The Disruptive Innovation Paradigm has a Crack in It

windshield-rock-chip-repair


A crack just appeared in the disruptive innovation paradigm. Just like when a rock pelts the windshield of your car and a hairline crack appears, I can only expect it to spread and get bigger.

 

Clayton Christensen is ranked the #1 business thinker in the world for a reason. His theory of disruptive innovation has become ingrained into business vernacular, business school curricula, and business strategies around the world. He’s the S#!t.

But if the New Yorker got it right (and I think they got pretty close), the theory of disruptive innovation doesn’t stand up to the test, and has sort of “run amok” in today’s business world. Here’s the oversimplified summary:

    • The theory of disruptive innovation isn’t founded upon robust research, just a few anecdotal case example
    • Although it’s about how one technology disrupts another, it’s been used as an argument for why whole industries like healthcare and education need to be reinvented – which ignores the fact that they’re complex social service systems run by human beings (vs. singular technologies that are ripe for disruption)
    • Disruptive innovation has become synonymous with “progress” which makes it an ironclad defense for anyone who wants to argue for changing just about anything
    • Christensen’s theory doesn’t forecast. It’s retrospective. It predicted that Apple’s iPhone would have failed. It clearly got that wrong.

Thanks to Christensen, the world embraces the concept of disruption as common sense. Who can argue that Netflix didn’t disrupt Blockbuster or the Internet and Wikipedia didn’t disrupt Encyclopedia Britannica? In the world of research, that’s called “face validity” – it make sense on the face of it, so the theory must be true.

But here’s the problem: Disruptive innovation has become business’ biggest paradigm.

Anyone familiar with “innovation” knows about “paradigms.” They’re mental models that contain unquestioned assumptions about how things work. These assumptions are accepted as truths – until they’re not.

The world is flat. The sun revolves around the earth. People get AIDS because God is punishing them for being gay. Paradigms have, and will always exist.

But they can also change.

The problem with the disruptive innovation paradigm is that it’s being applied to just about everything these days. For people like me, who have been living and breathing “innovation” for the last 20 years, just questioning the concept can feel like we’re tying our brain up in knots. But of course disruption is a natural part of life. But of course new ways of adding value will disrupt old ways of doing things.   It’s hard to think about it any other way.

And that’s exactly why we should.

For many years I’ve been saying that disruptive innovation should NOT be part of your business strategy. Why? That’s not how it’s done. Big breakthroughs rarely happen by methodically laying out your “disruptive innovation project.” Few companies or people have the staying power, resources, or vision for that anyway.

In my book, Leapfrogging, I describe how companies like Apple, Google, Gatorade, Nabisco, OpenTable, and many others took steps to solve meaningful problems for customers – or lead customers to entirely new products or services that “felt right” for them to do (thus creating new “needs” in the market). And which were eventually recognized as being disruptive.

Disruptors rarely intend to disrupt. It’s a bi-product of doing something that feels meaningful and then following a path laden with uncertainty and unforeseen surprises. It’s not methodical. And, in my view, no theory (even the theory of disruptive innovation) has bottled up what really happens during the process.

I’m about to publish another article in FastCompany that further lays all this out and includes examples and alternative strategies for innovating.   I’ll post it here soon.


For now, reply and let me know what you think.  Is disruptive innovation a “paradigm” ripe for disruption itself?  Or, it is really a universal law, perhaps the essence of “creative destruction?”

 

 

How to Measure Innovation (to Get Real Results)

MC

Just out – my latest FastCompany article on how to measure innovation: http://bit.ly/innovationmetrics

According to McKinsey, more than 70% of corporate leaders tout innovation as a top three business priority, but only 22 percent set innovation performance metrics.  It’s not surprising there’s a huge innovation gap in most companies.

Some might even argue that the very act of measuring anything “creative” stifles it out of the gate, or that innovation is just plain impossible to quantify. (They’re wrong.)  Measuring innovation is a combination of art and science, which is precisely why it’s tough to do.

