How to Create Disruptive Innovation (without the corporate immune system killing it)
Disruptive innovation in an established organization is like a virus in a person’s bloodstream — the immune system’s first reaction is to fight and kill it. This means that if an established company really wants to innovate — after all, it would be dangerous not to — the work has to be done on the edges of the organization.
This idea is one of the key messages from Singularity University’s Founding Executive Director Salim Ismail who wrote the best-selling book Exponential Organizations.
Large, established companies’ struggle to create disruptive innovation is natural if not expected. Their mandate is not to disrupt, but to scale the existing business, maintain, and protect it so that the company can grow even bigger and stronger. Just like a mother protects her children to make sure they grow up strong and healthy.
While this is fine and also important, it’s out of line with the world we live in. Today’s world is exponential. Disruption is happening left and right and it’s impossible for a company to protect itself with the tools and methods of the past. Large companies are world champions in scaling existing products and incremental innovation, but that’s no longer enough. I promise you that there is a startup waiting in the wings on the road to provide the same offering smarter, faster, and cheaper with the same if not greater value. The question is what you should do about it.
Truth be told, an established organization is lucky if they even see their disruption coming. Startups operate under the radar. They move in completely different circles and are hard to size up when they are only a five man team who just wrapped up their first round of funding. But that’s of course only until they’re not little anymore. It took Slack only eight months to go from zero to a billion dollar valuation. Eight months! No executive would ever have suspected that from their high-rise corner office. Such growth is unprecedented, but becoming more and more commonplace with the rise of exponential organizations.
So, what to do?
There are luckily a lot of things that companies can do. They’re not easy, but hey — if they were easy everyone would do it. Here are four suggestions for how you as an established business can innovate on the edges of your organization and thus maximize the likelihood that your company is also going to thrive in the future. The recommendations are listed in order of how many resources they require in regards to money, time, and manpower.
1. Build an X Division
This is very resource consuming.
In Denmark, for example, Danske Bank, built its own X division as inspired by Google’s Moonshot division Google X, which brought us Google Glass, autonomous cars, and other out-there ideas. They pulled existing employees or hired around 50–60 individuals to disrupt their existing products and shape the future of banking. All of this takes place in a separate office away from headquarters and daily operations. No one is allowed to talk about what they are working on. Because of this, the X division becomes like a Trojan horse within the corporate framework. They’re right under everyone’s nose, but still largely invisible. In addition to being isolated, the X division also uniquely reports directly to top management. The chances of success are upped when the layers of bureaucracy are removed and the division can appeal to key decision makers (although it’s probably a good idea to skip the CFO) who is able to guide them and allocate necessary resources without too much red tape.
2. Become a partner in an incubator
This is relatively costly.
If you do not have the resources to create your own X Division, working with a professional incubator and thus drawing on their ecosystem and expertise can be an ideal alternative. Our own thinkubator is featured in the book Exponential Organizations as an example of a corporate crowdfunded incubator. Established organizations pay a fee to go through thinkubator’s facilitated innovation process, part of which includes a 10-week accelerator program with startups. Corporates work directly with and are granted access to the startups’ brainpower enabling them to leverage disruptive thinking for new products and concepts. And it works. Like with the X Division, internal incubation requires establishing an ecosystem, hiring the right staff, finding entrepreneurs, an ideal location, and the right innovation process. Instead of doing all of this on your own, companies can tap into existing programs that have this infrastructure in place. Such professional matchmaking is also neutral because it takes place outside of the organization thus having the similar benefit of an offsite X division. Danish publishing house Saxo.com is an example of a company who reaped the benefits of facilitated incubation. See how here (in Danish):
3. Make a pop-up X Division
This requires fewer resources.
It’s pretty hard to think outside of that oh-so-famous box, if you’re always putting people into one. So, let’s just agree that in order for innovation to happen we need to drop the hotel method where we team up in dull meeting rooms, with post-it-notes and templates to make strategy and instead get out to an offsite location that can really stimulate creative thinking. At DARE2mansion we aim to provide this environment exactly. An auto body repair shop, turned funky startup co-working space, our facilities are rented by companies looking to host a pop-up X division. Corporates will come to DARE2mansion when the task at hand is clear or they are operating under a defined deadline. For instance, the company that wants to develop a new concept or product will rent our space. The key here is that they already have the team to do it, but need a new environment where they can work in peace, away from limitations and be in touch with the startup ecosystem, which can lend inspiration.
4. Get a “corporate in residence” office space in a startup environment
This requires few resources.
Research shows that innovation and development thrives better in environments that have a high degree of diversity. As humans, it is good for us to get out of our comfort zone. By working out of different environements and sparring with people who are doing projects completely different from ourselves, we grow and gain new perspective for how to solve challenging problems. A good example of this in practice is the innovation platform Kaggle, which makes incentive contests to solve corporate problems. They ran a competition for the insurance industry and the winners were people far outside the domain of expertise. The conslusion? Get out of the corporate ivory tower. Get cozy with entrepreneurs and creative types. An office space in an entrepreneurial ecosystem some days or weeks a month is a super simple, low cost, low risk, but impactful way to do this. Chances are that challenging the status quo and rubbing shoulders with people completely different from yourself will produce results you’d never expect.
No business you are familiar with today, will succeed in ten years if they don’t make the efforts now to disrupt themselves. The same applies to your business. One can only disrupt by doing so on the edges of the organization, otherwise the measures will most certainly be killed by the corporate immune system. The four recommendations above are proven methods that work. The same can also apply to government organizations, which should also think and work as ExOs, but that’s for another time and another blog post (coming up).
If you are interested in learning more about ExOs, you can book workshops and keynotes or read more here.
Kris Østergaard is an international ExO expert and the translator of the best selling book Exponential Organizations into Danish. He is also the co-founder of the innovation bureau DARE2, the startup hub DARE2mansion, and the accelerator program thinkubator.
