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Kim Sivillo, Director of Client Services
Twitter: @kimsivillo

"The concept of ‘disruptive innovation’ is, in an understatement, risky. The article concludes that while this is a “messy process with sweet rewards,” disruptive innovation is also a make-or-break model of doing business. Companies and brands that are excited to try disruptive innovation should practice the models of “incremental” and “breakthrough” first. If they succeed and the “disruptive” prospect is tempting – proceed with caution. Companies that succeed via disruptive innovation must realize that they cannot rest on their laurels; they must continue to innovate in order to stay ahead of competitors who may take their lead and then attempt to step ahead of them."

Are You Really Ready for Disruptive Innovation?


ChiefExecutive.net
by Patrice Murphy and Daniel Dworkin
May 30, 2013

Innovation is a powerful competitive advantage that starts with company leaders taking time to decide what kind of innovation they are after before determining the appropriate course of action:

Incremental innovation demands rethinking existing products or services to increase value. Tweaking a product design, streamlining a financial process, or evolving a marketing approach are all examples of incremental innovation. In many high performing organizations like GE, this is part of the organization’s culture and day-to-day operations.

Breakthrough innovation develops “game changers,” moving an existing category in a completely new direction. For example, Toyota Prius – the first commercially available hybrid car – challenged basic assumptions about what consumers wanted in a vehicle and reinvigorated the car industry. Breakthrough innovation often slaughters “sacred cows” (e.g., car companies need the oil industry), making it a challenging process to lead.

Disruptive innovation invents an entirely new game. Disruption happens when the current market moves in a totally different direction, or is replaced by something completely new. Think Amazon and its impact on book selling and publishing. Disruptive innovation emerges from the chaos of collaboration. One of the reasons Marissa Mayer wants Yahoo employees in the office is so ideas can collide and coalesce, to capitalize on new opportunities and tackle big challenges.

Salesforce mastered disruptive innovation – the toughest, least understood and most elusive of the three – early on by doing something new in an “old” market. And the company continues to disrupt the marketplace, leading the charge into cloud computing and now helping its customers become “social enterprises.” It has left competitors playing a never-ending game of catch up.

But resource investment for truly disruptive innovation is considerable and the odds of success low. The rules for launching, managing and measuring disruptive innovation are different, leaving it hard to manage, especially while keeping the core business running smoothly. Leaders considering the disruptive innovation path should pause at three decision points to determine how ready they – and their organizations – are to switch gears.

Are we prepared to ask, not tell?

Leaders must determine their openness to a quest, not a particular destination. Disruptive innovation is not born of a 50-page business plan churned out in a snazzy template. It starts with questions, not answers. The need for a high degree of customer involvement, rapid cycle experimentation and learning, means leaders must be prepared to sanction counter-cultural or even cannibalistic activities. Testing assumptions demands being okay with the possibility that they are, well, wrong. Team members need to ask customers for feedback on rough prototypes – anathema to many executives who want customers to see only perfect product. If the leadership team is not willing to risk failure, disruptive innovation is doomed.

Salesforce.com drives the search process by listening to customers’ direct feedback, collecting data on how they interact with products and services, and observing what they are talking about with one another. In many cases, the engagement approach is passive. Salesforce simply provides a platform for information sharing, resisting the temptation to jump into every conversation in response to different customer insights.

Where will ideas for new business opportunities come from?

The suggestion box is alive and well. The stimulus to start a new business can come from anywhere, including employees inside the company, outsiders demanding to know why a product or process is broken, customers who are expert users of current solutions, and competitors ready to leapfrog into an empty market space.

Salesforce’s “IdeaExchange” is an excellent example of how to effectively crowd-source ideas, and engage buyers and influencers in the innovation process. This homegrown customer community enables not only the sharing of product and service enhancements, but also the ability to like and comment on the ideas of others. Comments that generate considerable likes, builds or questions are valuable stimulus fodder for disruptive ideas.

Some companies also encourage employees to run ideas through a fast-track development process – like Intuit’s 2-day “Lean StartIn” experience that allows teams to brainstorm, test and quickly pivot startup ideas. Others invest huge resources in skunk works to isolate innovators from the corporate mother ship – a better environment to imagine and build a new vision.

Once teams get out of the building, even more ideas emerge for different ways of answering customer pain or gain, sometimes spawning radical solutions disrupting the existing business model. As serial entrepreneur Steve Blank explains, “No new business model survives first contact with the customer.” Netflix CEO Reed Hastings was a customer bummed about a $40 late fee when he imagined a monthly movie subscription model, destroying the brick-and-mortar business of movie rentals, and shifting it to the mailbox and later the Internet.

The trick is accelerating business model evolution in partnership with customers and partners until a viable product or service emerges. Revenue may not be the best way to test concept validity. The leadership team’s role is to spot leading indicators – website hits, contracts signed, orders placed, viral buzz, etc. – pointing to the possibility of a scalable, sustainable and profitable future business.

Are we open to reshuffling the talent deck and breaking the rules?

At Salesforce, executive support for disruptive innovation is extremely high. CEO Benioff is active on Chatter, its internal social networking tool, personally commenting on employee profiles and encouraging them to share perspectives on “what’s next.” A dedicated Product Manager for Ideas stimulates and curates the conversation among Salesforce stakeholders – employees, customers and partners – to uncover both smaller scale improvement opportunities and bold, leapfrog business model innovation ideas.

Once an exciting idea is in hand, going after big innovation goals needs a top-flight and passionately committed team. This could include high potentials, mavericks, or complainers who want to tear down how things are done now and build a better way. Keep in mind, while the innovation gang is off dream hunting, you will need to fill their void. When you find the right entrepreneurial spirit, these people will need to be pulled out of their day jobs to focus on the innovation assignment full time. Big opportunities cannot be tackled after hours at night and on weekends. There is a limit to how far people can take an idea during down time. And you must be willing to leave them alone to get the job done. That means granting freedom to come and go, disregarding policies and procedures, and making quick decisions without running up the chain of command. Clear guidelines and a high degree of trust in all involved are critical.

These questions are just the beginning. Along the path to disruption there will be countless other strategic decisions leaders must work through together. Success demands a big dose of courage, high tolerance for uncertainty, and considerable confidence in your ability to confront the sticking points head on. One thing is certain: it is a messy process with sweet rewards.

Now, who wants some ice cream?

Patrice Murphy is a senior partner and Danny Dworkin is a principal at Schaffer Consulting.