On August 18, 2016, Sue Bethanis hosted economist, Joshua Gans, the Jeffrey Skoll Chair in Technical Innovation and Entrepreneurship at the Rotman School of Management, University of Toronto and author of The Disruption Dilemma. Gans discussed his new research on innovation theory and the range of actions that leaders can take to deal with disruption.
“The disruption dilemma is “do we go for gold now or do we settle for silver every year?”
- Why do companies that are at the top of their game seem to get into trouble with disruptive innovations? Successful firms have trouble deciding what path to pursue because at first, their customers reject innovation, but eventually they begin to embrace it and the new entrant becomes a real business threat. That creates a real dilemma for an established firm.
- Sometimes something new comes along that in addition to being innovative, is put together in a new and completely different way. Blackberry is an excellent example of this supply side disruption. They just didn’t have the right organization to be able to do what Apple and Samsung were doing. Often, the incumbents are handicapped by the operation and structure that made them successful.
- You need to pay attention to the warning signs: A) a new product comes along and your organization dismisses it without evaluation, and/or B) situations where different parts of an organization have no idea what other parts of the organization are doing.
Tips for managing supply-side innovation:
- Your customers don’t know everything: You need to be actively monitoring new technologies and keep track of what’s going to be the next thing. You need to be strategic and anticipate the needs of the future.
- Acquire new disruptive entrants: Most firms have dealt with innovation by buying the firms that bring the new innovation to market. You must not only acquire them, but you also need to absorb them and their way of thinking and doing. Developing procedures is one way to make these acquisitions successful.
- Have very focused teams on rapid innovation and improvement: There is a cost to this, as you might have a very short time at the top of the industry, but there is the potential to make a lot of money in the short-term.
- Choose the life of the firm: By sacrificing rapid innovation you can lag a bit behind. This does come with a cost as you won’t have as many sales and you won’t be the leader in your industry. But, doing so will make your organization more flexible by breaking up silos and making sure that people rotate across teams. This doesn’t guarantee that a company will survive the next big disruption, but it does increase the odds quite a bit.
What we found most interesting:
Do you want to be gold or silver? Historically, when you choose to be gold you are choosing to be there for a short period of time. When thinking about disruptive threats, it is worthwhile to bring different parts of your organization together to identify and decide how you will deal with them.
To learn about Joshua’s theory and research on disruptive change, and more interesting insights about companies that have fallen to disruptive innovation, listen to the recording here.