Disruptive innovation happens across all industries and markets. Sometimes, the disruption is only recognised in a particular field of activity. From time to time it is visible to everybody around the globe. This is especially true if the innovation touches as solution for the every-day consumer. And in recent years, we have seen a lot of innovation in the technology field. What’s next?
“Disruptive means that you change an
existing industry with a new solution,
and that you take over that new industry
and the revenues in it”
existing industry with a new solution,
and that you take over that new industry
and the revenues in it”
(Professor Marcus Schoegel)
What does that mean for corporations?
- A new exciting solution is not sufficient to change the game. It really needs to be radically different and well timed before it could take over an existing industry and its revenues. And
this is rather the exception than the norm
- This also concludes that disruption happens far less than it is talked about. Far more often we see new solutions containing just evolutionary changes
- Many ideas with disruptive potential do not sneak around the corner with a big bang. They usually need time to take off. And this allows us to closely monitor them as they evolve if we do not
neglect them
- Yes, the touch screen enabled iPhone was such a new disruptive solution for example. It hit Nokia, Ericsson, Motorola and alike big time as we all know. But look at music digitization, online
shopping, video on demand or digital photography in contrast. It took years of incremental steps before the respective solutions really took off for the mass market. And it took another few years
to create the ecosystems able to overtake the existing revenues. This also means, that first-movers do not always have the advantage here and could be disrupted by a strong incumbent
themselves
How companies can respond to disruptive innovation
- As already mentioned, disruptive new solutions are rather the exception than the norm. It’s important firms to take this seriously but not to panic
- It’s also key for organisations to regularly self-challenge their products, solutions, services and business models. Even if firms don’t find a revolutionary new way of serving their clients,
it keeps firms agile and alerted for potential market changes
- Companies have KPIs for all kinds of important and not so important fields of activities. What about a “did-we-challenge-ourselves-enough” KPI?
- Organisations should embrace finding new solutions that could cannibalise their existing business. If they find such a solution, others will find it too. So, it’s better to cannibalise your
own business first than losing it to a competitor later on
- It’s also crucial that firms have this topic on their strategic roadmap and proactively steer it with sufficient lead-time. This also paves the road for strategic partnerships and for staying
ahead of the innovation curve
- Incumbents have customer data, existing relationships and a trusted brand new entrants need to build first. Therefore, if faced by a challenger, incumbents could keep what works in their
current business model and include the new disruptive element for their own advantage
- Alternatively, if changing the current business model could lead to a service dilution for existing customers, why not adding a new service to the portfolio as a response to a potential
disrupter? For example: if you normally sell your services while a new entrant gets momentum with a subscription model, you could start offering the same in parallel. On the one hand, this would
broaden the options for your current customers. On the other hand, it would extend your service offerings for potential new customer segments. Should the subscription model become the new norm
later on, you are well positioned for the transformation
- Companies can also put venture capital aside and either invest in start-ups directly or through specialised VC firms. This provide companies with early access to evolving new solutions before
they might disrupt the market. It also allows companies to help steer such new solutions and learn from them quickly
Disruptive innovation - although often technology driven at first sight - is not an IT task per se. It is a business challenge where IT is one enabler among many other functions. Therefore, the
topic needs to be on the agenda of the CEO. This ensures that it receives the attention it requires for a successful interplay among all functions on C-level.
If correctly positioned, incumbents have a wide range of opportunities to respond to disruptive innovation or become disrupters themselves.
Chris Frey @chrisfrey.com
