Don’t fear disruptors: learn from them

Disruption is inescapable. But rather than running for cover or attempting to bulldoze competitors with ill-fated disruptions of your own, listen, learn and adapt in a way that works for your future, and your customer’s. Disruptors help us challenge preconceptions and ask, what business am I in? What am I missing? What have they seen, that I haven’t? Find the answers to these questions, and you will be ready for what comes next.

 

First, does not necessarily mean best.

Kodak engineer Steven Sasson invented the world’s first digital camera in 1975, decades before the devices were shrunk down and squeezed into mobile phones; a disruption that ultimately led to the 120-year-old company’s bankruptcy. So what went wrong? “Kodak created a digital camera, invested in the technology, and even understood that photos would be shared online,” prompts the Harvard Business Review. “Where they failed was in realising that online photo sharing was the new business, not just a way to expand the printing business.”

There are many reasons why one idea fails and another triumphs. But a reluctance to change or an inability to adapt fast enough, is among the most common. Rather than adapting their world view, Kodak made the mistake of trying to fit a new technology into an old business model.

Preventing disruption is impossible. But if businesses can think and operate like disruptors, it can equip them with a resilience and flexibility necessary to adapt, fast. Predicting the future is also impossible. But if we educate ourselves on likely outcomes and equip teams with the tools and techniques they need to experiment and learn, that ability to adapt at speed is compounded.

It’s an enormous challenge. But it’s also a challenge that can force a company to hone its core purpose and, in doing so, secure its future. If Kodak’s fall teaches us anything, it’s that sticking to the status quo – just because it made you successful in the past – is a grave miscalculation. It prevents you from asking bold questions that could hold the key to your future.

“Companies should prepare for disruption but not actually be disruptive. This means being flexible, understanding their competitive advantage and having an organisational structure that can change and evolve"

Joshua Gans

Purpose-driven innovation is key to weathering disruption

In the 1700s manufacturing advancements transformed the textile, agricultural and transportation systems. Today, exponential technologies – from artificial intelligence to augmented reality, nanotechnology to robotics – are ensuring no sphere is safe from disruption. According to Credit Suisse, 80 per cent of industries that existed in the US in 1900 no longer exist or are small today. And while estimates vary wildly, some 375 million workers are expected to be displaced by emerging technologies.

“Businesses simply cannot keep doing the thing that made them successful and expect success to be infinite,” argues Dan Quinn, Business Group Director at Happen. “Yet most companies are structured to do just that. They have a finite business model, and are structured in a finite way. It also means, they have a finite lifespan.”

Change is not a known, finite entity – so your innovation behaviours can’t be either. In the context of rapid technological and cultural shifts, businesses need to ensure their purpose is directly tied to long-term change. “You need to ask – what’s our role in helping build a better future world? What’s our reason for being?” Quinn says. “If you’re an automotive business and your longterm purpose is to provide transportation for all, you should be exploring everything from air travel to teleportation technology. Once you define your purpose, it becomes transformative: it acts as a north-star and filter with which to audit your innovation culture, systems and roadmaps. It sits above everything and ensures your business is on the right trajectory.”

This theory is reinforced by a paper in the journal Organization Science, “Corporate Purpose and Financial Performance”, which aimed to prove a link between a company’s purpose, and its profit. Researchers from the University of Pennsylvania, Columbia University and Harvard Business School surveyed 500,000 workers, asking how they perceived their employers. “Firms exhibiting both high purpose and clarity have systematically higher future accounting and stock market performance,” it concluded.

A successful startup is created with a singular purpose. It’s not looking for a new market; it has already done the groundwork and identified a profitable gap in the market. All hiring, structures and project work is designed entirely around that purpose, so everything is focussed to get the startup to its goal. If an incumbent were able to gain that same sense of clarity around a singular goal that holds enormous future potential, it could grow even faster – and with the added possibilities of scale that come from heritage, resources and reputation.

Every element of the business must feed the longterm purpose

A transformative purpose makes adaptation faster, because it informs every stage of the innovation process. “It enables more efficient decision-making because you will always have a context in which to make those decisions,” points Quinn. “When you’re wondering where to invest, you just need to work out if it’s part of your future. It’s a framework for lasting change, where all systems compound to create impact.” He likens the approach to healthy living: it’s something we all know we should be doing, but many put it off until their first health scare. “The need to transform is thrust upon them by the context – but if you have a vision of healthy active old age, and spend half an hour walking every day, the benefit compounds unbelievably. Suddenly, you find yourself in the 1 per cent of people that can do anything they want to do.”

“It’s the same in business. You either wait until you have no choice but to change, or you put structures in place that mean progressive transformation isn’t abrupt and difficult – it’s something you work towards. You might not see the benefit in the first six months, but if you have the confidence and the right vision, over time those benefits compound.”

This structural groundwork is perhaps the most vital part of surviving disruption. Joshua Gans, author of The Disruption Dilemma, warns: “Companies should prepare for disruption but not actually be disruptive. This means being flexible, understanding their competitive advantage and having an organisational structure that can change and evolve… Incumbents need to avoid organisational sclerosis whereby it focuses on being efficient today, at the expense of being flexible tomorrow.”

Incumbents with a strong purpose adapt to win

Dyson is a perfect example of an incumbent that adapts its business model to a fast-changing market, while playing to its core strengths. The British company spent generations building its heritage and desirability in the vacuum sector, then successfully launched a hairdryer in 2016 for hundreds of pounds more than everything else on the market. The product was embraced because it adhered to Dyson’s core purpose: using engineering expertise to make an everyday task less frustrating, more efficient, beautiful and desirable.

Ensuring the entire organisation is onboard with its core purpose, is also paramount. “Corporate Purpose and Financial Performance” found that companies perform better when mid-level employees held “strong beliefs in the purpose of their organisation and the clarity in the path towards that purpose”. All structures and rewards must therefore be setup to foster these behaviours among teams. Human resources startups are already helping businesses achieve this through a combination of bots and AI. Humu, for example, founded by a trio of ex-Googlers, uses ‘nudges’ to modify employee behaviour and increase productivity and wellbeing.

The disruption myth

Clayton Christensen first introduced the idea of disruptive innovation in 1995 in the Harvard Business Review, to global applause. In the two decades since, the original definition has been lost in the noise of the crowd as every other startup claims to be disrupting our universe. According to the original model, for instance, Uber is not an example of disruptive innovation because it invests in “sustaining” innovations. Sustaining innovation, is what incumbents tend to do well. And there is no rule that says they must always be disruptive to survive. “Incumbent companies do need to respond to disruption if it’s occurring, but they should not overreact by dismantling a still-profitable business,” warns Christensen.

Instead, big companies should be focussing on a disruption-proof mindset, utilising methodologies or philosophies from startup culture when appropriate – but above all else, adhering to their core, long-term purpose. The result is a company that remains curious, receptive to change, and fast to respond to and creatively exploit signals of upcoming evolution in the market.

Christensen recommends creating a new division within a business, specifically focussed on “growth opportunities that arise from the disruption”. Sharing learnings company-wide from within those divisions, is vital. Gans says: “Good approaches include avoiding silos that don’t talk to other parts of the business and CEOs who take too much of a hands off approach and do not work at integrated plans across business units.”

Combined, visionary leadership and a strong sense of purpose – communicated effectively and company-wide – can have an enormous impact on future growth. “You can’t just dip your toe into the future,” reminds Quinn. “You need to make fundamental changes to the ways in which you think, grow teams, invest and evolve. Do this, and you will get to that future intact – and ready to innovate.”

Want to learn more about disruptive innovation? Contact Dan Quinn: DanielQ@happen.com or click here.