You can’t smear it all over something and enjoy the deliciousness.
In other words, “Innovation” is not a one-sized-fits-all term. If you apply it to everything new and different that you’re doing, you’ll be confused, frustrated, and ultimately left with very little to show for your efforts.
In a previous post, I defined Innovation as something different that creates value. For companies to increase their odds of creating value, however, they need to develop a language and discipline around at least three different types of innovation.
Why do I need different types of innovation?
Imagine if we used the word “Cat” to describe every feline from a house-cat to a lion. If you proudly proclaim that you just got a new cat, people might wonder whether that purchase was truly legal. If you yell, “There’s a cat behind you!” people might not react with the level of urgency required.
Specificity enables rapid understanding which leads to better decision making.
Labeling everything new and different with the term “innovation” can result in dramatically under-resourcing some efforts and prematurely canceling others. After all, launching an entirely new business model takes far more time, money, people, and patience than launching an improved version of an existing product. You need a language that reflects that.
Why do I need at least three types of innovation?
Because, after decades of research and application, academics and practitioners alike seem to agree that two is too few and, since three comes after two and three seems to work, you need at least three. (Doblin said 10 but that feels like too many to remember).
Which three should I use?
The three that best reflect your company’s strategies, priorities, and culture.
I know that’s a bit vague, but the truth is that there is no one right answer. The only “right answer” I’ve ever seen is the one that sticks, that advances key corporate strategies, and that enables thoughtful decision making.
When one of my clients is at the very beginning of building their innovation capability, we start simple
Core Innovation is improvements to what they currently do
Adjacent refers to innovations which combine existing and new elements (e.g. selling an existing offering to a new customer, selling a new offering to an existing customer, or monetizing an existing offering in a new way)
Breakthrough innovations change everything (e.g. new offerings to new customers, monetized and delivered in new ways)
We then develop a high-level innovation process that can apply to all three (this helps with communication across the company and reinforces that everyone can participate in innovation). From there, we create more detailed structures, processes, tools, trainings, and timelines for each type of innovation to ensure that we have a balanced innovation portfolio, allocate appropriate levels of resources, and set realistic expectations with regards to timelines and ROI.
But what about (fill in the framework here)?
Again, the two most important things about innovation types are that (1) you define them and (2) they are practical, actionable, memorable, and enable progress against your strategic priorities.
That said, there are other Innovation Type frameworks from which you can draw inspiration. Here are three of the most popular
McKinsey’s 3 Horizons Making its debut in the 1998 book The Alchemy of Growth, McKinsey’s 3 Horizons frameworks remains a favorite amongst consultants and executives (but not Steve Blank, who thinks it no longer applies).
The book argued that for companies to kick-start growth or continue to grow rapidly, they need to simultaneously focus on three “horizons of growth:”
Horizon 1 ideas drive continuous improvements in existing offerings, business models, and capabilities
Horizon 2 ideas extend the core to new customers or markets
Horizon 3 ideas create new capabilities or businesses in response to disruptive opportunities or threats
In his 2014 Harvard Business Review article, “The Capitalist’s Dilemma,” Professor Christensen wrote that the terms he famously coined, “disruptive” and “sustaining” innovation, are not types of innovation, rather they describe “the process by which innovations become dominant in established markets and the new entrants challenge incumbents.” Innovation types, however, should describe the outcome of the innovation. The three he identified are:
Performance-improving innovations that replace old products with new better models
Efficiency innovations that enable companies to sell existing products to existing customers at lower prices
Market-creating innovations that combine an enabling technology that rapidly reduces costs with a new business model to reach new customers, resulting in the creation of (as the name implies) entirely new markets.
From 2000 through 2012, P&G, under the leadership of CEO AG Lafley, improved its innovation success rate from 15% to 50% and doubled the average size of successful initiatives.
One of the first steps in achieving these dramatic results was to define 4 types of innovation.
Commercial innovations that increase trial and use of existing products
Sustaining innovations that make existing products better, faster, cheaper, or easier to use
Transformational innovations that deliver a step-change improvement in a product’s performance, ultimately setting new performance expectations for a category
Disruptive innovations (new brands or business models) that “win through simplicity or affordability”
OK, I’m on-board. How do I start?
