Monday, April 24, 2017

Disruption and Innovation – Identical or Fraternal Twins?

Are disruption and innovation different?

In business today, both words have been hyped to the point of becoming generic qualifiers or buzzwords. Checking the dictionary does not help; the meanings do not provide a context in which a person or company can promote their idea or product.

In March 2017, I had the opportunity to chair a conference where many of the panelists touted the ability of their institutions to disrupt and innovate. We had a panel on "Lessons from Disruptive Industries" but no one could define disruption and what made it unique from the innovation and evolution seen in every industry. How can we share a lesson when we are not agreed on its message and application?

I proposed a working definition for disruption as:
A smaller group with fewer resources - and a radically different business model /unconstrained by current business model - challenges the incumbent(s) for business/customers. When a non-participant, community or customer adopts the new entrant, disruption occurs.

This presents basic assumptions which further draw a line between the two concepts:

·        Disruptors begin with few or no customers/consumers
·        Disruption takes the community beyond an individual product offering to include the process and all surrounding infrastructure, from technology to governance and related industry(s)
·        Disruptors experiment, introducing uncertainty or chaos to related industries and may birth new ones
·        Disruptors may fail completely, including the fragile new infrastructure being built
·        Disruption brings new habits and behaviours for all participants - disruptors and their consumers
Therefore innovation implies product/process introduction or iteration and has a precedent in an established business model and resourcing.

Why does this matter?

Like their hard-working cousins "transformation" and "change," the concept of disruption and innovation only has tangible meaning when we can articulate their scale and context - which then allows us to understand successful application.
1.      Language sets expectations.
·        We can use the words we want as long as we check that we have assigned the same meaning and implications. We may both say "red" but that does not mean we are envisioning the same colour
2.      Exploration of an idea must include a discussion of assumptions.
·        We can't share a goal if we don't agree to its terms
3.      Most importantly - by its very nature, the risk profile of disruption is different from innovation (large or small).
·        How can we plan and navigate a process if we cannot understand the inherent risk and benefit structure?

What could this definition look like in real life?

Music: People have been listening to music for centuries. Music has advanced and expanded - from its styles to its instruments, evolving over millennia.

In the late 1970s, the Sony Walkman made music portable. I remember my dad being one of the first adopters and his painstaking hours spent moving his reel-to-reel collection to cassettes. While my son would view anything less than wireless streaming as hopelessly outdated, he will never know the joy of being literally unplugged from a stereo system.

There are some who would claim that this began a rejigging of the entire industry – a disruption. However, it was (and streaming remains) an innovation. The business model was established – manufacturing, branding, licensing, etc. models were in place. While the business model has continued to evolve in response to consumer demands and habits, it is still an innovation. Walkmans (and streaming) don't require new audiences or conversions of non-music lovers. The distribution of the money may be in flux but that is business-as-usual.

If the Walkman had failed, the music business would have kept chugging along. The risk was measurable and absorbable in the bigger scheme of the industry.

Light bulbs: We have been using light for as long as we've been listening to music. Personally, I bet music has been around longer. The gentlemen who perfected the lightbulb (approx. 1878) created disruption.

While electricity existed, there was no electricity grid or electric transformers in place; that would come over the next 50+ years, from installing NYC streetlamps late 1882 to the passing of a Federal Power Act and The Public Utility Holding Co Act in 1935. That year, a baseball game was played under electric lights for the first time.

With no were no lamps waiting with empty sockets, no government or safety standards for use or manufacturing (AC or DC?), new industries and infrastructures were created.  Housing, city and factory design was rethought. Consumers emerged from all communities.

If the lightbulb had failed, imagine our world today. We might still have computers and light (and music) but with the introduction of the lightbulb, electric development pace increased, new business models emerged and the gas light industry is dead.

Put your idea to the test
Disruption and innovation are both necessary. Help supporters understand what you are doing and the risks involved.

Disruption aims to…
Innovation aims to…
Transform (full fairy-godmother-to-the-ball-effort)
Change (something different on a large or small scale)
Introduce element of chaos
Introduce element of uncertainty
Begin with few or no customers/consumers
Begin in established industry
Turn  non-participants into participants
Deepen relationship with existing community and invite new participants
Envision a new business model
Operate within an existing business model
Experiment & accept failure
Improve  & accept measured risk profile
Introduce new behaviours, policies, thinking, etc. to multiple and potentially unrelated communities and industries
Influence, change or replace habits and policies in limited, related communities, industries
Is often a catalyst for innovation in other areas
Reflects evolution and can spur change in related areas

So what's next?
At the conference, it became obvious that those of us being disruptive and/or trying to push an innovation agenda can work together. The workforce is changing, along with technology and global politics to the point where status quo means sliding backward. To embrace and embed the fraternal twins, Disruption & Innovation, we need to understand their different natures and measurements and then apply our ideas as hard as our risk tolerance allows!

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