Why disruptive innovation matters to companies big and small
You hear this word in office meetings, conferences and perhaps even casual networking sessions at a bar. But even though companies are citing “innovation” as their key focus or competitive advantage, there are different types of innovation that are practised.
What disruptive innovation entails
Most big companies involve themselves in continuous or incremental innovation but it is, disruptive innovation that creates the most value for large corporations.
One of the world’s top business thinkers, Professor Clayton Christensen, defined that disruptive innovation is a product or service that manifests in simple applications within the market and moves up the chain of demand and consumption rapidly while dislodging competitors.[1] Disruptive companies that have made a name for themselves include Uber and Airbnb, that have shaken up the transport and hospitality industry.
But the practice of disruptive innovation doesn’t mean it should be limited to small and lean start-up examples like these.. The changes that disruptive innovation brings are not to be feared, as they enable multi-national corporations (MNCs) to maintain their competitive edge and market relevance.
Incubating innovation
The first step in engaging in disruptive innovation is to understand and empathise with customer concerns. Product development teams in many large corporations are often focused only on creating next-generation products, instead of improving and re-thinking an existing product in creative ways that consider new technologies and market trends.
However, innovation begins with the customer — the one who chooses a product and gains an insight into its use. This customer perspective should become the springboard from where solutions are designed.
Turning risks into rewards
One barrier to this process of innovation and conceptualising of solutions may be a company’s aversion to uncertainty, especially for large companies which have more at stake. MNCs may also hold back from exploring possibilities and testing ideas because of their reliance on heavy investment, which becomes a risk to their growth and road to innovation.
However, it’s important to remember that knowledge is never absolute. Adopting a ‘test-and-learn’ process is key to assessing the potential of an idea. This spirit of experimentation doesn’t require or waste a lot of investment. Instead the premise of an idea can be tested by ‘faking’ it first.
For example, your team may have an idea for a product that could create a new business or stream of revenue. Instead of plunging headfirst into building this product, a brochure about this new offering could be handed out to potential customers to first judge the positivity of response.
In this way, investment is minimised until the data collected validates the assumptions you have about a customer pain point and solution. This paves the way for business ideas that are actually viable.
The benefits of creative partnerships
A lack of resources is also no excuse to skimp on efforts to innovate. The answer to that lies in the establishment of effective partnerships — a lesson I have picked up from my 20 years of living in Silicon Valley, the global epicentre of innovation and venture capitalism.
But first, finding partners requires the ability to share your ideas with your community. The start-up community in Silicon Valley shares ideas and gets feedback before acting on their plans. They build less-than-perfect prototypes and mock-ups on their own dime before they are able to attract funding from angel investors or venture capitalists.
Large corporations, on the other hand, treat everything they know or do as confidential and avoid sharing for fear that a competitor might steal their idea and displace their market position. The reality is that good ideas are plentiful but making your execution unique makes it difficult for others to overtake you. By adopting a more collaborative approach, a company may gain fresh new insights and develop new ideas.
If a company cannot do everything by itself, it may still succeed in bringing disruptive new innovations into the market through win-win partnerships. Sharing ideas with start-ups and partners is a way of embracing open innovation and it’s what makes Silicon Valley so special.
It is also something that Singapore may easily replicate with its flourishing business ecosystem, proven private-public partnership opportunities and ability to attract talent across Asia. There has never been a better time to invest in innovation.