My clients and I follow these four steps:
Put a stake in the ground and name 3 types of innovation. Don’t overthink it. Just pick three types and go on to step 2
Share the types (names and definitions) with people and see how they react. Do they immediately understand? Do they look confused? Do they recoil in horror? Get curious about their reactions and ask for feedback. Refine your types and their definitions until a majority of people immediately understand (note: you’re not going for 100% agreement because that never happens, you’re going for “good enough with no one violently disagreeing)
Map your innovation initiatives to each type.
Are there types with no initiatives? Is that type critical to achieving a strategic priority or key metric?
If yes, you have a gap in your portfolio.
If no, get rid of the type.
Are there initiatives with no types? Is that initiative critical to achieving a strategic priority or key metric?
If yes, create a type to describe that (and hopefully other) initiatives.
If no, get rid of the initiative.
Share your innovation portfolio with key decision-makers and start developing your innovation strategy.
Congrats, you have a working draft of your Innovation Types! You’ve taken a crucial first step in your journey getting real results from innovation. Reward yourself with some peanut butter!
Last week, I published a post with a very simple goal – define innovation so we can stop debating what it means and start doing it.
The response was amazing. So, I figured that this week I would tackle another buzzword – Design thinking.
We’ve all heard it and we’ve probably all said it but, like “innovation’ we probably all have a different definition for it. In fact, in the last few months alone I’ve heard it used as a synonym for brainstorming, for customer interviews, and for sketching while talking. Those things are all part of Design thinking but they aren’t the entirety of Design thinking.
What I tell my clients
When a client asks if we’re “doing Design thinking,” here’s what I say;
“Yes, because Design thinking is a way of solving problems that puts customers and stakeholders, not your organization, at the center of the process and seeks to produce solutions that create, capture, and deliver value to your customers, stakeholders, and your company.”
What: One could consider the official definition of Design thinking to come from Tim Brown, Executive Char of IDEO, who stated that “Design Thinking is a human-centered approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success”
Why: Useful in solving “wicked problems,” problems that are ill-defined or tricky and for which pre-existing rules and domain knowledge will be of limited or no help (or potentially detrimental)
Inspiration: Understand the problem by building empathy with stakeholders (deeply understand their functional, emotional, and social Jobs to be Done) and document that understanding in a brief that outlines goals (ideal end state), bounds (elements to be avoided), and benchmarks against which progress can be measured
Ideation: Generate ideas using brainstorming to develop a vast quantity of ideas (divergent thinking) and then home in on the ideas at the intersection of desirability, feasibility, and viability that best fit the brief (convergent thinking)
Implementation: Prototype ideas so that they can be tested, evaluated, iterated, and refined in partnership with customers and stakeholders, ensuring that humans remain at the center of the process.
When: At the start of any R&D or development process
Traditionally, design was involved only in the late stages of development work, primarily to improve a solution’s functionality or aesthetic. Design Thinking’s ability to pull the designer mindset into the earliest phases of development is, perhaps, one of the biggest impacts it has made on business and technical fields
Where: Can be done anywhere BUT, because it is a human-centered approach, it must involve multiple human beings through the process
Who: Anyone who is willing to adopt a “beginner’s mind,” an attitude of openness to new possibilities, curiosity about the problem and the people with it, and humility to be surprised and even wrong
Important Points & Fun Facts
Design Thinking IS a human-centered design approach. This means that it seeks to develop solutions to problems by involving the human perspective at every single step of the process
Design thinking is NOT synonymous with user-centered design though user-centered design could be considered a subset of Design Thinking because it gives attention to usability goals and the user experience
Design Thinking was NOT invented by IDEO, but I would argue that they have done more to popularize it and bring it into the mainstream, especially into business management practices, than any other person or firm.
Design Thinking IS the product of 50+ years of academic and practical study and application. Here’s some fun facts:
1935: The practice of Design thinking was first established by John Dewey as the melding of aesthetics and engineering principles
2005: Stanford’s d.school begins teaching Design thinking as a general approach to innovation
Design Thinking is NOT just for radical/breakthrough/disruptive innovation
Design Thinking IS useful for all types of innovation (something different that creates value) resulting from wicked problems. In fact, as far back as 1959, John E. Arnold identified four types of innovation that could benefit from a Design thinking approach:
Novel functionality, i.e. solutions that satisfy a novel need or solutions that satisfy an old need in an entirely new way
Higher performance levels of a solution
Lower production costs
If you want to learn more…
As noted above, there are lots of resources available to those who are deeply curious about Design thinking. I recommend starting with Tim Brown’s 2008 HBR article, Design Thinking, and then diving into IDEO’s extremely helpful and beautifully designed website dedicated entirely to Design thinking.
