Is Disruptive Innovation the Exclusive Domain of Only Startups?

Steven ten Napel By Steven ten Napel on March 9, 2016

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“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change” - Charles Darwin

In my earlier blog (http://blog.comakeit.com/every-company-is-a-software-company), I have outlined the major technology and business challenges corporations are confronted with, and briefly discussed the risks of not embracing innovation, and showcased the rewards of adapting to the changing landscape. In this blog, I would like to address a very important question often asked by corporations: “Is disruptive innovation the exclusive domain of only startups?” First, let's start with addressing a very basic question.

 

What's disruptive innovation?

While there are many definitions floating around, I prefer the simplest:

  • “the kind of innovation that transforms what exists, and creates what didn't before”
  • “innovations that create new markets, new business models, and new categories of customers”*

While there are many examples of disruptive innovation, some standout for their impact on modern economy and society; for example, while expensive mainframe computers existed and were in use by major corporations and universities, personal computers created a completely new mass market that didn't exist before. One can add the likes of Apple, Google, Netflix, Amazon and many others to this illustrious list of disruptive innovators.

Intrinsic traits of disruptive innovators

Very often, we see disruptive innovators with the following differentiating characteristics:

  • entrepreneurial and risk taking
  • dissatisfaction with status quo
  • unafraid to experiment
  • high tolerance for failure

If you consider the above cited internal characteristics to be one side of the innovators coin, the other side of the coin is the equally important market and customer focus that differentiates the innovator from the crowd.

Extreme customer centricity and relevancy

"Everything is becoming digital and because of that the value of the human touch is increasing every day," says Steven Van Belleghem, author of When Digital Becomes Human: The transformation of customer relationships. "This statement is based on the law of scarcity — when something becomes scarce, it increases in value. The one thing that will become scarce in the customer relationship of tomorrow is the pure human touch and because of that its value increases," he says. As a result, companies are dealing with a double transformation - digital and human. The successful innovator is someone who excels at both the digital part as well as the human part of the transformation. At the heart of the human transformation is ‘Extreme Customer Centricity’. Companies with extreme customer focus will acquire the agility, quality, and innovation to stay relevant to their customers, which is the cornerstone of their success.

Apple with its focus on extreme customer ease of use as the basis of its product design, and Amazon with its laser sharp focus on wow customer experience, are great examples of companies which have put the customer at the heart of their business, and achieved phenomenal success.

Success in brick and mortars doesn’t automatically translate into digital success

Consider the case of Walmart with its phenomenal success in physical or brick and mortars retailing. It was always recognized for its technology savvy and had the reputation for attracting bright software engineers to be part of its IT team at its headquarters in Bentonville, Arkansas. But even then it failed to capitalize on its strengths and embrace the ecommerce revolution and fell behind the likes of Amazon.

While there is no simple answer in this case, one can theorize that incumbents often tend to fail in the face of technological change simply because of the existence of a large and successful pre-existing business in a similar field, and in fact their own success ends up being a huge handicap.

Existing companies are also capable of disruptive innovation

As I have illustrated above, even though startups are naturally equipped with the DNA to be a successful innovator, established businesses can also be successful at innovation. But one has to be aware of the digital and human transformations needed to tackle the challenges associated with innovation to be in tune with the emerging business landscape.

It is my submission that there are many existing companies and businesses which excel at disruptive innovation, while some failed.   

Companies like Xerox, Disney, and Apple are just a few examples of businesses which are not startups, have a legacy of success, and yet came up with not only disruptive, but transformative innovations, that have changed the status quo and created enormous business and customer value.

Digital transformation and innovation strategy 

 

As I have outlined in my earlier blog, the tremendous changes happening in the technology landscape especially SMAC, Big data and IOT offer an unparalleled opportunity for companies to fundamentally transform every aspect of their business, discover new business models, and enhance their relevance to the customer.

It is critical to understand the role of technology in business transformation, and as leading analyst Forrester has pointed out:

  • Business transformation has become a critical part of innovation strategy
  • Digital requirements are driving the business transformation initiatives
  • Majority of the transformations are enabled by software

It is therefore imperative for companies to acquire the ability to rapidly design, develop, and support high quality software that can facilitate the digital transformation of their businesses. In my next blog, I will talk about the kind of organizational change needed in existing companies to acquire the skill and ability to develop software IP.

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Steven ten Napel

CEO

 

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