This article was originally published on CFO.com.
Executives say they want disruptive innovation, but what they really crave is “managed evolution,” says John Parkinson.
I collect useful and illustrative quotes from famous people. Two of my favorites are from George Bernard Shaw (an Irish author and playwright and a co-founder of the London School of Economics): “Those who can’t change their minds can’t change anything” and “Progress is not made by reasonable men.” I have always liked the implications of his attitude, reminding us that we need to remain flexible and open to new ideas, however “unreasonable” they may at first seem.
Which brings me to the topic of disruptive innovation. …
I do so love an intramural academic spat, especially in areas where there is little actual “science” underlying the debate. Even better when conventional “wisdom” (much of which is akin to folklore, without rigorous foundation or supporting evidence) is challenged on the merits, and the reputation of an academic icon is called (justifiably or otherwise) into question.
This happened recently, sparked by an article by Jill Lepore, a professor at Harvard, who declared war on the term “disruptive innovation.” In her June 23 story in The New Yorker she attacked the research and thinking behind the “The Innovator’s Dilemma,” the 1997 book by Clayton Christensen, a Harvard Business School professor, that originally popularized the idea of disruptive innovation. At the heart of the debate is an attack on the assumption that innovation-driven disruption is inherently positive and an accusation that the research behind the idea of disruptive innovation is flawed. It’s flawed because it ignores aspects of readily available data that don’t support the argument and focuses on a few select case studies that don’t generalize well, claims Lepore.
Mr. Christensen fired back calling Lepore’s article (among other things) “a criminal act of dishonesty.” What it is, or isn’t, isn’t really important, but it does raise some interesting issues related to what’s become an almost universal theme in business. Do you need to disrupt in order to succeed?
I’ve worked in the general areas of business strategy and innovation for almost 40 years (I didn’t even realize that’s what I was doing for the first 20; I thought I was just being a helpful adviser or getting things done), and I’ve developed some rules of thumb when advising on and teaching about innovation (of all kinds) in the real world.
First of all, I know of almost no one in a senior business leadership position who says they don’t want innovation. And I know very few senior leaders who actively embrace the idea of disruption in their business or market. They know it happens; they know they have to deal with it; but they don’t actually want to encourage it. What they value is “managed evolution” – homeostasis with incremental change for the better.
Because of this, real disruptive innovations are actually pretty rare, often visible only in retrospect and are almost always a very high stakes game in which there are many more losers (on all sides) than winners. That’s not generally true of sustaining innovations or of the companies that master how to create them on a regular basis. Let’s take a look at what “disruptive innovation” really means:
- Disruption is simply a change in the status quo, can be caused by many things (legislation, fashion, economic crisis, war, politics, crime and so on) and is mostly separate from the process of “innovation.” Of course, an innovation may create a market disruption, but they are not the same thing.
- Innovation (resulting from either discovery or invention), on the other hand, is simply something new. It may be a new (never existed before) thing or just a new way of doing or thinking about something.
- So disruptive innovation must be something new that changes the status quo.
Looking at the history of disruptive innovations you see some common characteristics:
- Not all the incumbents disappear. Some adapt and compete successfully with new entrants.
- Not all new entrants succeed. In fact, most are either complete failures or are acquired by incumbents (or each other) as a part of (a) the incumbent’s strategy to adapt; (b) the market’s adjustment to overcapacity; (c) return on capital requirements; and (d) fundamental economics.
- Access to capital (financial and human) matters just as much as access to ideas.
- Disruption often triggers an acceleration in sustaining innovations in incumbents, reducing the potential advantage of the disruptors.
- Fast followers win as often as first movers.
Given that disruption is hard to manage (although sometimes easy to create), winning is difficult and rare. There is a good living to be made managing an evolutionary process of frequent incremental improvements, so I have always wondered why there is so much focus on the disruptive innovation meme.
If you really believe in the need for disruptive innovation, your business has to exhibit some very visible (and hard-to-manage) characteristics – for its financial structure, its human resource policies and hiring practices, its operating style and so on – or you’ll almost certainly fail. I see very few companies that actually match this model, but many that talk the talk (and presumably hope for the best).
Make sure you’re not one of the many if you want to be one of the few that succeed.