Here’s what I’d like to learn…
Was this helpful in clarifying what Design Thinking is?
What, if anything, surprised you?
What else would you like to know?
Drop your thoughts in the comments or shoot me an email at firstname.lastname@example.org
I took my last flight on Friday, March 13, two days after the president’s first address to the nation about COVID-19.
It was a JetBlue flight from Charlotte, NC back home to Boston. And it was awesome!
Setting aside the fact that I was wearing disposable gloves and wiping down every surface with Clorox wipes, I felt like I was flying private. I was the only person in my row, with no one in the row ahead of or behind me. Snacks and drinks were plentiful. The stewards were friendly and attentive. Even the boarding process was swift and orderly.
But when stay-at-home orders went into effect the following Monday and I shared my travel story with clients, they were aghast. How could I take such risks? Did I feel safe? Did I wear a mask?
Their reactions surprised me. After all, these executives are frequent travelers, even road warriors they travel so much. Yet the fear in their voices revealed a changing perception of travel. What was once a necessary evil for work and an efficient solution for vacation had, in just 3 days, become a senseless risk.
In the 2 months since that flight, the airline industry has been rocked. Consider:
94% drop in US commercial airlines’ passenger volume
75% decrease in the number of worldwide commercial flights per day
80% decline in the global daily number of flight searches
61% increase in the amount of time between booking and traveling
That last stat – 61% increase in the amount of time between booking and traveling – indicates that people don’t expect to fly any time soon. But is that expectation a reaction to the drastic measures taken to flatten the curve or is it a sign of changing travel habits?
Many experts and industry associations are looking to data about the airline industry’s recovery post-9/11 and the 2008 global financial crisis. According to data from Airlines for America, it took 3 years for passenger volume and revenue to return to pre-9/11 levels and approximately 7 years to recover to pre-2008 financial crisis levels.
Here’s the harsh truth – we cannot possibly know what will happen next. 9/11 and the 2008 financial crisis were fundamentally different events than what we’re experiencing now.
So while I understand why people are looking to these past events – data offers a sense of comfort and control over the future – using data from them is pointless. It offers a warm snuggly illusion that things won’t change that much and a return to the old days is inevitable.
Instead of looking to the past for answers, we need to look to physics.
Newton’s 3rd Law, to be precise. It states that for every action, there is an equal and opposite reaction.
By looking at the actions that airlines, and regulatory and legislative bodies, are currently considering, it’s possible to predict customers’ equal and opposite reactions and, as a result, what the new normal could look like.
Photo by Nadine Shaabana on Unsplash
Action: Travelers who cross state or country borders must quarantine for 14-days unless they can prove that they are COVID-19 negative
Reaction: People will limit their travel to within their home states or countries
Most US states and many countries have 14-day mandatory quarantines in place for people traveling into their jurisdictions. Given that most trips last less than two weeks, these restrictions essentially make most travel impractical.
Some places, like Hong Kong and Vienna, are trying to lessen that barrier by testing arriving passengers at the airport and, if they test negative for COVID-19, exempting them from quarantine.
But until a vaccine is widely available, “travel is likely to return first to domestic markets with ‘staycations,’ then to a country’s nearest neighbors before expanding across regions, and then finally across continents to welcome the return of journeys to long-haul international destinations,” according to Cecilia Rodriguez, a senior contributor to Forbes.
Photo by Dino Reichmuth on Unsplash
Action: Prices increase due to fewer flights, reduced capacity
Reaction: Demand decreases as vacations become road trips and business travelers continue to use virtual meeting technology
According to research by Longwoods International, a research firm focused on the tourism industry, 82% of people traveling in the next 6 months have changed their travel plans. 22% of these people have changed from flying to driving. “Our clients are a little hesitant to get on an airplane right now,” Jessica Griscavage, director of marketing at McCabe World Travel in McLean, Virginia, told CNBC. “We’re already preparing for the drive market for the remainder of the year, and probably into 2021.”
In conversations I’ve had with business clients, the shift isn’t from air to road travel, the shift is more drastic – from traveling to not traveling. For most large companies, business hasn’t stopped or even slowed. Instead, it’s shifted to technologies like Zoom and Microsoft Teams. As people become more comfortable working “virtually,” these solutions will become far more attractive and just as effective as hopping on a plane.