Check out the article to learn how to tackle this tough challenge…

 

Key Opinion Leaders & Outside Experts Drive Innovation

 

opinionleaders

 

I’m sitting here at the Philips Healthcare “KOL Leadership Summit.”  It’s all about tapping into outside expertise to drive innovation.  After listening to the first speaker, I wrote this brief article that outlines my take on the broader topic…
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Naval gazing.  Insular thinking.  Drinking your own bath water.

Whatever you call it, it kills effective strategic thinking and innovation.  Many organizations suffer from too much internal thinking, discussions, and focus.  The cost?  Lost opportunities, slow responsiveness to market shifts, and a myriad of other challenges.

Tapping into “Key Opinion Leaders” (KOLs) and other outside experts helps fill the void.  Some companies, especially in healthcare, use KOLs to influence the market and push preference for products, pharmaceuticals, and even medical procedures.  Consumer products companies use outside “Thought Leaders” as catalysts for new product ideas, marketing strategies, and promotions.  Other companies use “cultural icons” like musicians, sports stars, and actors to promote their brands.

So how do you engage and leverage outside expertise and influence to drive your own strategies, innovation, and business growth?

Here are a number of ways to use external expert Key Opinion Leaders:

  • Interviewees to collect trend data to inform strategy and product development
  • Councils or Panels to review new ideas and provide expert feedback on what will (and won’t) work
  • Participants in strategy sessions to help avoid insular thinking and groupthink
  • Lead user customers who get access to early versions of products or services and who help promote
  • Expert testimonials that advocate for a specific brand, product, service or solution

And here are the strategies for defining your KOL strategy:

  1.  Identify your opportunity areas and/or knowledge gaps
  2.  Determine what markets are priorities
  3.  Identify the KOLs or Thought Leaders shaping those markets
  4.  Identify the “early adopter” customers that are reference points for the market
  5.  Determine the best way to use these KOLs to further your strategies and business goals
  6.  Create “program” that engages these outside experts in formal (or informal) ways

Here’s a white paper I recently wrote on Strategic Imagination using external Thought Leaders that highlights how one of these strategies actually works to drive innovation.

Visionary companies don’t just talk to themselves.  They may start there, but they infuse outside perspectives into their culture to ensure a market-driven culture that’s pulled forward by the future.

 

 

How to Innovate Your Corporate Business Function


Disruptive Innovation is as relevant to internal business functions like HR, Legal, and Finance as it is to breakthrough technologies, products, and services.

 

 

Last year I spoke at Disney.  The company wanted me to teach their high potential leaders the ins and outs of breakthrough innovation.  Awesome.

But the end of the session something surprising happened.  A participant walked up to me and said, “disruptive innovation is great, but what does it mean for me and my function?  I’m in Human Resources.”

And that’s the problem.  “Innovation” today is almost exclusively about products, services, and business models.

Most companies enlist R&D and product development groups to find the next big thing that grows the business and creates competitive advantage.  So if you’re sitting in HR, Legal, Finance, Marketing, or other internal functions, finding “disruptive innovation” can feel like a daunting challenge.

One of the best examples of what’s possible comes from the legal department at DuPont. Here’s an excerpt from my book, Leapfrogging:

With sixty-thousand employees in ninety different countries, not to mention a huge variety of products in everything from agriculture to electronics to clothing, the volume of legal work needed to keep DuPont’s operation going is utterly staggering. Patent law, tax law, employment law, contracts, antitrust, intellectual property, class action defense – a company like DuPont simply cannot survive without lawyers, lots and lots of lawyers.

By the early 1990′s, the company’s then-associate General Counsel, Thomas Sager, knew that things had gotten out of hand. At that point, more than 350 law firms were working on DuPont’s dime.  The sheer number of lawyers and their lack of coordination weren’t the only problems Sager identified. There was also a troubling disconnect between the company’s interests and the interests of its legal advocates. For the law firms, everything was about billable hours. That meant, no matter what, they wanted to fight cases to the bitter end. If one of DuPont’s products or the way the company was doing business were truly causing harm, Sager reasoned it would be more profitable to change that product or that business practice rather than litigate the matter for years and years. But the law firms working for DuPont would never recommend such a thing because it would mean less revenue for them.

