Fostering disruptive innovation © Darryl Bubner, CEO Disciplined Innovation, January 2012

A new year represents a chance for us to leave the past behind and focus our leadership on a more prosperous future. This is the time for enterprise leaders to pause and reflect on balancing the tensions between business units charged with achieving high profit from today’s business and those charged with creating more exciting businesses and products for tomorrow.

An enquiry from a finance company about disruptive innovation led me to look around. There are consultants that offer to relieve leaders of their concerns with strategic management towards a predictable future but enablers of truly disruptive innovation are a sparse commodity.

A recent study of disruptive innovation, titled ‘Rejuvenating the established firm’, found that there are 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

The report came from a collaborative effort led by Cambridge University. It involved a research team with members from five universities with funding from several private and public sources. This report also identifies the barriers to disruptive innovation. They were

organisational inertia cultural resistance lack of incentive aversion to risk, and over-commitment to current customers

Megan (our resident analyst*) was delighted to see a reputable report that didn’t even mention the phrase lean manufacturing. However she wondered why, even though the case studies were of 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 the view that, since one can’t be all things to all stakeholders; different people and 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. Megan pointed to a section of the report that 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 framing value propositions at the demonstration stage or on the commercialisation of technology 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. I reminded Megan that the evidence is indisputable that LEAN cuts costs and builds efficiency. She agreed and said just add innovation, preferably breakthrough innovation, for growth.

It seems that across manufacturing and many service sectors that LEAN has replaced quality as the thought-god of business success over the last decade. Now as a former quality systems specialists I have a soft spot for quality. Quality systems are important in delivering customer satisfaction and keeping costs down, and they become essential as small firms grow to medium sized companies. Megan retorted that she knows leading firms who are delighted that their competitors see LEAN as the way to go and are investing, with training, manuals and so on, in the lean philosophy and tools.

On international comparisons Australian SMEs are very good as 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.

* Megan and Potter are fictional characters that appear in Darryl’s blogs; or are they?