Photo by CDC on Unsplash
Action: 4-hour pre-flight processing to ensure that all bags are sanitized, and all passengers are healthy
Reaction: Business travelers will choose private flights or fractional jet ownership over commercial air travel
The average business trip is approximately 3 days long according to Travel Leaders Corporate, an award-winning leader in business travel. With most days packed with meetings, executives will have neither the time nor the patience to devote half-a-day to check-in, security and health screening, and boarding.
Instead, they’ll opt for private or private-like offerings such as NetJets that offer an expedited check-in, screening, and boarding process.
Photo by JC Gellidon on Unsplash
Action: Longer flight turnarounds due to the need to sanitize planes
Reaction: Demand (and prices) for direct flights will increase while demand to get to places that don’t offer direct flights will decrease
Consultants often joke about the “Misery Tax” – the premium that clients in hard reach location have to pay to make it “worth the firm’s wile” to serve them. Although that may seem crass, there’s no debating that direct flights are significantly easier and less painful than ones that require connections.
The pain of connecting flights, however, is likely to go through the roof as the 30-minute turn-around times that airlines have been chasing become nearly impossible due to increased cleaning and sanitation guidelines. Gone will be the days when travelers worried about making their connections. Instead, they’ll worry about how to fill the hours between flights.
In fact, it’s likely that the misery of a given itinerary will shift from being a “tax” passed on to clients to a filter that business and leisure travelers will use when deciding where to travel.
Photo by Sharon McCutcheon on Unsplash
Action: Airlines will use the need for more screening and sanitizing to justify more fees
Reaction: People will fly only when needed, instead opting for other, cheaper, and easier convenient options.
With $82B in additional revenue from add-on fees, airlines aren’t going to pull back from charging for “extras.” Instead, the need for more passenger screening, social distancing, and control over what is allowed in the cabin, will inspire even more add-on fees.
For example, airline industry consulting firm, Simplifying, predicts that airlines will no longer allow passengers to pick their seats but will instead assign seats to ensure proper social distancing and offer passengers the opportunity to pay for premium seats and/or keep the seat next to them empty.
Other options under consideration are banning carry-on baggage (which conveniently increases the number of bags checked and therefore the revenue from checked-bag fees) and selling safety kits containing face masks, disposable gloves, and cleaning wipes.
Already tired of being nickel-and-dimed, travelers are unlikely to willingly pay extra for required services and, as a result, are more likely to be open to alternatives such as car trips or virtual face-to-face meetings.
Photo by JESHOOTS.COM on Unsplash
There will always be demand for air travel.
But it may take generations for demand to pre-COVID levels.
Unlike 2001 and 2008, air travelers have options beyond commercial air carriers. Wealthy and business travelers can opt for private jets or services offering fractional ownership. Businesses, already eager to cut costs, will be more open to virtual face-to-face meetings. Families can re-discover the adventure of road trips and the creativity of staycations.
It is the availability of these comparable options combined with the invisible threat of disease that will cause people to re-think their habits and default options and slow the airline industry’s recovery. If it ever fully recovers at all.
It’s been 22 years since the publication of The Innovator’s Dilemma, the book that catapulted Clayton Christensen to guru status, shocked and scared executives at large companies, and brought innovation into the mainstream.
In the decades since, “innovation,” “disruption,” and a host of related terms have become meaningless buzzwords, a massive industry of consultants and advisors (yes, including Mile Zero) has sprung up, and an untold number of books and articles have been written about how to innovate.
Yet nothing has changed.
Large organizations still struggle to launch anything other than incremental innovations, the failure rate of start-ups remains astoundingly high, and executives continue to flock to the latest innovation trend (2019 seems to be the year of Corporate Venture Capital).
That’s the question that Joshua Gans, Professor of Strategic Management and holder of the Jeffrey S. Skoll Chair of Technical Innovation and Entrepreneurship at the University of Toronto’s Rotman School of Management, tries to answer in his book The Disruption Dilemma.
He starts by grounding the reader in the core definitions and theories related to disruption, then makes the case that rather than trying to predict disruption (a difficult if not impossible task) organization should instead follow one of four strategies, before wrapping up with a re-examination of the data and research Christensen used to create his original theory of disruption.
