Wednesday, November 5, 2014

Dealing With Disruptive Innovation

 Harvard business professor Clayton Christensen is renowned for formulating the theory of disruptive innovation—which describes novel products or services with the potential to revolutionize an industry, and displace incumbents from their market position. In his 1996 book The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail, Christensen reflects on corporate decisions that, though ostensibly rational, failed to anticipate and profitably respond to make-or-break technological advances. He draws a distinction between sustaining innovations, which enhance the quality or effectiveness of an existing product, and disruptive innovations: technological developments which can displace a popular product altogether, especially by offering a more affordable, more accessible, or more versatile alternative.

For example, when personal computers (a potentially disruptive technology) first appeared on the consumer market, it was not entirely clear that they would supplant typewriters as the principal word-processing tool in our society. Thus, typewriter manufacturers faced a pivotal choice: to stick to their area of expertise and strive to create better and more reliable typewriters, or to shift their business model dramatically. Some firms—notably the American conglomerate Smith Corona—opted for the former, and found themselves manufacturing machines of excellent quality, the demand for which rapidly dried up.

While there are no sure things in business (after all, the penchant for innovation and dynamism is one of the key selling points of a market capitalist economy), there are some pragmatic steps companies can take to avoid being “disrupted”:

Know—and expand—your market. Maintaining relationships with customers/clients while striving to attract new (and especially less affluent) ones is key. Engage with your clientele, welcome their feedback, keep tabs on their wants and values, and consider ways to serve them better. Customer loyalty—the result of a reputation for professionalism, ethical practices, and high-quality products—can help keep your enterprise afloat as you integrate new technologies into your business model.

What are your competitors doing? Although spying on rivals is an obvious faux pas, you can derive plenty of information by building an amicable rapport with competitors in your industry. Is there a technique or technology they might introduce that would keep you up at night?

Apprise yourself of trends and innovations. The upside of innovation is that it helps us solve problems, spares us effort, and tends to build on itself. Stay abreast of the latest trends, both within your industry and in society at large. Are there any new ideas or technologies you can make use of? What aspects of your operation would you like to run more smoothly? (Don’t overlook the possibility that you could devise your own innovative solution!)

Harness the innovativeness of a start-up while running an established firm. In The Innovator’s Dilemma, Christenson refers to discovery-driven planning, which involves real-time strategic adjustments, learning-by-doing, and a bit of trial-and-error. Accordingly, firms and their managers should be willing to take calculated risks, adopting innovations that may not work out perfectly on the first attempt.

Bear in mind that there is no such thing as a monopoly on good ideas. Start-up firms tend to be nimble and creative not only because their founders may feel they have nothing to lose, but also because there is little hierarchy between workers and managers, or entrenched operational protocols, to obstruct the free flow of ideas. Don’t be afraid to ask employees what they think, and encourage equal-opportunity communication in the workplace.

Intimidating though it may seem, disruptive innovation needn’t be a threat to your business. With the right approach and attitude, you will be equipped to not only respond to potentially disruptive innovations, but to place yourself at the leading edge.