is disruption inevitable?

Reading the mainstream press you would think so… “hey we’re going out of business because we got disrupted”….Kodak, Dell, Borders…. all poster child examples of it…

But is it inevitable?

I think the first thing to get clear on is what is disruption. I summarised it (a long time ago using Clayton Christensen’s model), But it is light on an incumbents inertia to change (hey, i’ve learnt a bit since then). It appears that product disruption is slightly more granular…
There ARE unpredictable technology advances ….but in writing this, I was struck by how hard they are to identify… to me there aren’t really that many. I’m thinking truly revolutionary stuff – the printing press, electricity, 3D printing, the wheel, lasers.  I think they are truly disruptive because they caused a large discontinuity in the natural evolution of the product.. For instance, could companies who make eye glasses have reliably picked lasers would compete with them (LASIC), do builders/OEM think 3D printers are a threat to them?  For printing its an evolution, for them… thats different.

swardley

Being disrupted by unpredictable market change is part of business BUT ….. being disrupted by a predictable market change is a sign of woeful strategic failure

But then there is a bunch of things that are labeled disruptive (including by me), but really are predictable. Digital printing (kodak invented it), streaming content, cloud computing, IP telephony…. all predictable evolutions. Failure in these instances is a management failure…but its more convenient and easy for management to blame disruption or an outside force, than it is to accept responsibility.

Inertia…it definitely exists, i’ve pushed against it for years. But again its a scapegoat kind of word. All change is hard, changing the what a company does, how and why .. the fundamentals is even harder. But given the stark choice of obsolescence, or taking on hard stuff.. what are you gonna do?

How to deal with predictable disruption is also pretty well documented, (he’s my quick summary). However it is not convenient, easy or without risk… CEO’s prefer not to battle politics rather than fund a step out, they’d rather milk the cash cow than canabalise their existing revenues. (interestingly, hard ass CEO’s of great companies do this)

The two types of innovation

Innovation gets gets so much hype in just about every industry, that you would realistically think that more people understood the basics… I don’t see it. Am i an expert? I’d like to think i’ve at least done enough to understand the basics, so here is some wisdom.

The first type of innovation is incremental innovation. The is the stuff that most companies are built to deliver (in some cases not!). The tweaks and product improvements that we expect. In fact, any enhancement that increases performance of the current business (using Druckers definition) would fall into that category.  Its the stuff that gets talked about in universities a lot with the theoretical ‘when we hit the maturity phase we’ll keep growing by adding features or selling to a new segment’ type stuff.

You need this type of innovation when you are a mature company. In fact without this kind of constant evolution, you will in the end become obsolete (Red Queen‘s hypothesis )

“It takes all the running you can do, to keep in the same place.”

As a senior manager, your job is to truthfully evaluate the companies performance. There are sign’s when you are doing this kind of innovation well enough, and when you aren’t.

Clearly those peer organisations on the right aren’t keeping up. I have no doubt they are expending lots of energy trying, but clearly its not working. And senior people should be seriously asking why its not working, what can be done differently and how can they get better returns on their effort (see my previous post on translating strategy into reality)

“Faced with the choice between changing the way we do things or finding facts to refute the strategy, most people get busy finding facts.” My take on a quote by John Kenneth Galbraith

The second type of innovation is disruptive innovation. Nirvana, the one big hit everyone strives for. This is way harder to do (this blog is littered with posts about it).  Essentially you are trying to launch a new product category (walkman’s, cloud computing) or targeting new segments of consumers (mobile phones).

In doing this inside a mature business you are battling everything.

  • The culture “the way we do things”,
  • Process’s – we build things this way…
  • The resource allocation process ” must make the same margins, must hit the investment hurdles”
  • The skills of the company ” we’ve lost the skill innovation ” ahem Google / Cisco
  • Priority – the rule of large numbers always wins
  • Personal agenda’s – mid-managers putting forward risky bets

And don’t forget, you still have to battle the market! Actually build and launch that product, convince customers to buy it, recommend it…  Like is said, this is tough,

And it takes time.  My observations of senior leaders is that they treat innovation like kids treat Xmas toys, they are over the excitement of the idea by day 2.  Want to know how much time? And for that matter, want to know WHY you would even bother given its sooooo hard… check this  graph out

Yeah i know, its Apple. But here are some other companies that have done this. Nokia (when they went from pulp to phones), Lego (themes!), Amazon (books to cloud!), Caterpillar (shoes)….

“We also found that business model innovation tended to generate bigger gains than product or process innovation”

Jens-Olaf Berwig, Nathan Marston, Lauri Pukkinen, and Lothar Stein – McKinsey & Co

In other words, if you are the CEO and want to seriously change the total shareholder returns, you need a disruptive growth plan.

Also, if you are shareholder, and you don’t hear the CEO talking about this, don’t have decent visibility of what the company is investing in…then you are investing with the herd…  maybe keeping up, maybe (Sony, Google, Cisco???)

Doing the hard stuff.

Jim Donovan post today highlighted the worlds top 50 business thinkers. The thing that struck me about this list is how many of the folks there are responsible for creating the theory of business growth, or for delivering it.  Why do they get this acknowledgement and respect? To me, its because these people do the hard stuff.

Growth is far harder to achieve than most of us are willing to accept. There is a bunch of research that highlights that the perennial growth story for any company is fiction. For example, Creative Destruction by Forster & Kaplan highlights that most companies not only fail to grow, but only a small percentage (16%) actually survive !  

Stop and think about that…. for 84% of you out there working. You are in companies that are dead men walking. 

Got me thinking about my own experience. You might have noticed, I’m a growth guy, I’ve even been called ‘Mr Disruption’ by some folks. Others think of me as a destroyer of value, god knows what they call me. 

What I do is hard, I’m constantly fighting the  machine  to get things done.

There is an almost religious battle going on. When I talk about disruptive innovation , the incumbent minded folks hear creative destruction.  I look forward and see opportunity, they look backwards and try to pinpoint the death knell (like the internet). Ultimately I advocate that we need to grow,  they counter it saying we need to cut costs. 

Heads up people. Cutting costs is the easy thing to do, giving a considered ‘no’ to new opportunity is simpler than taking it on.

Well here’s the rub, look at the stats from Foster and Kaplan (there are more**). If you are focusing on doing the easy stuff, something else becomes easy. Predicting the future of your company.

 

** Profit from the Core, Zook and Allen.

Blue Ocean Strategy, Kim and Mauborgne;

Good to Great, Collins

Stall points