While innovation is key to success in digital era, radical transformation may not always yield results
The consequences and impact of a disruptive change is generally unknown adding severe amount of unpredictability to the business.
Disrupt, or get disrupted,” John Chambers, executive chairman and former CEO of Cisco, said during his conversation with CNBC’s Tyler Mathisen.
While innovation is the key to success in the digital era, it is being made to believe that innovation is only possible if you change your business in some radical way i.e. if businesses undergo major disruption. However, the results are not so encouraging. As per McKinsey research, 94 percent C-level executives are not happy with their innovation effort. Around 60–70 percent of disruptive ideas fail. It’s time we start exploring other models of innovation.
Why disruptive innovation fails for few?
More often than not, we have been explained innovation strategy only through “disruption” lens and that too in the context of modern day companies including Uber, Airbnb, Netflix, Amazon, among others. These examples while highlight the success but cannot be straight away adopted by industry incumbents that have a history and an established brand. Most disruptive programs require considerable realignment of process, people and systems. The consequences and impact of a disruptive change is generally unknown adding severe amount of unpredictability to the business.
Imagine a situation where the entire company is radically reformed but fails to impress the customers. Does the brand stand a chance to recover? Innovation is a journey and not a destination! The framework should allow organisations to try, and if they fail, then “recover”.
Interestingly, Lego in 2003 had almost gone bankrupt because they picked up the disruptive approach to face the competition and revive sales. They developed too many different products very different from their core business in the name of disruptive ideas. Lego was put back on track when they went back to focus on the core and started augmenting and completing the key products.
When Ron Johnson became the CEO of J C Penney in 2011, his team decided to implement extremely bold and disruptive ideas. They eliminated coupons and clearance racks, filled stores with branded boutiques, and eliminated cashiers, cash registers, and checkout counters. Yet just 17 months sales had plunged, losses had soared, and Johnson had lost his job.
Consider a risk-free innovative approach
In order to think of an alternative to big, disruptive and radical approach for innovation that is risk-free and affordable, we need to first discern “disruption” from innovation. The commonly accepted definition of innovation is about creating values by meeting unfulfilled needs or serving the customer better through new products or services. It is interesting to note that nowhere in the definition there is a mandatory dependency on disruption and yet as a panic reaction most of the brands try to desperately think of a disruptive idea when faced with competition, in their attempt to innovate.
Lego’s successful turnaround throws light on the “other” model where innovation effort when shifted from disrupting the core product to innovating around the core product, helped them bounce back.
In his book David C Robertson, Professor at the Wharton School, calls this as the third way of innovation where in place of disrupting the core, one strives to get better at serving customer needs by innovating around the core product or shall we say complimentary innovation.
The desire to fulfil customer needs in turn helps shift the focus from how “new” is the idea to how “good” is it. The shift invites a wider range of ideas: taking existing products, services, technologies to a new market or to a new group of customers. Given that there is always a plethora of good ideas, it forces the culture of experimentation to select the best in terms of effectiveness and impact. You are no longer talking about “the” one idea but a portfolio of good ideas. Conducting experiments to show value ensures that the organisation survival is not threatened even if few ideas fail.
One of the advantages of complimentary innovation is the close examination of customer journeys and the associated context. This brings the customer back to the centre. One of the big reasons for failure of disruptive innovation is the lack of customer focus. The customer journey typically touches different functions like legal, finance and customer supports, etc. and they too are challenged to rally around to support the complimentary innovation. Most of the time these functions are out of innovation purview.
Every organisation is different, Innovation for one may not be that cutting edge for the other or an old approach for someone else. Complimentary innovation helps the organisation to discover their strengths, focus areas and align their innovation strategy to serve the larger organisational purpose.
While I used the world “alternative” to describe complimentary innovation, I don’t intend to mean that complimentary innovation is mutually exclusive to disruptive approach. Few situations demand complete disruption. For instance, back in the days pagers and typewriters were eliminated with the arrival of mobiles, desktops, laptops and tablets in the market. No complimentary innovation could have saved it.
There are many paths of innovation and not just the headline grabbing disruptive idea. Any innovation strategy focused only on radical ideas is not always sustainable in the longer run. So next time when asked to think out of the box, one must focus on thinking around the box as well.
(The writer is Director, Technology, SapientRazorfish)
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