“Disruption” is more than a new technology…it is an identity crisis
in their 1995 Harvard Business Review article, “Disruptive Technologies: Catching the Wave,” Clayton Christensen and Joseph L. Bower coined the term “disruptive technology” and defined it as having
“two important characteristics: First they present a different package of performance attributes — one that, at least at the outset are not valued by existing customers. Second, the performance attributes that existing customers do value improve at such a rapid rate that the new technology can later invade those established markets.”
For Christensen. disruption occurs when management chooses not respond to a new innovation because it does not perform as well as existing solutions along traditional performance dimensions and therefore is unappealing to existing customer.
Interestingly, at the same time that Christensen was studying for his PhD at Harvard, another doctoral student was also conducting research into why successful firms fail in light of new technologies. In 1990, Rebecca Henderson, now one of only two University Professors at Harvard (the other one is Michael Porter), debuted the term “Architectural Innovation” with her collaborator, Kim Clark, in their paper “Architectural Innovation: The Reconfiguration of Existing Product Technologies and The Failure of Established Firms.”
For Henderson, disruption, happens when managers are unable to respond because the innovation requires changes to how the firm operates, communicates, coordinates, learns, and makes decisions. Thus,
“Architectural innovation presents established firms with a more subtle challenge. Much of what the firm knows is useful and needs to be applied in the new product but some of what it knows is not only not useful but may actually handicap the firm. Recognizing what is useful and what is not, and acquiring and applying new knowledge when necessary, may be quite difficult for an established firm….”
Gans terms the Christensen theory demand-side disruption and the Henderson theory supply-side disruption. He unites both of these two types of disruption under a single definition of disruption as
“what a firm faces when the choices that once drive a firm’s success now become those that destroy its future.”
What I like about this definition is that it takes disruption beyond the narrow fields of technology, products, or services and considers it in the broader context of markets and industries. It reveals disruption to be something that all organizations are likely to face at some point in their future and one that will call into question many of the fundamental beliefs upon which the organization operates. Further, identifying and understanding both demand- and supply-side disruption can help organizations understand the challenge they face and where and how to focus their resources to navigate the rough road ahead.
Predicting disruption is hard.
What both demand-side Disruption (Christensen) and supply-side Disruption (Henderson) theories have in common is that they are kicked off by the introduction of a new innovation into the market.
However, new innovations launch all the time and very few of them start the domino effect that characterizes disruption. This is because an innovation must do two things in order to be disruptive: (1) offer poorer performance on some dimensions that existing customers value and offer new performance benefits that appeal to new customers and (2) improve rapidly enough that the innovation is able to quickly perform at levels desired by existing customers while offering the new benefits that new customers have grown to love.
As Gans point out, it’s relatively easy to determine if an innovation will meet the first criteria but it takes time to know whether or not the second criteria will be met. “Therefore, both supply- and demand-side theories lead to the conclusion that predicting disruptive events is very challenging, if not impossible.”
Responding is even harder.
To illustrate this point, Gans shares the stories of Polaroid and Kodak, two companies that recognized and responded to a potentially disruptive innovation decades before it transformed the market, but still failed.
In 1981, Polaroid recognized the threat posed by digital technologies. By 1989, it was investing over 40% of its R&D budget into digital imaging. However, while it was investing in technology, it was struggling to envision the right products to commercialize its technological advancement. This struggle was rooted not in its ability to innovate cameras but rather by “razor/blade” business model (and supporting mindset) that resulted in Polaroid subsidizing cameras and making money on film, a model (architecture) that would need to change if the company shifted from film to digital technology.
The company resisted re-organizing itself around the new architecture such that when it eventually developed and launched a digital camera it into the market, there were already 40 established competitors and Polaroid struggled to differentiate itself. Five years later, in 2001, Polaroid declared bankruptcy.
Digital imaging technology had been on Kodak’s radar screen since the mid-1970s. In the 1990s, it partnered with companies like Apple to develop digital cameras and, by 2005, was the market leader in docks that enabled sharing of digital images between computers and cameras.
So prescient were Kodak’s senior executives that “it was even one of the first few companies to consult with Clayton Christensen himself. Managers at Kodak read the Innovator’s Dilemma upon its publication and used it messages to direct Kodak’s product strategy. One example of this was to launch cameras in toy stores as a defense against Nintendo, which had put them in one million Game Boys. Nintendo’s cameras were by all accounts awful, but they were enough to get Kodak worried about disruption. Kodak was able to outpredict the market and to make substantial investments in what came to be disruptive innovations. Though they were initially inferior on multiple dimensions, the improved to take the market in less than a decade.”
