Innovation: It’s No Longer An Option
Take A Good Look At Your Industry And See What Needs Some Innovating
Mature companies understand that to compete today they need to innovate. But finding sources of innovation while still paying attention to the current business can be a struggle. The good news, says Harvard Business School professor Lynda M. Applegate, is that one of the forces that threatens established companies can also be a source of salvation: disruptive change.This excerpt from a recent presentation encourages executives to leverage disruptive change as a platform for innovation. Innovation is not an option today. This interest in innovation is confirmed by an IBM study in 2006 that asked over 750 CEOs of the world’s largest and most respected firms, “What’s the extent of change that you need to make in the next 2 years?” The answer surprised them. They knew that innovation was important, but 65% of the CEOs said they were planning significant change over the next 2 years, and another 22% said they planned to implement moderate change. Clearly, jumpstarting innovation is a critical business imperative. Executives realize that radical change is needed, and they do not feel equipped to make those changes. Almost 50% of the CEOs surveyed in the IBM study said the source of innovation was from changes in the business environment. Disruptions in the business environment cause economic shifts that destabilize industries, companies, and even countries.
What are some of the disruptors that innovators are exploiting to create value? As you review the list below, take a moment to stop and think: What are some of the disruptive changes in your industry that might serve as the source of innovation for you and your company? Each topic can pose as an opportunity or as a threat.
Technology: What are the key emerging technologies, and how are they being used inside and outside your industry, company, and region to create proprietary advantage?
Business Models: Are there new business models emerging that you can adopt or adapt to deliver radical improvements in the way you and others do business? Can you expand not just your “share of market” but also your “share of wallet” by adding new business models? Can you expand into adjacent businesses by either taking over activities that used to be done by someone else in your industry, expanding into new markets, or adding new products?
Industry Dynamics: Are there fragmented industries where significant value can be delivered through consolidation?
Globalization: What’s happening in another part of the world that you could adopt or adapt in your environment? What are the proprietary advantages that you have based on your access to people, information, materials, or capital?
Offshoring and Outsourcing: Are there opportunities to create value by outsourcing or offshoring activities that you currently perform inside your organization?
Different Approaches
Entrepreneurs often view disruptive change as a source of opportunity. When they see a disrupted business environment—whether that disruption is from new technologies, new business models, or new regulations—they ask, “How can I leverage these changes to create value?” Established companies often approach innovation and disruption much differently. Having worked hard to align strategy and organization to support the current business, they develop tunnel vision, encouraging employees, customers, suppliers, and partners to work together to deliver today’s business results. As a result, executives in established firms often frame disruption as a threat. When they see changes happening, they work to defend their existing business model and ask, “How can I insulate against these disruptive threats and preserve my current business model?”
As disruptive technologies, business models, regulatory environments, and societal norms destabilize markets, industries, and organizations, executives are finding that incremental innovation is not enough. The good news is that these disruptive shifts are the perfect place to search for opportunities. The key is knowing where to look, how to interpret what you see, and then how to manage uncertainty as you exploit opportunity.
