage), Amazon (logistics) or the MOOC movement (education) – and with good reason. All now household names, these companies have enabled the general public to do things far better than they were previously able to.
Disruption requires an impact on a wide range of customers
How is that different to innovation?
As discussed above, while disruption is around the creation of new products, services, or markets as a whole, innovation is far more subtle – it’s concerned with doing existing things better – shaving time off processes, enabling existing processes to do more, or otherwise. Being “just” innovative isn’t a bad thing – in fact, it’s more feasible, and offers quicker, measurable results (compared to disruption, which inherently requires creating/entering new markets).
Some of the classic innovations we’ve seen in our times have been evolutionary, rather than revolutionary, changes. Companies like Tesla (automotive), Apple (technology – consumer), Microsoft (technology – enterprise/developer), CBA (finance) have all shown how making regular, small changes to both their operations and product base has reaped massive returns.
How are they applied in the real world?
Companies do it one way….
Many companies are now trying to include innovation and disruption in their modus operandi. As I discussed earlier, innovation in the firm is often more of a ground-up effort, requiring consistent intrapreneurship by employees in their discretionary time – often without any reward.
Innovation, if cultivated correctly, can result in massive gains to companies – and their employees. As a hypothetical example – introducing new systems at a manufacturing plant to reduce operational costs would be considered an example of innovation done right. Getting this project approved and funded, however, is a different situation – and often the area where these sorts of innovations may fall down.
While innovation can be hard, disruption is even more so – and potentially nigh on impossible. As an example, Gmail was started under Google’s now defunct 20% program. Few companies, however, have the resources on hand to dedicate a portion of their employees’ time to developing new products distinct from the core, proven revenue streams – and as Christensen covered in The Innovator’s Dilemma, by the time investment is poured in, it’s too late.
Few companies… dedicate a portion of their employees’ time to developing new products distinct from the core… revenue streams [until] it’s too late.
….While startups are different again
Every startup coming up these days is the new disruptor, innovator, or whatever the next buzzword will be – but statistically speaking, it is unlikely that they will be the catalyst causing the downfall of existing industries.
Startups need to engage in an activity corporates already excel at – expectation management. While positioning themselves as “the people doing X better” might not be the flashiest pitch, it will allow customers, and investors, to see what they really are – and give them a much better chance of survival. High hopes for startups are often the death knell which causes them to fail – being the next Uber for X brings with it a whole multitude of issues they must overcome, lest they become just another in a line of failures.
While startups may feel the need to be classed in the broad categories of “X for Y”, the ones who seek to improve existing processes may eventually turn into the bigger success stories – think SwiftKey (typing), Sunrise (calendars), Eventbrite (events). While none of these startups would be considered as doing anything remotely disruptive, they’ve had a far bigger (and sustained) impact on the lives of their users.
Startups need to engage in an activity corporates already excel at – expectation management.
What can we do better?
If companies want to be ahead of the curve and avoid being the next Kodak, Nokia or Blackberry, they need to invest heavily in their innovation labs – and give them the autonomy (and reduced accountability) associated with a space which is likely to fail – multiple times – until it results in positive returns. We already know that so many of these Innovation Labs exist, but are ineffective at generating truly ‘innovative’ offerings. The people working in these teams need to be given the mandate of developing better ways of doing existing things – either as a new product, or better ways of performing existing processes. If corporates want to focus on doing something truly disruptive, it would be far more beneficial for the internal labs to be “spun off” as discrete entities, without the burden the processes of big corporates bring.
For the startups who are doing something truly disruptive – think Uber (transport), Airbnb (accommodation), Magic Leap (virtual reality) or Hadoop (big data), need to focus on delivering the results they are promising. Developing their product in such a way as to be accessible and powerful is the key to ensuring that they live up to their potential. The other side of the startup scene, who are focused on the innovation spectrum, need to position themselves as such.
Blog image: Brian Solis, Flickr