Disruptive Innovation

What if businesses failed NOT because of the things they did wrong but because of the things they did RIGHT?

You might be thinking, “Now what’s Mark been smoking?”But those are the words of Clayton M. Christensen, Harvard Business Professor and author of the book, The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail.I am just about finished with this amazing book and I have to tell you it has shaken the foundations of everything that I have believed about innovation. Christensen makes the point that when companies focus on products or services that are currently profitable and in high demand, they ultimately weaken the strength of both their market position and their ability to lead and grow.This is in sharp contrast to what we have been taught as marketers. That is to pay close attention to what our customers are saying. It’s been drummed into our heads for years: “The customer is always right.” Marketers spend millions on research, focus groups, regression analysis and more. These findings are often the basis for establishing innovation within companies and industries. Christensen takes issue with this type of strategy. His contention is that blindly ascribing to this philosophy can be the very thing that STANDS IN THE WAY of innovation.He shows that regardless of the industry, (pharmaceuticals, retail, automotive, steel, computers and financial services), market leaders often will abandon the truly innovative niche oriented products and services in favor of the current broad demands of consumers. This creates a vacuum for the nimble, entrepreneurial companies to catch the next wave of growth by creating products and services that are more innovative. Consumers then abandon their long-held preferences in favor of this more innovative category.This being said, it can not be denied that many market leaders have succeeded BECAUSE they have listened to their “next generation customers” and developed products and services for that “next generation customer.” However, the “Innovators Dilemma” is that some of those same companies have ended up FAILING for the very same reason.An article on businesswire.com illustrated that one-third of the companies listed in the 1970 Fortune 500 had vanished by 1983 and attributed almost all of this demise to companies not anticipating and embracing disruptive innovation.How can business leaders determine precisely WHEN to listen to their customers or WHEN to invest heavily in products and service that may be “ahead of their time?” Christensen demonstrates that understanding the phenomenon of “disruptive innovation” is critical in understanding when to listen to the customer or when to apply radical change.In many ways innovation is the single most important building block of competitive advantage: giving a company something unique that its competitors lack. Disruptive innovation, however, is a term used to describe innovation that is of a highly discontinuous or revolutionary nature, which is the opposite of evolutionary or incremental innovation.An example of disruptive innovation currently in progress is the DVD industry disrupting the VHS industry. While DVDs were only for the “nerds” or the more “geeky” crowd, today DVDs are becoming the standard in the audio-visual format. The same happened with CDs and audio cassettes, reel-to-reel; 8-track tapes (for those of us in the over 40 crowd), and so on.A potential disruptive innovation might be “flash card memory” (as the technology improves it has the potential to disrupt the disk drive industry). This industry has been through so much disruption that it is amazing that some of the players can afford to keep pace with the breakneck speed of innovation. Technologies are innovated and exploited in a matter of months rather than decades.In short, for a discontinuous innovation to be disruptive, successful exploitation is vital, which results in significant transformation of the mainstream market and its value proposition. This theory holds true for simple technologies as well. Think about a simple example such as the light-bulb industry’s disruption of the candle industry and the ball-point pen’s disruption of the ink-well pen.Now think about your industry and the position your company occupies in that industry. What kind of disruption has already occurred? What are the discontinuities that exist? What innovation is expected in the future? What are the consuming “geeks”or “nerds” in your industry looking for? How can you restructure your organization to be more entrepreneurial and nimble in order to respond on to disruptive innovation?All of us need to think of ways that we can apply disruptive innovation to our products or services. Let’s help one another do so. I’d like to invite anyone to use our message board to post questions and comments about disruptions occurring in their industry. I will commit to answer every message and perhaps others can give their input as well. Let’s all work together to help make innovation a standard in every industry. It’s good for the consumer, its good for the supplier and its good for everyone in between.It’s EASY to participate in the message board! To post questions or comments just click on the link below: Disruptive InnovationI will answer them the same day if possible.I hope that this “Business Update” has been helpful in assisting you to improve the performance of your organization. For more information on how the Small Business Advisory Network assists companies in improving their performance, please feel free to contact us at 310-320-8190 or email mark deo.