05. Dec. 2017

Factors That Affect Disruptive Innovation Part II of II

by CHRISTENSEN CALAYTON M

Leveraging the right capabilities

Disruptive innovations fail to materialize when the organization fails to create the right environment for them. Disruptive innovations fail under three circumstances:

  1. When the organization has limited resources to support them. Inadequate resources might disallow innovations.
  2. Organizations are limited by their processes. Unsuitable processes can restrain innovations from becoming effective.
  3. The organization’s value could also be hostile to disruptive innovation.

Inadequate resources:

Managers and money play key roles in the success of disruptive innovation. Very often managers who are successful in mainstream business are appointed to look after the disruptive innovation process. This could be dangerous, as the skills needed and the challenges faced by these managers in their previous careers are entirely different from the challenges they face and the skills necessary to promote disruptive innovation. They make wrong assumptions about customer needs, and the strategies necessary to address these needs. They often employ the strategies which proved useful in mature and stable markets. Disruptive innovations create new markets and new opportunities. But these managers are illequipped to operate successfully in such markets.

While managing the other resource – money, managers must avoid two misconceptions, one relates to the size of the company’s reserves, the other to making losses. It is a general belief that having large reserves is an advantage for the growth of new businesses. This is not always so. Large reserves available for a new venture might result in managers sticking to the wrong strategy for too long. Instead, when there is less money, managers will naturally be more responsive to customer needs, and fulfilling them would generate revenues. As a result, a viable strategy emerges quickly.

It is also often believed that when there are disruptive innovations, losses have to be borne for a long period before profits begin to arise. And so, being patient is a virtue. But according to Christensen, innovators should be patient about the size of the business and not about profits. When profit is the driving force, a valid strategy emerges. But if the venture is concerned about its size from the very beginning, it may gamble on over-expansion which may lead to failure of the new venture.

Inflexible processes:

While resources as such as technology, cash and technical talent are flexible and can be used for different purpose, processes are not. Processes are more inflexible than resources. Processes are usually not adaptable but are meant to do same job reliably, and repetitively. Hence, if a process works well for a particular task, this does not mean it will work well for other tasks as well. Failure can occur when disruptive innovation is attempted, keeping existing processes in place. For example, Sony brought out 12 disruptive innovations (in radios, tvs, vcrs and walkmans, to name a few) between 1950 and 1980. These innovations created new markets, and brought down industry leaders. However, between 1980 and 1997, the company was not able to bring out a single disruptive innovation.  Sony relied increasingly on sustaining innovations.  Though the playstation, and the Vaio Notebooks were dramatic products, they were introduced late, and in established markets. What brought about this change in the company’s capacity for disruptive innovation? Before 1980, Akio Morita and his team used to decide on new product launches. No market research was done. The process of decision-making was based entirely on intuition. When Akio Morita retired from active management in the 1980s, decision-making was left to newly recruited marketing and product planning professionals. These professionals institutionalized data-intensive, analytical processes for market research. These processes identified segments in existing markets where customer needs were unmet, but the personal intuition required for disruptive innovations was missing.

Organizational values that are hostile to disruptive innovation

If there are rigid values in force in an organization, a separate independent unit or venture should be created to deal with innovations. Values play a crucial role in decision-making in the organization. Values are often more inflexible than resources. They are integrated in the minds of top executives, other managers and employees. Even the suppliers and distributors associated with a particular firm hold certain fixed values. A new venture may be more successful than an existing one in targeting orders to attract better resources and utilize new opportunities. When new sales people, distributors, and retailing channels embodying new values and ideas are employed, the chances of disruptive innovations breaking through are improved.

Bringing Simplicity and Convenience to customers

A disruptive innovation succeeds when it brings simplicity and convenience into what the customer is doing. It must minimize the need for customers to change their lives in ways they are not inclined to do. An innovation should aim at disrupting the competitors and not the customers. In order to find what the customer is doing, observation is necessary. A popular method to know what the customer is doing is to conduct market research. But market research can mislead organizations. Customers do not always tell surveyors about what they do. It is necessary for organizations to watch the customers to know what they are doing.

Many times, innovations do not materialize due to the incompability of resources, processes and values. The success of a few companies often inspires other companies to attempt innovation. But these successful companies operated under different circumstances and with different independent variables, from the organization in which disruptive innovation is being attempted. It is only the organizations that identify the variables in their unique situation, and manage them well, that can succeed in disruptive innovation.

Acknowledgement: Leadership and change management - Book by ICFAI center for management research

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