Disrupt or Die

Or Is There A Third Way
out of the Disruptive Innovation Dilemma?
If last year was finally the Year of Mobile, 2015 has been the year of Disruption. Disrupt the status quo, disrupt the future, disrupt the disruptors... The D word has been more prevalent in the media than if a Democratic delegate had done dirty deeds at a disreputable Downtown discoteque. One could hardly move for conferences about 'disruptive innovation', or visit a tech blog without hearing about 'the Uber of Food/Fashion/Aviation etc' disrupting the fusty industrial old guard and changing the way an economy will function forever.

Disruption overkill set in a while ago — SXSWi 2014 being an approximate marker — prompting a media backlash exemplified by Jill Lepore's now notorious piece in the New Yorker, rubbishing Clayton Christensen's seminal work The Innovator's Dilemma and soothing, at least temporarily, grey-haired temples across the corporate landscape that were fretting about the hordes of 20-something Fast Company fanboy innovators snapping at their heels.
So where does that leave us now, as evangelists of innovation? Innovation for its own sake is an expensive indulgence, as Google clearly realized when it hived off its more self-indulgent creative projects into a separate entity, Alphabet (or 'Alphabet Soup' as one wag suggested) earlier in the year. Elon Musk, on the other hand, seems to be flying the flag for the 'Innovate or Die' crowd. With valuations almost embarrassingly high for so many disruptive start-ups still searching for a business model, one could argue that innovation per se needs no justification, so long as the market will pick up the tab.

At Castle, we're into sustainable innovation — not just in the sense that Christensen coined as a 'sustaining innovation' (one that supports a company's current product line or proprietary tech) — but in the sense that an innovation worth investing in should be able to stand on its own two feet. Too often, we see proposals for a so-called 'Minimum Viable Product' (MVP) which are actually euphemisms for eye-catching hack-jobs that will see their 15 minutes of flame, disrupt a moribund incumbent, but then fail to make a lasting impression on the consumer.

Short-termism may be acceptable in marketing because of an ingrained campaign culture. The communication channels that marketing operates within have been disrupted by pervasive changes in human behavior and consumer electronics, making agile innovation a daily necessity. But marketing has gone a stage further, not just by adapting to the new media, but by innovating with its product — the message itself. As the likes of Unilever are showing with their innovative hub, the Unilever Foundry, brands can derive significantly more ROI by developing new digital experiences, products, platforms, even business ventures, than by crafting one-way messages that do not maintain a relationship with the consumer.

In this way, Unilever is not only reacting to disruption from external forces beyond its control, but channeling disruptive innovation to bring about change from within. Can other industries follow suit, and not just apply digital innovation to marketing channels, but to the products they develop? No industry could be said to be 'innovation-proof', especially not in these volatile, fast-changing times. The question is: do you innovate to disrupt, or do you innovate to survive?

This strikes at the heart of the innovator's dilemma, which correctly posits that, no matter how prone to innovation one's corporate culture may be, it actually makes better business sense in most cases to focus on boosting profits from current product lines, and that introducing newer, faster, cheaper, better alternatives to continuously delight the consumer can be ultimately self-defeating.
The question is:
do you innovate to disrupt,
or do you innovate to survive?
"You say you want a revolution, yeah we know," Lennon sang drily, "We all want to change the world". Disruption is relatively easy, it's coming up with a lasting replacement with mass appeal that's hard. It takes foresight, for a start.

Christensen observed that established companies, often built on the back of an innovative technology, have a tendency to be 'blindsided' by the growth of a disruptive technology which they have previously dismissed for being flawed. This is one of the fascinating aspects of the rapid innovation cycles that we are in: seeing a technology introduced that may initially appear unsustainable, and then realizing that while it has been operating in the market, it has, almost accidentally, stumbled upon its killer use case, developed a value proposition and achieved a position to bid for market leadership.

Many people dismissed the potential of Uber to succeed in New York City, where you can, most times of the day and in the center of the city, walk out the front door and stick out your arm and get a cab in a matter of minutes. But after years of iteration and product optimization, Uber organically evolved and improved, and now no one would contest that it offers New Yorkers something radically better and more convenient than the old system used to, in certain distinct ways.

Your blogger can recall scoffing at Open Table as some unnecessary embellishment of the simple act of calling a restaurant to make a reservation. Yet it is now hard to imagine life without it, given how painful it can be to call restaurants and wait to speak to a human being, and how quick and simple it now is to bag the available space online, or get a recommendation of alternative times and similar establishments.

Many inventions at first seem laughable, indeed the current buzz around the Internet of Things has thrown up plenty of eyebrow-furrowing material. The 'connected belt' springs to mind, which will tell you if you're eating too much and suggest a healthier diet. Who knows?

One could equally well question the value of the much-vaunted 'connected thermostat' such as those made by Nest, because 'you can use the internet to turn it on and off when you are not there', when of course the battery-operated timer has been doing that perfectly well for decades.

People also once queried the value of SMS on the basis that it is more arduous for a teenager to write a message than say something into a phone. However they had not appreciated how convenient it would be to send a message without someone having to be on the other end of the line to receive it, aka the direct but asynchronous connection, or the emotional shelter afforded by indirect, real-time communication.

The point here is that it's hard to predict how an innovation will behave. Of course, it all comes down to user-friendliness. A common denominator of most disruptive innovations is that they were introduced by someone who wanted to use them personally, rather than being struck by some flash of heaven-sent genius. Aside from the occasional, mind-boggling original inventions, it is not until you have put something out into the market and received feedback from users as to what they like most about it, that you as an innovator are likely to know what a given product or technology is going to be most useful for, and hence the degree to which it may disrupt an industry — or not.
It's hard to predict how an innovation will behave.
Once you've figured out how the product will do the disrupting, there comes the question of where it will disrupt. Have Open Table and Seamless disrupted the restaurant business, by thrusting themselves into the reservations line and ordering queues, or have they just disintermediated an old services provider? Did Trip Advisor disrupt the hotel industry, for example, or did it more simply disrupt the booking system? Air B'n'B, one can claim, goes further in disrupting the hotel industry because it offers an alternative product, as well as busting open the conversation between suppliers and demand.

With so much uncertainty about how all disruptive innovation is going to play out, it's a wonder companies innovate at all. Innovations can go Oedipal and kill their parent companies. For a cautionary tale, consider the invention of the audio CD. Digitizing music at first seemed like a classic case of Christensen's 'sustaining innovation', in that it took the record labels' IP and offered the consumer a chance to buy it all over again on an ostensibly superior format, at higher cost. But then going digital turned out to be the death of the record labels, and they ultimately disrupted themselves out of the game as their primary product became commoditized.

Leaders in innovation need to be savvy about this and suggest a third way, possibly centered around corporate venture funds that have a strategic advantage over other capital reserves in investing in their own sectors. This arms-length form of innovation can be the best way for established companies to lead in innovation while avoiding the entrenched culture of the parent company, snuffing out any threats from below and from within. Done right, it can also look like free market capitalism healing itself.

As a wise man once said: it's the early bird that gets the worm, but the second mouse that gets the cheese.
Innovation series
This is the second of our Innovation series of insights. Our first insight was Why Should You Show Innovative Leadership?