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Guest View: Disrupting the disruptive innovators – winner takes all

Paul Nunes | March 19, 2014
Disruptive innovation isn’t what it used to be.

Disruptive innovation isn't what it used to be. In the past, disruptive innovations took over a market in measured stages.  Established businesses-incumbents-had time to prepare and fight back. (Many, however, chose to ignore the upstarts for far too long.)

But, as major businesses in a range of industries can attest, disruptive innovation now comes seemingly out of nowhere, upending companies that have thrived for decades in a winner-take-all contest. Must all industries and companies become victims of this new "big bang disruption," and if not, how can they counter with their own innovations?

To counter this challenge, incumbents must understand the new disruptors' modus operandi. At the heart of it, they defy the conventional wisdom that says a company must choose to be either the low-cost producer, the innovation leader, or the most customer-intimate-you can't be all three at once. Big Bang Disruptors do not play by traditional rules: they manage to do all three at once.

Armed with this knowledge, what should established businesses do next?

First: develop a new type of early warning system.  Incumbents need to be able to recognise the warning signs of market intrusion early, and to be able to act quickly, via internal or external "truth tellers."  Originally named for the characters on soap operas who move the plot forward by revealing big secrets, truth tellers are difficult to manage, even eccentric, and they are not focused on incremental change or next quarter's results. 

For example, Yukiyasu Togo performed this role at Toyota. He pushed the company to launch the Lexus brand after recognising fundamental shifts in higher income and spending patterns in the American auto market.  Identifying such individuals is hard - learning to listen to them could be even harder.

Since disruptive innovators see only two market segments (the beta testing segment and then everyone else),  companies need to be able to slow down the new entrants. They may even need to embrace some of their competitors' strategies. 

In retail, incumbents have seen Big Bang Disruptors gather a wealth of online to obtain easy access to market opinion, facts and comparative data; this has enabled them to quickly steal sales and revenues.  Companies like Amazon have struck the right combination of component technologies and business innovations (starting with books - now everything, even groceries) so that everyone knows about it instantly, and the results are immediate and vertical.  

Second, companies must drive their own innovations by taking advantage of the availability of near-perfect market information (e.g. instant price comparisons) and customer-intimacy (reviews and customer opinions). 

Tough-minded management, steeped in big-bang strategy but not encumbered by emotional responses to potentially traumatic change, is required to take decisive action.  Management needs to be ready to shed mature assets before they become worthless, retire old products, and shelve outdated business models.


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