Innovator’s dilemma: Balancing disruption and firm profitability

Innovation seems to be everywhere – a common commodity. PHOTO | SHUTTERSTOCK

Innovation seems to be everywhere – a common commodity. What company or organisation does not say they are innovative? It’s a word used quite casually. Is anything new, automatically innovative? Innovation is an element, thought to be as common as carbon on the periodic table, yet it is often as hard to find as the rare earth: Scandium, used in aerospace technology. Innovation is a mindset, requiring a shift in thinking and seeing.

Innovation can be defined in all sorts of ways. One of the most helpful frameworks comes from the innovation thinker: Clayton Christensen, whose 1997 landmark book The Innovator’s Dilmenma – When New Technologies Cause Great Firm’s to Fail is referred to as one of the seven most influential books on management ever written.

For the former Harvard professor, innovation has three types: efficiency, sustaining and disruptive. Efficiency innovations, usually have to do with reducing costs. Ideal is to find a way to reduce the cost of a product or service while maintaining the same level of quality. Sustaining innovations are all those things a company does just to remain competitive.

Lastly, disruptive innovation is the rare earth-like game changer that alters the course of how we do things. Examples would be the internet, personal computers, smartphone, and now artificial intelligence.

Dismal performance

Large corporates are failures at disruptive innovations, that usually come from some quirky, ignored little company producing a product that is thought to have a very limited market, and just isn’t profitable. But what happens is, the small upstart product, created by misfits, gradually improves, and moves up the value chain, capturing market share, and the hearts, minds and wallets of customers.

Managers in corporates are taught in MBA schools to focus on profitability and maximise market share. The innovator’s dilemma is that by following so-called ‘good management practices’, they miss the disruptive innovations, that eventually change the face of an industry. That paradox is the essence of the problem to be addressed.

Don’t despair. Cost and sustaining innovations are quite doable, they just require a dose of creativity, and thinking beyond the obvious. And, banishing fluffy jargon, that just demonstrates fuzzy thinking. Here, one requires some hard analytical thinking, asking two similar questions. What is the job being done – when the customer uses our product or service? And, more fundamentally, what is the problem being addressed, from the customer’s perspective?

In the domain, of disruptive innovations, these come from the tiny start-ups, the small fly that the big boys [and girls] ignore.

See what others miss

Shifting from the broader business perspective to a more personal ground-level view: How does one create innovations? How do you see innovation? Remember Isaac Newton sitting under a tree in the late summer of 1666 watching an apple fall to the ground, leading to his developing the universal law of gravitation, that holds the moon’s orbit in place.

To be innovative – one has to think differently. And, yet it is that ‘thinking’ that may hold us back. Thinking comes with all the heavy baggage of learning, theory, facts and figures, inevitable prejudice, bias and assumptions. It helps to imagine putting all of that in a mental box, popping it in another room, for the moment.

To be innovative the trick is to see what is there in the present moment. Forget the dramas of the past and the nagging worries about the future. Ask: What is the problem to be addressed? Look at it from the customer’s perspective, not what you guess the customer wants.

Ask them, step into their world and see with their eyes. Inquire: in using your product or service, what is the task that the customer is doing? Careful, it may not be the obvious.

Having an innovative mindset, is as much an art, as it is a science. No rush, take small steps. To master the difficulty of innovation requires an awareness of ‘thinking about how one thinks’. And, seeing what others may have missed. These Eureka moments come out of the blue, at the most unexpected times, not when you are sitting in a 9 to 5 corporate cubicle.

Albert SzentGyörgyi said it best: “Innovation is seeing what everybody has seen and thinking what nobody has thought.”

The writer is a director at aCatalyst Consulting. [email protected]