One of the mantras we hear most often in business is that we need to innovate in order to compete and to be viable. In scouring the best thinking on business innovation, we have discovered that innovation is not a revolution; it is evolution and execution. It is the successful implementation of creative ideas within an organization. It is about challenging whether the business has the right business model. Consistently successful organizations have clear processes around innovation.
In the business world, the distinction between innovation, value creation, value extraction and operation execution is often blurred. This has led to the acceptance of a number of myths as conventional wisdom. Perhaps the most enduring is that the breakthrough idea is key to innovation.
But this is rarely the case. We can all identify companies that have become industry leaders due to a breakthrough, transformational idea. We also know that these companies are few and far between. Indeed, the established business models of many organizations are somewhat less than optimal. Increasingly, executives recognize that their companies’ long-term successes rest on the ability to better understand future trends and to identify their impact on existing operations and strategies. Their refrain is innovating is better than waiting. Executives cannot move fast enough to find the solutions they require in the constantly changing global economy. They search for new ideas, methods and techniques. They create new experiments, new pilot projects and new networks of collaboration. In short, they are searching for seminal ideas that will drive transformational change.
This type of innovation is disruptive in nature. Disruptive innovations either create new markets or reshape existing ones by delivering relatively simple, convenient, low-cost innovations to a group of customers who are ignored by industry. From a technological perspective, disruptive innovation is most often the domain of small companies that are new to a market. Typically, established companies will avoid disruptive technologies and products that lower profits and, they fear, kill the market. This opens the door to entrants who offer products that are simpler and less expensive. Their success leads ultimately to a paradigm shift within the market sector.
Disruptive technology doesn’t just occur. It is messy and halting. Disruptive products frequently take a number of years to realize their full potential. All the while, companies must continue to hone their new business models and innovate beyond their first products.
Disruptive innovation ultimately restructures the very essence of what has existed previously. It reflects a change in the very nature of an institution, concept, method or technique. The challenge for managers is that while transformational change is essential to new growth, organizations must not neglect their core offerings. Profits generated from the core offerings are essential to fund initiatives leading to transformational change and sustainable growth. The key is to put in a set of processes that can simultaneously balance disruption and attention to the core. This point may appear obvious, but it is often forgotten.