Sager knew he had a mammoth project on his hands. He also knew that he wanted to do more than just cut costs – he could run his function like most other corporate legal departments, or he could create a new model that would push his own comfort zone, a model that would ensure that his department became a core contributor to the strategic operations of the business and even influence the operating models of the dozens of firms working for DuPont. 

And here’s how he did it.

First, Sager reduced the number of law firms that were working with DuPont. The ones that remained were strategic partners.

Second, he changed the method in which the law firms were paid to a structure that encouraged the firms to solve problems faster.

And, in an effort to remove the stigma of law only being an “old boy’s club,” Sager also made diversity a priority when choosing which law firms to retain as partners. DuPont now has programs and job fairs dedicated to recruiting more women and minorities.

Sager essentially disrupted the legal department.  He challenged assumptions.  He saved the company millions.  He reinvented the corporate legal business model.  He anchored his actions in business results with a greater purpose.

So how do you start to innovate your corporate business function?

1.  Identify longstanding assumptions that constrain what’s possible (e.g., we pay for external legal services by the billable hour).

2.  Determine the desired business results without worrying about these constraints (e.g., we need to resolve cases 10 times faster and at much lower cost).

3.  Brainstorm list of new operating assumptions (e.g., what if we pay incentives to quickly resolve cases?)

4.  Try it out (e.g., test the idea as a pilot project to work out the kinks)

Today, many companies mandate “innovation” across the enterprise.  Internal business functions can be as “innovative” as the products and services their companies provide to the market.

How as your own internal business function innovated?  How have you challenged assumptions?

 

Silicon Valley’s Secret and other Resources

 

Secret


What’s Silicon Valley’s secret?  How do you become #1 out of 30,000?  How do you create a culture of innovation?  Simple questions with complex answers.


These resources will help you leapfrog to your next big thing…

 

Silicon Valley isn’t just a spot on a map. It’s a brand–a global symbol of enduring innovation. Today, companies can create a culture of value creation no matter where they’re based.
Soren’s Rabble Rouser:  “Location, location, location” isn’t what it used to be
Source:  FastCompany

Learn about Google’s amazing job screening criteria and hiring strategies
Soren’s Rabble Rouser:  School is overrated
Source:  New York Times

 

How to Innovate a City
See what New York has done to its “High Line” and how it has transformed the city
Soren’s Rabble Rouser:  Breakthroughs come from the other side of the tracks
Source:  FastCompany

One of the reasons that only about 1/3 of all Fortune 1000 companies have formal innovation metrics is because this simple question does not have a simple answer.
Soren’s Rabble Rouser:  You get what you measure
Source:  InnovationExcellence

There are 30,000 bistros and cafes in Paris.  This little gem is #1.  Here’s how they did it.
Soren’s Rabble Rouser:  Mix great product, business model, & purpose – Voila!
Source:  YouTube

 
 

Crucial Innovation Strategies for 2014

 

Breakthrough

 

As we move into 2014, we must remind ourselves about what we already know while keeping on eye on what’s changing.  Doing so can make the difference between disrupting and being disrupted.

 

When I originally wrote this article for FastCompany, I wanted to highlight several present day realities:

  1. The world is changing – and innovating – faster than ever
  2. Many companies continue to fall into well-known innovation traps
  3. Disruptive innovation requires that we look outside as well as inside at our assumptions, capabilities, and (increasingly outdated) organizational models

Here’s a summary of my original article with my top three favorite strategies…

 

2013 was a banner year for innovation.  Twitter went public.  3D printing went mainstream.  Tesla turned a profit.  Start-up money flowed.

So what did we learn last year that we might apply and extend into the next?  Here are three strategies for keeping innovation flowing and the business growing.

