Uber disrupted the world taxi market in a couple of years and even the courts are having trouble slowing their growth. Even in other less-Uber-dominated markets, you can still find similar locals services. But in either case the process of disruption is the same.
An industry with a tradition reaching back to the time of horse-driven coaches has been turned upside down and been disrupted by a new service only possible because of available technology with minimal initial investment.
Yesterday I took a ride with Uber in Berkeley and the driver wasn’t doing the job for money. He is close to a public launch of his third startup and drives Uber for three hours each day to recruit students from UC-Berkeley for his startup.
The story entertained me, but it also demonstrated that that the driver has the potential to disrupt the travel industry! It shows that beside the startups already existing, hundreds are waiting behind the scenes “to take over”.
And Uber? It’s commonplace knowledge that Uber’s next big leap will be to disrupt the traffic and automotive industry by introducing autonomous driving on a big scale. Even after they’ve already disrupted an existing industry. In this respect, they are doing exactly what companies should do: planning for the next big leap while they are still establishing the current one.
It’s also what most companies are forgetting to do…
The major obstacles for established companies
As a person working in innovation management with clients around the globe I sometimes can’t believe how little some clients seem to care about a question that should be their number one priority:
“How will the startups waiting behind the scenes disrupt my business?”
But to answer that, they need to consider two additional problems:
- Lack of awareness of vulnerability
- How to facilitate being disruptive as an established player
When we talk about missing awareness, this doesn’t mean that those company are not thinking about risks. That happens all day, what is missing is a structured process to identify the biggest risks and to develop strategies to be unleashed and implemented at any cost once evidence is given that the identified risks are inevitable or likely to hit.
Identify your biggest nightmare!
To do that a company need to create hypothetical scenarios, which outflank the business in the worst imaginable way. If a company can identify its biggest nightmare, they can bet that they also just identified what they must do in the future.
Tesla is a great example for the automotive industry because it’s not a car. It looks like a car from the outside but it’s as much a car as early cars were coaches (when they still looked like coaches).
Turning a nightmare into a dream!
It’s a total nightmare for car builders because they can write off the biggest part of what they deliver today if they would try to do the same. But there is little doubt that electric vehicles will dominate transportation in a time span that it takes to grow a newborn child into elementary school. And if one of the established car builders had been developing an electrical car in the same radical way as Tesla did this company would still be selling standard cars but would have the ticket into the future in the pocket – as a leader!
In theory, the market leaders of today have the resources to reinvent their market space and be the biggest innovation force in there.
So, why is it so hard for them to do groundbreaking, disruptive innovation and avoid what happened to Blackberry, Nokia, Yahoo and Kodak? And why is it so difficult for big companies to establish (and maintain) the ability to innovate, while all of them have innovation programs, innovation departments, and/or innovation officers?
The innovators dilemma haunts us all!
One major driver is the Innovator’s Dilemma. It arises when companies are dominant and start to believe they need to protect their market. From that moment, their focus moves from disruptive innovation to sustaining innovation.
When a company does only sustainable innovation it is inevitable that at some point, a competitor will emerge who outflanks the business with a better alternative. On the other hand, pushing disruptive innovation too hard can minimize the time you have to sell a great and mature existing product.
Because disruptive innovation is a bet on the future with a substantial risk, a lot of companies retreat completely to sustaining innovation. A fatal mistake.
A perfect example is the music industry in the end 90s, which got inventive in creating CD protection… while others disrupted the space completely.
The problem is not the risk of failure but the lack of innovation strategy. A good innovation strategy can resolve the innovator’s dilemma because the root cause of the dilemma is timing and the level of preparation. With a good innovation strategy, a company knows when disruption and when sustainability is more important and the next leap can be prepared behind the scenes, waiting to be revealed once its time has come.
The figure “Disruptive/Sustaining Innovation Cycle” (above) shows that sustaining and disruptive innovation typically happen in parallel. Sustaining innovation starts at the “saturation point” and the disruptive product takes over at the “break point.” The break point is inevitable and the figure reveals what happens if companies do not innovate disruptively in parallel to sustaining innovation efforts: another force from outside will takes over.
In reality, the picture is more complex and similar cycles exist in parallel depending on the structure of the company. The “domination gap” is the most critical part and parallel running processes, which represent success diversity will help to mitigate the gaps.
However, a good working innovation strategy is the only way to control and optimize all these processes including the length of the gaps. Having no innovation strategy is the best way to get surprised by the break point and face a company-wide exponential decline for which BlackBerry and Nokia are again representative examples.
To establish an innovation strategy with the capability to create disruptive solutions in parallel with a perfectly-running product portfolio and business model, a culture of innovation must be established which is executes sustainable innovation in parallel with the worst nightmare scenarios… and then makes them happen!
This blog post is part of a series authored by IdeaScale employees. It showcases how they’re thinking about crowdsourcing and innovation as part of their daily routine. Feel free to ask questions or make comments.
This post is by Hans Dreis, Chief Innovation Officer at IdeaScale.