If Kodak did everything right, at least according to Christensen’s theory, why did it declare bankruptcy in 2012?
It failed because it did not predict that the dominant design for digital photos would shift from cameras to phones and continued to innovate and invest in “hybrid products that would combine its existing strengths with the new technologies, for example the Photo CD, a way of taking film to photo shops and bringing a digital product home.”
The moral or these stories is that if you are able to identify a potentially disruptive innovation and if you take action to respond, it is nearly impossible to predict the path the innovation will take and attempting to do so is likely to require considerable resources but result in adding only a few years to the organization’s life.
4 strategies for responding to disruption
If you buy-in to Gans’ argument that predicting and trying to stave off disruption is a fool’s errand, it can be tempting to throw up your hands, declare defeat, and simply wait for disruption to claim your organization as its next victim. And, to be fair, Gans does offer this, Wait and Give up, as one of four possible strategies to deal with disruption.
But let’s say you’re not one to declare defeat easily or quickly, what then?
According to Gans, you first need to acknowledge that the two greatest barriers to innovation are uncertainty and cost. Uncertainty is a barrier because, as described above, you can’t be certain of an innovation’s disruptive path until it is well on the journey and this uncertainty is likely to make managers hesitant to take action. However, even if managers are willing to stomach uncertainty, “established firms face a dilemma in introducing new products or innovations because this cannibalizes their existing, profitable businesses….” This reality, “that there are no free lunches, only trade-offs,” has been part of economic theory since Nobel Prize winner Kenneth Arrow named it “the replacement effect” in a 1962 paper.
For organizations unwilling to surrender to disruption, Gans offers three potential strategies to manage uncertainty and cost and position themselves for success:
1. Double Downby leveraging existing strengths to contain a new entrant. This strategy works best when the innovation to which the organization is responding turns out to NOT be disruptive. In cases where it is disruptive, organizations are likely to face the same challenges and fate as Kodak and Polaroid
2. Wait and Double Upby investing heavily only once it is certain that an innovation is disruptive. This approach works because, as economists Richard Gilbert and David Newbury wrote in 1981, “when an established firm can defend a monopoly segment against innovative entry through investment, its incentive to protect its monopoly will be greater than the incentive for new entrants to invade.”
3. Wait and Buy Upa the most promising new entrant. Even though established firms are likely to pay a premium to acquire the new entrant, it offers them certainty of watching the market shake out and saving them the cost of the Double down or Double up strategies. However, this strategy works the best when only market-side (Christensen) disruption is occurring as “the problem faced by established firms is not the acquisition of such knowledge but instead the integration of different ways of doing things into an organization that already has ingrained processes.”
Putting it all into practice
As much fun as it is to nerd-out on innovation theory, let’s get down to brass tacks and outline what all of this means to Intrapreneurs (people trying to innovate within existing organizations).
For me, this boils down to three questions organizations need to ask themselves:
1. Should we act in response to a potential disruption?
2. How should we organize to respond?
3. What should we do to respond?
The questions and their corresponding answers form a basic decision tree:
The answers to question 1 were outlined above — large organizations should WAIT until they are certain that disruption is occurring and have confidence in the path it could take
The answers to question 2 reveal another point of difference between Christensen’s and Henderson’s theories:
Christiansen advocates for independent autonomous units, using Lockheed’s famous Skunk Works as an example. He asserts that, in order to be successful, independent units “cannot be forced to compete with projects in the mainstream organization for resources. Because values are the criteria by which prioritization decisions are made, projects that are inconsistent with a company’s mainstream values will naturally be accorded lowest priority. Whether the independent organization is physically separate is less important than is its independence from the normal resource allocation process.” (The Innovator’s Dilemma)
Henderson recommends integration — a culture and practice in which organizations examine and question the implicit linkages in how they operate, evolve them to meet business needs, and readily assimilate linkages that emerge or are acquired. This approach enables firms to respond to both demand- and supply-side disruption. However, “to proactively use integration to prevent disruption often involves sacrificing short-term competitiveness and even market leadership” and, as a result, Gans argued is best used by companies operating in industries where disruption is frequent.
How an organization answers question 3 is based on numerous factors, including available capital, competitive activity, and market/ shareholder pressure. In my experience, however, the choice usually boils down to how the organization has historically grown. Companies that have grown primarily through acquisition should prioritize a Buy up strategy while those that typically grow organically should eschew acquisition for and either Double up or Double Down.