1. Cannibalize yourself.
2013 saw the bankruptcy of a global brand and innovation icon.  Kodak invented the digital camera in their Rochester labs. But the company sequestered the technology from the start, fearing it would lead to the demise of film.  It did.  It just wasn’t Kodak who commercialized and then capitalized on the disruptive innovation. They viewed themselves as a “chemical company” to their dying end by holding onto film while they struggled to get into the saturated inkjet printer market.  Don’t view killing off profitable products as a problem.  If you don’t eat your lunch and reinvent yourself, someone else will.

2. Simplify life for customers, not yourself.
A couple of years ago Netflix announced that its DVD rentals and streaming video service would separate into two distinct offers. Sure, dividing up its two business models would make life easier for the company internally.  But customers hated the idea since they had to split their existing subscription into two and pay for each separately.  Netflix listened and apologized. Outraged customers returned in 2013 and Wall Street responded (the company’s stock jumped almost 300% last year).  The lesson:  Keep things simple for customers even if it means absorbing the complexity.

3. Solve “unsolvable” problems.
Tackling small problems leads to incremental innovation.  Focusing on seemingly insurmountable challenges inevitably lead to solutions that create new categories and markets.  TruTag Technologies’ edible bar codes, introduced last year for example, address the growing pharmaceutical counterfeiting crisis in developing countries – and the World Economic Forum selected the company as a Technology Pioneer to watch in 2014.  Incremental thinking rarely changes the world.

Not all of 2013’s lessons were new, a commentary itself on the state of innovation (as Blockbuster,  Borders Books, and Blackberry for example can attest).  As we move into 2014, we must remind ourselves about what we already know while keeping on eye on what’s changing.  Doing so can make the difference between disrupting and being disrupted.

 

What other innovation and strategic leadership lessons did 2013 teach us?  What’s do you think are the imperatives for 2014?


Here’s the original version of the article

5 Strategies for Nonprofit Innovation

SOSNonprofits face a fundamental “business” challenge:  they’re “nonprofits.” Most of the 1.5 millions US nonprofits don’t support themselves through “competing” or creating better products, services, or business models.  They fundraise, get donations, and find grants.

Historically, the typical nonprofit business model has been based on dependence.  Dependence limits innovative thinking.

Social business is gaining steam.  The Old Skool Café in San Francisco, for example, delivers a 1940’s supper club experience that includes great food, music and service – all delivered by and in support of at-risk youth.  And earlier this year, New York’s Mayor Bloomberg doled out awards specifically recognizing the city’s most innovative nonprofits.

But here’s the challenge: most nonprofit innovations come from socially minded start-ups that invented themselves from scratch.  So what do the rest of the 1.5 million do?

Running a nonprofit today means reinventing existing business models – by acting like a business.

Imagine taking on three of the toughest challenges in America – homelessness, drug addiction, and HIV – all at the same time.  Now imagine the amount of work and dedication that would take, not to mention money.  And now try to imagine doing all of that, and turning a “profit” too.  I put the word profit in quotes because New York-based Housing Works, which manages to do everything I just described, is technically a charity operation. But it acts an awful lot like a business. And a very successful one at that.

In an era when most nonprofits are cutting back, largely because they rely on private donors and government funding, New York’s Housing Works is expanding. It just opened subsidiaries in Haiti, Washington D.C., and Mississippi.  Since Housing Works opened in 1990, an estimated 20,000 people have benefited from its work, and that number continues to grow, thanks to the company’s pioneering “social enterprise” approach.

If Mother Teresa had earned an MBA, she might have turned into someone a lot like Housing Works’ co-founder Charles King. King and his late partner Keith Cylar opened Housing Works’ first thrift store in Manhattan in the mid-90s. This was not your typical Salvation Army-style second hand shop. King and Cylar’s surprising approach began with the idea that thrift stores don’t have to be dingy caves with bins of unwanted scrappy clothes. In fact, they did not accept all, or even most, donations. Only the highest-end goods were allowed in.  “We see ourselves as the Barneys of thrift shops,” King once said.

That first location was so successful that Housing Works soon opened another outlet to handle the demand, and then another, and another still. There are now ten Housing Works thrifts around the city. In 2009, the company expanded to Brooklyn. The new store across the East River made a million dollars in its first year – in the midst of the recession.

