Innovation, Disruption, Transformation: Be Best at One

There are a lot of buzzwords being thrown around today. The ones I hear most often are Innovation, Disruption, and Transformation.

Most people speak about them interchangeably, but they are each dramatically different, and companies today had better become best at one or they won’t be here tomorrow. Contrary to popular opinion, the key is not trying to be all of these things, but making sure your company is the best at one of them.

What does it mean to be an Innovation company?

Innovation companies innovate. Period. Innovation companies solve existing problems in brand new ways (think Henry Ford). Being an Innovation company is a great thing. You get to charge a premium for something different and often your shares are overvalued (think Apple).

There is, however, a massive challenge to being an Innovation company: it’s hard to keep innovating things people actually want to buy. Most innovation companies eventually turn into continuous improvement companies, and end up dying a slow death, or sometimes fast (think RIM / Blackberry).

What does it mean to be a Disruption company?

Disruption isn’t new, and neither are Disruption companies. Fast food disrupted the traditional family restaurant in the 1950s; delivery enabled the pizza companies to disrupt the hamburger business in the 1980s; and healthy-fast-food is disrupting all fast food today.

This current disruption period we are in, which stems from the Internet era (a true innovation), started with the disruption of the traditional travel agent by Expedia (and their competitors), and continues today with Uber’s disruption of the traditional taxi industry. So what is disruption?

Disruption is taking innovation (e.g. the Internet) and using it ways that are new, unique, and provide something faster, better, or cheaper. Can big companies disrupt? On paper, yes. In reality, it pretty much doesn’t happen. Big companies are often far too risk-averse, saddled by a culture than cannot think or move at the pace to truly disrupt industries. Has it happened? Yes, but rarely.

ING Bank, headquartered in the Netherlands, is one of the world’s largest Banks. When they first introduced ING Direct, it truly disrupted the traditional banking world, but eventually competition arose. ING Direct failed to sustain its ‘disruptor’ status and failed to differentiate its unique offering, and eventually ING sold it off.

Should businesses try to be ‘disruptors’? No. Disruption takes massive risk, usually fails (we just don’t hear about those), is often easily copied (think Groupon), and doesn’t necessarily build long-term competitive advantage. It can definitely make for great short-term gains if you happen to land on a winner.

What does it mean to be a Transformation company?

Transformation companies are special, rare, and they are companies with longevity built into their entire business. As such, they are the only type of company that has any chance of building long-term competitive advantage.

Transformation companies thrive on change. They recognize that change happens fast. They recognize that they need to be ready for change. They are primed for ongoing change. Transformation companies adopt new technologies, recognize when a cost is sunk and move on, admit failure fast, change culture fast, love innovation, and are able to adapt so fast to disruptors that they can remain on top.

Transformation companies recognize that:

  • Continuous Improvement has been a colossal failure and has not delivered any long-term competitive advantage for any company in existence. Continuous improvement is too slow, doesn’t leverage innovation at the appropriate pace and tends to be open to disruption.
  • Transformation is as much cultural as it is technological.
  • Transformation takes investment, but should add value the entire time.
  • Transformation isn’t separate from the core business; it is the core of the business.
  • Transformation never stops; in fact, the need to transform will increase in pace as time goes on.
  • Transformation is all about adaptiveness; the ability to see and leverage innovation and avoid being disrupted by transforming into something new that is smarter, better, faster, and more efficient.

So, how do companies become Transformation companies?

First, companies need to recognize Transformation is difficult — very difficult. It requires not only the desire, ability, and know-how around how, and where to start, it also requires viewing business through a holistic lens of the business. We call our approach of factoring all variables the 4Ps, representing People, Process, Policy, and Platform. On its own, this requires the inculcation of a new core set of values that thrives on change and thrives on the knowledge that you are never finished.

Why Desire? Most companies cannot transform because, in spite of general recognition that things need to change, not enough people are willing to make the tough decisions required.

Why Ability? Transformation isn’t a department; it is at the core of the business. So the C-level executives and their board of Directors must recognize that change is tough, ongoing, and takes investment. If this is not recognized at the top, mid-level management cannot turn a company into a Transformation company.

Why Know-How? Transformation requires change on all of the 4Ps of Transformation, and it is rare that a company has the knowledge and objectivity to take on all four:

  1. People: The most-often missed one, but the most important. Hire, Fire, Promote and Retain the right people. Through change management, alter existing culture(s) and behaviours within an organization and get everyone at the core of the business to think and act differently.
  2. Policy: The most-often misunderstood. Policy is all about a company’s rules, procedures, and guidelines; not just what is documented in folios but also unwritten rules and sacred cows within an organization. Corporate urban myths can stymie any transformation initiative, and the ability to uncover and alter these Policies is what makes this P so difficult.
  3. Process: Get me some swim-lane diagrams and I can improve your process … welcome to the 1990s. Process is so much more than just streamlining swim-lane diagrams. It is all about thinking differently, designing from scratch, automating, componentizing and modularizing tasks and activities to allow for future change in process easily and quickly. Technology (see next P) has become integral to Process and has allowed for the realization of STP (Straight-Through-Processing), Real-Time Processes, and Digital Business Process Management. Rules Engines have allowed for less rigid process-flow diagrams and more sophisticated ‘choose your own adventure’ processes that meet the unique needs of various clienteles in extremely personalized manners, and are still running smoothly and efficiently within organizations.
  4. Platform: Platform is all about Technology. Leverage the right platforms for your business to enable rapid change, pace, and more consistent and improved customer experiences. Platform often takes precedence with clients; actually Technology often takes precedence, and when I say Technology I mean toys — cool tech that may not create real business value. Platform is not about creating an app for the new Apple Watch. Platform is about making smart technology decisions to advance your business for business purposes only. It might mean web-based omni-channel applications, it might mean native apps, it might mean back-end integrations into and among legacy systems, or data-analytics to drive artificial intelligence.

The 4Ps are about taking advantage of what is available to an organization today and using it better and wiser than your competition, in order to win…not just compete.

Great companies — companies that not only survive but prosper — will become Transformation companies.

If you want to learn more, feel free to contact me at: LTepperman@k2digital.com