Do you have to be a start-up to set the disruption agenda?
A crowdsourced panel of innovation executives weighs in on how corporate leadership, culture, innovation structures and external sensing capabilities contribute to disruption readiness
Generated by EYQ, an EY think tank that explores leading and emerging trends, focusing on “what’s after what’s next?”
We all know the narrative of the nimble start-up that brings down industry titans. Buffeted by the disruptions springing from the intersections of technology, globalization and demographics, large corporations are too slow, too focused on the most valuable customers of the moment and too invested in incumbent systems.
But what if we could flip the narrative and instead focus on what enables a large company to disrupt, to innovate a new business model that displaces the existing ones in a market?
While the threat of disruption by another business remains urgent, failure to grow may represent an equally urgent disruptive challenge to the world’s largest companies as we enter the seventh consecutive year of global economic stagnation.1
Today, the average company sits on the Fortune 500 for just 15 years. Classic disruption accounts for some of this churn. But so does the failure of some companies to meet the rising bar of financial performance that determines the benchmark’s annual reconstitution.
Rather than talk about how to avoid being disrupted, let’s examine what enables a large organization to seize the upside of disruption and realize radical growth. Classic examples of the kind of disruption we’re talking about include:
- 1980s: Intel’s turn away from commodity memory chips in favor of microprocessors under Andy Grove’s leadership.
- 1990s: Nokia’s decision to focus on mobile phones and cellular network infrastructure for communication service providers (CSPs).
- 2000s: Apple’s launch of iTunes in 2001 and the iPhone in 2007; also Netflix’s expansion into streaming media in 2007 and their entry into content creation in 2013.
GE’s 2015 launch of Predix and its ongoing transformation into an industrial internet company reflect similar ambitions.
Convening innovative minds
To gain insight into this question of disruption readiness, we convened a virtual global panel of 15 chief innovation officers, academics and thought leaders on a crowdsourcing platform. Most of them hold, or have held, senior innovation positions with Global 1000 companies.
We asked the panelists to consider companies such as the ones above and their own professional experiences to address the question:
What are the most important organizational attributes that enable a large global company to disrupt?
Given the immediate profitability pressures, legacy mindsets, established job functions and incumbent talent in most large companies, disruptive innovation is unlikely to impossible in business-as-usual circumstances. To enable a large company to escape this limiting framework, the panelists pointed to a number of attributes — falling under the themes of leadership, culture, innovation practices and external sensing capabilities.
Leadership: models innovation culture, empowers and asks the right questions
The starting point of disruptive innovation is leadership that gives the rest of the organization the confidence to take risks and explore by advocating, celebrating and rewarding disruption efforts. Disruption initiatives should be prioritized by giving them senior executive sponsors and empowering teams to achieve disruption objectives independently. Most importantly, in the words of one panelist, leaders must “ask the right question, and identify the questions behind the question,” to steer the organization in building the right action plans.
Culture: diverse, open, customer-focused
A culture that values diversity of thought, background and life experience — in addition to the traditional definitions of diversity — is essential to the ideation and creativity that fuel disruption. Openness, trust and transparency contribute to interchange and risk-taking. Speed should be valued more than perfection. A commitment to treating failure as an inevitable outcome of experimentation that provides a learning opportunity — ”embracing failure” — enables agile product development and reinforces the other important cultural attributes.
These attributes must be accompanied by an intense focus on listening to the customer in a highly socially networked, fast-moving global community where technology is driving transparency at all levels.
Innovation structures: separate, globally networked
Panelists emphasized the need to elevate the importance of the disruption unit and remove institutional obstacles by separating it from the main business. “Separate” connotes both a physical separation and different governance, goals and reporting lines. However, the disruption unit must interact with rest of the company to set the stage for integrating disruptive innovations back into the organization.
The ability to create a new, disruptive business model turns upon the ability to put together new or disparate ideas, capabilities or technology. Achieving this requires getting people to think differently, together. For this reason, panelists viewed innovation network creation and orchestration as a key capability. Establish networks across traditional silos within the company and globally, empowering people to self-identify and connect over related explorations.
Similarly, it has become more difficult for companies to disrupt on their own due to industry convergence. “It is an ecosystem play. We stand no chance of success if we face disruption alone,” said one of the panelists. Creating and managing business ecosystems of partners and collaborators will become an increasingly important core innovation function.
External sensing: looking beyond
The best ideas often come from companies, people or industries with different experiences, motivations, perspectives and knowledge. Which is to say, disruptive ideas and innovations are likely to come from outside your core market.
To pick up on the weak signals of change and opportunity, a company must look beyond industry, geography and professional disciplines. This involves partnering beyond industry boundaries, using scenario planning, engaging with startups globally and tapping the academic world.
Seek solutions beyond core competences and business lines. “The world is the innovation lab,” commented one of the panelists.
Key attributes of disruption readiness
Disruption is a journey
Our panelists underscored that it's hard to set out to disrupt your business model and that the timeframe is long and unpredictable. Most innovations turn out to be sustaining or incremental. Even disruptive innovations are usually the result of years of experimentation and iteration to make them market ready and aligned to a large market. Rather than setting an explicit goal of disruption, stay focused on looking ahead and the customers’ deepest need.
Our panel reaffirmed the value of the core innovation toolset. Concepts such as diversity, networks, open innovation, ecosystems, empowerment and special incubation structures remain essential. However, the business context has transformed. The world is now massively connected. Digital transformations are dissolving industry boundaries. Ideas are the new unit of value. As a result, corporations must flex the tools and concepts of innovation in new directions, deploy them faster and drive them throughout the organization, leveraging technologies such as crowdsourcing and open platforms.
What to consider on your corporate disruption readiness journey:
- Be the disruptive company. Disruption is a journey that involves activating the organizational attributes that enable the exploration, risk-taking and innovation needed to seize the upsides.
- Disruption starts at the top. The CEO must give license to the organization to be disruptive, by personally modeling disruptive values and supporting the broader set of disruption-readiness attributes.
- Culture and talent trumps strategy. Disruption depends on developing the culture that attracts, retains and empowers the talent capable of both operating the existing business model and disrupting it.
- Symphony, not solo. As companies — and the sectors they operate in — become more porous to the outside, the ability to orchestrate innovation networks and ecosystem partners becomes a disruptive differentiator.
Find out more about disruption readiness at Innovation Realized 2017 – the two-day retreat presenting a uniquely creative and interactive environment in which to explore innovation, collaboration and growth in a digital world.
1. Global Economic Outlook 2017, Conference Board website, https://www.conference-board.org/data/globaloutlook/, accessed 19 February 2017.