The bottom line
The book wraps up with a nerd-tastic deep dive into Christensen’s research of the micro-processor industry, the data set he used to develop his theory of disruption, and the logic and analysis flaws in his conclusions. It’s worth reading but, as Gans admits, it shouldn’t significantly alter how we think about disruption
Ultimately, by weaving together multiple theories of disruption with tried and true economic theories, The Disruption Dilemma expands how we think and talk about the dynamics that influence if and how organizations respond to disruption and ultimately how we can be more successful when confronting it.
If you want to read The Disruption Dilemma you can buy it at MIT Press, Amazon, Powell’s, or (hopefully) your local independent book seller.
It’s Monday morning, you’re settling into your office. As you sip your coffee and start scanning your email for the newest crisis, you hear a knock on the door. Turning, you see your boss standing there…
“Good morning! Wanted to talk to you about an exciting opportunity. As you know, our CEO wants us to be more innovative. The Executive Committee met last week and we decided you would be the perfect person to lead our new innovation team. We want you to really own this so let us know what you need to make things happen. Any questions?”
If you are like the hundreds of people I’ve worked with over the past 15 years who have found themselves in this situation (or something similar), you’re so surprised that your mind has gone blank.
Fear not! Here are the 4 things you need to know to get off to a strong start:
Question 1: Why now?
Yes, the CEO thinks the company needs to be more innovative, but what happened to spur the company to action? Did a new competitor enter the market? Is your company’s revenue declining? Did the CEO read a book that says innovation is important?
Getting to the “why” behind the request is critical because it gives you insight into how serious the commitment to innovation is. If your business results are suffering, competitors are taking share, or shareholders are demanding better results, odds are there is real commitment to doing something.
If the answer is that your CEO just read the latest books or article on the importance of innovation, then just smile and nod. Odds are, this is the executive whim of the month and will pass soon.
Question 2: What do we expect as a result of our new focus on innovation?
You never start a journey without a destination in mind (even if that destination shifts as you travel) so find out now what you are expected to deliver and when. Do you need to solicit a bunch of ideas from across the company in the next quarter? Launch a new product in the next year? Generate $13B in new revenues in the next 7 years (true story of an actual answer to this question)?
Whatever the answer is, don’t panic. You have time to figure out how to achieve it if it’s possible or propose an alternative if it’s not.
And, if your boss doesn’t have an answer find out who might and schedule meetings with them to ask this question
Question 3: What type of innovation do we want?
Google “types of innovation” and you’ll get 1.86M results in 0.53 seconds. To be fair, there are lots of very useful ways to classify innovation, especially as you start building a portfolio. But you’re not there yet.
Right now, you need to know what “innovation” means to the people asking for it. Does the company make products and it wants more innovative products OR does it want you to create services? Does the company sell to businesses and want to expand the types of businesses it sells to OR sell direct to consumers?
Understanding what “innovation” looks like will give you important insights into the challenge you’re facing and the resources and support you’ll need to be successful
Question 4: What resources are we dedicating to this?
I guarantee that when you ask this question, this will be the response, “Great question. Let us know what you need.”
DO NOT accept this!
Everyone has a limit to how much they’re willing to dedicate to innovation efforts, especially at the start. You need to find those limits now. The best way to do that is to give options:
“Great, is it fair to assume that I should dedicate 100% of my time to this? If so, who should I transfer my current workload to?” (you’ll most likely be told that No, you should not dedicate 100% of your time). “Ok, how many days per week should I spend on this”
“From what I’ve read, successful innovation efforts require fully dedicated teams. Is it fair to assume that, once we have a plan, we’ll dedicate 2–3 people to this full-time?”
“Of course we’ll need money to make things happen. How much is being set aside for this? Since we usually spend $X on new R&D projects, I assume we’ll allocate at least 10% of X on innovation projects.”
Trust me, if you get answers, they won’t feel like good ones and you will make people uncomfortable. But you need to ask these questions now so people realize that innovation is not about creating something out of nothing (you’re an innovator, not a magician) it’s a serious business investment that requires resources just like all the other investments the company makes.
You’re at the start of an incredible, crazy, terrifying, thrilling, maddening, exhilarating, mind-altering, life-changing journey as your company’s new head of innovation! With the answers to these 4 questions, you’re set-up for success and ready to take the next step — Finding Your Innovation Focus