By hosting upscale events like fashion shows and celebrity clothes auctions, King and the rest of the Housing Works team have turned the thrifts into must-visit attractions. W Magazine once hailed the stores as the “hottest” in the city, “the place where the city’s fashionistas drop off last year’s Prada and Comme des Garçons.”

The organization has built prestigious brands for its other moneymaking enterprises as well. It recently hired well-known chef Michael Sherman to design the menus for its cafe and catering businesses. Famous writers give readings at a Housing Works-run bookstore. And big time music acts like Bjork have performed at Housing Works benefits.

All told, Housing Works’ social enterprise investments yield a quarter of its $43 million yearly budget. Most of its other revenues come from fee-for-service contracts with the government. Housing Works model seizes control of its future while ensuring its ongoing role in change the world for the better.

Any nonprofit can reinvent itself and its business model.  Here are five strategies for doing so:

1. Think like a business.  Assume your funding will dry up within the next  year.  How would you self-fund your activities?

2. Redefine “customer.”  In addition to those you serve, consider who could become a paying customer.  Who has money that would buy something you have to offer related to your world-changing mission?

3. Package up offerings.  Think creatively about what you “sell,” whether a product, service, event, or experience.  What could you do to add value to people’s lives (that they would pay for)?

4. Don’t go it alone.  Innovation is about partnerships.  What are the for-profit companies that could provide you with resources or revenue in return for positive press or promotion from working with you?

5. Create a sustainable business model.  Measure your organization like a business. What percentage of revenue will come from revenue-generating activities, and how will this evolve over time?

In today’s challenging times, not making a profit doesn’t mean not thinking like a business.  Nonprofits leaders who want to change the world know they must change themselves and their organizations in the process.

Use the “Surprise Factor” for Viral Innovation

Surprises

Infuse the unexpected into everything you do for customers — and deliver a continuous stream of positive surprises.

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When I ask business leaders, students, or friends to think back on their favorite experiences with what they consider truly breakthrough new products or services, many can’t help but smile.  The range of things I’ve heard when I’ve asked the question is immense:  iPads, Disneyland, Diaper Genies, Facebook, snowboards, rollerblades, Zappos, the Swiffer, Etch A Sketch, Crest White Strips, the Amazon Kindle, Skype, the University of Phoenix, MTV, eBay, Segway scooters, Harry Potter books, and the list goes on.

There is a reason for their Cheshire Cat grins. They’re reliving the pleasure of being surprised.  Not the kind of surprise when our older brother jumps out from behind a door and scares the crap out of us. It’s the opposite kind of surprise – the kind that signals delight, appreciation and intrigue.  When we experience a positive surprise, it compels us to do three things:

  1. Want to experience more of it
  2. Learn about how or why it works the way it does
  3. Share it, so we can take a small amount of credit for others’ own smiles of surprise.

When things give us a positive jolt of surprise, we embrace and share them.  It’s not just about recommending a new product.  It’s also about what makes things go viral.

It turns out that there is a physiological basis for these types of positive responses. Our brains are built to like the “pleasingly unexpected.”  Two neuroscience researchers, Gregory Burns and Read Montague, discovered this fact in a pretty interesting way.

Burns and Montague convinced some unsuspecting research subjects to join them for a drink – in their lab.  Their subjects were first hooked up to an MRI machine to measure their brain’s “pleasure centers.”  This is the part of the brain that’s responsible for pleasurable feelings. It lights up like a slot machine when people take addictive drugs or anticipate receiving money.  Once Burns and Montague connected their subjects to the MRI device, they asked them to open wide, just like they might do at the dentist – though what came next wasn’t painful.

The participants hadn’t been told what was going to happen, so no one knew that a computer was about to squirt water or juice into their mouths!  Half of the people received water; the other half got juice.  To further segment their research subjects, half of the people in each of the water and juice groups received their drinks at regular, predictable intervals while the others were continually surprised through random, sporadic squirts.

Burns and Montague presumed that people’s brains would respond most positively to their preferred beverage.  But they found that it didn’t matter whether their subjects’ wanted water or juice.  Across the board, the brain’s pleasure centers were most activated in those who received unpredictable, random squirts, regardless of the beverage they were given.

