How to foster disruptive innovation

A new year represents a chance to leave the past behind and pick up the leadership pace for a more prosperous future.  It’s the time for leaders to balance the tensions between units responsible for achieving high profit for today and units charged with creating more exciting businesses and products for tomorrow.

An inquiry from a finance company about disruptive innovation made me curious and led me to look around.  There are some local consultants who offer to relieve leaders of their concerns with strategic management towards a more predictable future, but there’s a dearth of enablers of truly disruptive innovation.

A recent study of disruptive innovation, subtitled Rejuvenating the established firm, found four ways to foster disruptive innovation:

• Encourage greater risk-taking
• Accept that failure of some radical innovation projects is a natural part of the learning process
• Make it easy to achieve organisational buy-in, and
• Develop innovation incentive programs that give employees ownership of radical projects

Cambridge University collaborated on the report with research teams from five universities, with funding from four public sources. The report identified the following barriers to disruptive innovation:

• Organisational inertia
• Cultural resistance
• Lack of incentive
• Aversion to risk, and overcommitment to current customers

Megan, our resident analyst, was delighted to see a reputable report that didn’t mention the word ‘lean’, or the phrase ‘lean manufacturing’. But she wondered why, even though the case studies looked at manufacturing, the researchers did not see that the findings were equally applicable to service, retail, ICT and even exploration companies.

The ever-pragmatic Potter, our marketing guru, takes this view: since one can’t be all things to all stakeholders, different people in different parts of a firm should be delivering excellent service to customers and thinking about building value from new customers and new markets.

This discussion raised the question about leading companies’ need for structure, consistency and continuity in order to accommodate radical innovation.  As the report states: “Radical innovations need some form of structure. You need to ensure that it fits inside the strategic or tactical goals of the organisation.” 

That reminded me of the ambidextrous organisation, where leaders foster and balance the tensions between units charged with achieving high profit from today’s business and units charged with creating more exciting businesses and products for tomorrow. Identifying and shaping new ideas and value propositions at the demonstration stage depends more on the exercise of strategic focus than on subsidies.

Innovations can be driven from the bottom up, by entrepreneurially-minded individuals (intrapreneurs) or from the top down through senior management initiatives. The evidence is indisputable that LEAN cuts costs and builds efficiency. Our analyst Megan agreed, but said innovation – preferably breakthrough innovation – should be added for growth.

It seems that across manufacturing and many service sectors that LEAN has replaced quality as the mantra of business success over the last decade. As a former quality systems specialist I have a soft spot for quality. Quality systems are important in delivering customer satisfaction and keeping costs down. Many leading firms are delighted that their competitors see LEAN as the way to go, thus investing in its philosophy and tools.

It is interesting to see that the government’s leading advisor suggests subsidising firms to help them adopt foreign technology. It’s the same strategy that’s been so generous – to the tune of about a billion dollars in grants – to textile and clothing firms for well over a decade, without taking Australia to the top of the innovative league table. On international comparisons Australian businesses are very good at adopting new technology but not at collaborating or taking a lead in bringing new products into a global market.

For those of us wanting to collaborate, the Cambridge findings confirm and clarify some long-established secrets of leading companies.