Time for disruptive innovation?
I was asked lately, when it is time for a disruptive innovation or a business model innovation? When should a company try to steer away from sustaining innovations toward a blue ocean of less competition.
Well, I would like to open this question to all of you. Please, tell me when you think it is time for change. Do we need a crisis or can we do it deliberately?
Please use the comment function for the discussion.
In my opinion, this question cannot be clearly answered with a certain recipie. Like most things in life it depends.
On the one hand I argue whenever a company can win new markets by introducing disruptive technology, it should do so. Of course, profitability and a match to the company’s image, reputation, and products have to be taken into account. This does not necessarily mean, to give up the (old) sustaining business.
On the other hand a business model innovation should be taken into consideration when the company comes to a dead end (e.g. no profits, too many competitors). In this case it might also be possible to completly rely on recently developed disruptive technologies.
I think you should not wait until you really need innovation, because I doubt that companies find the best innovations when they are under pressure.
Only if a company keeps in mind, to develop, to find new ways to satisfy consumer needs, it will be successful in finding good innovations (either business model or disruptive).
The name of the game is to stay (at least) one step ahead of the others. Particularly successful companies are prone to be benchmarked by others. Not keeping ahead necessarily bears the risk of falling back into the ranks of the ordinary. Continuous development of innovation therefore is the hallmark of successive behavior regardsless of its underlying motives. Whether for keeping ahead, because of need or profit maximization, companies always need to cultivate an innovative culture.
Manage your business like a portfolio. If certain businesses could benefit from business model innvoation to unlock new customer demand, then pursue it. Key is to have a mix of opportunities that balance cash flow with growth opportunity, all focused on creating value for customers, while carefully removing cost elements that don’t support business strategy.
. . . and I agree with Uta – don’t wait. If you think you can see a competitor coming, you are less likely to be right than ever before. Proactively innovate to continue to build strength and brand equity.
I agree with franman that “like most things in life it depends”. However, it does seem that particularly big companies have a tendency to wait with business model innovation until it is (almost) too late. Look at what happened to the major record companies, to airlines or to newspapers. They all waited for too long before trying to re-invent their business model.
Personally, I advise companies to try to build a portfolio of business models and experiment. This can be done while one’s main business model is still successful. Look at Nestlé: They are running Nespresso and Dolce Gusto as two distinct, but nevertheless competing, coffee pod business models within the same group. In other words, they are managing a portfolio of business models in the same industry.
A more experimental example is car manufacturer Daimler, which is testing car2go.com. This potentially disruptive business model allows customers to rent and drop-off cars anywhere in the German city of Ulm and then pay per minute of usage. It could be that car manufacturers will stop selling cars, but move towards selling services like those of car2go. Who knows? However, one thing is sure: testing a portfolio of such strategic options allows companies to be prepared.
Just some ideas, Alex