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THREE THINGS TO REMEMBER ABOUT DISRUPTIVE INNOVATION

Posted by Mark Davies 7 November 2017 Innovation Consultancy

Innovation can be both incremental and disruptive, but when the latter is the case, this can be both an opportunity and a threat to organisations.

YOU NEED TO KNOW WHAT REALLY COUNTS AS DISRUPTIVE INNOVATION

Coined around 20 years ago, the term “disruptive innovation: has been broadly disseminated and come into common usage, but according to Harvard Business Review (HBR) ‘the theory’s core concepts have been widely misunderstood and its basic tenets frequently misapplied.’

Arguing that ‘many researchers, writers, and consultants use “disruptive innovation” to describe any situation in which an industry is shaken up and previously successful incumbents stumble,’ HBR believes that this is not the full picture and that specific usage of the term is essential if organisations are to understand its nuances. 

HBR posits that ‘disruption describes a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses.’ By initially targeting overlooked segments of consumers that are not addressed by current business models, and subsequently moving upmarket to challenge this incumbent business’ dominance in the field, disruptive businesses benefit from agility and upset the status quo.

More often than not the origins of disruptive innovations lie in low-end or new market footholds and are responsible for driving down prices. Yet HBR believes that ‘applying the theory correctly is essential to realizing its benefits’ and a step towards seeing disruptive innovations as an ongoing process as opposed to one fixed point in time.

FEAR OF DISRUPTION CAN BE DAMAGING

When disruption is seen as a threat that cannot be dealt with or even curbed, the fear of disruption as a potentially fatal phenomenon can be problematic for organisations.

Management magazine Strategy and Business, which is published by firms of the PwC network, published an article in which it was argued that this ‘fear of disruption can be more damaging than actual disruption.’ Having surveyed 1,379 chief executives around the world, a PwC study found that ‘60 percent said that technological advancements had significantly changed or completely reshaped competition in their sector in the last five years.’ Yet a recent study also found that when it comes to the ‘real-world impact of competitive upheaval […] fear of disruption is exaggerated.’

So what accounts for this gap between the perception and reality of disruption? While recognising that complacency and inaction can indeed lead to incumbent organisations becoming vulnerable, many organisations fear disruption because they feel unable to predict or react with agility should a threat arise. These worries can be overcome by staying away from ‘hasty, reactive, short-term-oriented decisions’ and focusing on proactive measures so as not to leave weak spots in your strategy.

To combat these fears, Strategy and Business recommends ‘instead of letting anxiety about disruption lead your strategy, concentrate on making the investments that can build an identity for your company that is strong and resilient in the face of change.’

TEACH YOURSELF TO SEE DISRUPTION AS AN OPPORTUNITY

Part of reducing the fear of disruption is learning to see it as an opportunity rather than a threat.  

Although this is not something which can be done overnight, taking the first steps in this process is important if you are to bring about a real change in your organisation’s culture. For online consultancy commentators Consultancy.uk, many CEO’s in fact are beginning to embrace this approach to disruption.

Pointing to a report from KPMG titled ‘Disrupt and Grow: 2017 Global CEO Outlook’, which considers how CEOs are reacting to current trends around disruption, Consultancy.uk reported that 65% of CEOs see technological disruption as more of an opportunity than a threat, with 74% saying that their organisation is actively disrupting its own marketplace rather than waiting to be disrupted.

Although this does not fit perfectly into HBR’s definition of disruption as a phenomenon carried out by smaller companies, the sentiment is an important one. Given that ‘leveraging technology to drive disruption is no easy task,’ the ability to manage risk and respond to changes within and outside a given marketplace is essential for CEOs operating in a fast-pace and constantly evolving world.

Whatever your marketplace or potential challenges, ensuring that you are well-placed and ready to respond to and even anticipate these challenges can go a long way towards having a positive relationship with disruptive innovation.

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