These two researchers pinpointed the fundamental mechanism behind why we perceive breakthroughs as special: we’re wired to appreciate positive surprise.

Whether it’s iPads, Netflix, or Cirque du Soleil, most of us recognize breakthroughs when we see or experience them because our brains are set-up to appreciate the way they challenge assumptions while adding value to things we care about.

Want to innovate? When creating and testing your ideas, incorporate and measure the “surprise factor.”  Ask yourself:

  • What unexpected benefits, features, or experiences would delight your customers?
  • To what degree does your product, service, or business model elicit positive surprise?
  • What do your customers say or convey as the most surprising elements of your solution?
  • What surprises you about your customers’ reactions?

Positive surprise…  It’s the source of radical innovation and viral customer delight.

 

4 Rabble-Rousing Resources for Innovating the Soft Stuff

 

Leading innovation is about recognizing the importance of formal and informal rewards, communication through storytelling, and giving people freedom while providing just the right amount of structure.

Here are four rabble-rousers from the last few months that will give you an edge:

 

6 Ways to Create a Culture of Innovation

Gain insight into six ways to cultivate your own unique system for innovation for your organization

Rabble Rouser:  I couldn’t agree more (well, I did write it)

Source:  FastCompany

 

9 Rules for Stifling Innovation

Learn what  Rosebeth Moss Kanter says about how to kill innovation

Rabble Rouser:  Killing things is easy.  Creating them isn’t.

Source:  Harvard Business Review Blog

 

Getting Past the Innovation One-Off

See what local governments are doing to foster sustainable innovation

Rabble Rouser:  Isn’t “government” & “innovation” an oxymoron?  Not anymore.

Source:  Bloomberg

 

How to Inspire a Culture of Innovation (through Design Thinking)

Learn what Mauro Porcini, Chief Design Officer from PepsiCo, says about fostering innovation through instilling “design thinking” throughout the organization

Rabble Rouser:  Design thinking is great, but don’t forget about execution!

Source:  Entrepreneur

 

Forget Brainstorming. Use Painstorming for breakthrough innovation.

(download the Painstorming Template)

 

Beautiful sad girl with hurt finger


Most brainstorms fall far short of breakthroughs.  Painstorming provides the focus and insight to leapfrog to the next big thing.

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Brainstorming is today’s no-brainer.  Most leaders and organizations preach it and teach it.  It’s about generating lots of ideas, deferring judgment and then – for savvy innovators – using some type of meaningful criteria to winnow down the laundry list.

Here’s the problem: We often don’t realize we’ve got great ideas for a misguided focus until it’s too late.  A Fortune 500 client of mine once said, “We’re great at executing on bad ideas.” Most of us are absolutely awesome at coming up with creative solutions to the wrong problem.  But as the saying goes, “Garbage in, garbage out.”

What’s the solution?  Painstorming.

Painstorming is the process of uncovering pain points to drive breakthrough innovation.

Instead of jumping to solutions, Painstorming uncovers the fundamental drivers of new opportunities.  No more innovating around the fringes of the problem.

Here are the steps:

  1. Person – who’s the specific person or customer you’re innovating for?
  2. Activities – what are the everyday things they do, why, and to what ends?
  3. Insights – what are the processes, tools, or activities that they unnecessarily do or have invented themselves to “work around” the way things are “supposed” to be done?
  4. Needs – what are the biggest pain points that are the root causes of the customers’ problems, unmet needs, or desires? What are the workarounds, things that cause stress or concern, dissatisfaction, or anything else that’s responsible for their “pain”?

Here’s a simple template for plotting pain points (click image to enlarge or click these links to download PDF or MS Word versions):

Screen Shot 2013-06-19 at 9.05.57 AM

With this, you’re ready to heal your customers’ pain.  Jump back into brainstorming and generate options for solving individual or multiple pain points through new products, services, processes, and business models.

Painstorming solves one of the biggest pain points in the innovation process itself.