Disruptive innovation in the Enterprise

in Thoughts

Take action on disruptive innovation with this idea campaign

 

Facebook is regarded as one of the most innovative companies in the world. FastCompany has them in 7th place on 2017’s Most Innovative Companies Index.  One of the things that have kept Facebook growing and innovating is their clear strategy for disruptive innovation.

When new employees have their first day at  the company’s HQ in Menlo Park, they get the “Little Red Book”. The book is full of lessons learned and ideas that form the DNA of Facebook. To see the whole book, you have to get a job at Facebook. For the rest of us, it’s an exciting and potentially valuable look into the culture that spawned the one of the most widely used products and most valuable companies in the world.

 

If we don’t create the thing that kills Facebook, someone else will.

 

To see evidence of this line of thinking, notice how Facebook have acquired Instagram and WhatsApp in the last few years. In the language of “disruptive innovation”, Facebook is the “incumbent” (the reigning champion of the world), and Instagram is the “disrupter” (the upcoming, scrappy challenger).

Let’s looks at another set of incumbents and disruptors: Atlassian and Trello.

Earlier in 2017, Trello, a simple project management platform was acquired by Atlassian for $425 million. The acquisition and the nature of Trello’s product has all the markings of a disruptive innovator and the incumbent who realises that it’s about to be disrupted, and duly takes action by acquiring the threat.

Trello was the new, simple and cheap alternative on route to becoming an existential threat to the experienced, sophisticated and highly valued (or “pricey”, if you will), Jira from Atlassian. This is what often happens. A product that is a success for long enough, will begin innovating toward the high-end of the market, by adding more and more new features. In other words, the product ends up “overshooting”  the needs in the low-end and middle of the market.

Trello then becomes a threat to Atlassian because they made a product that people would “hire” to do some of the same project management tasks as they would in Jira, but without the need for all the features of a fully fledged project management suite.

Disruptive innovation in a nutshell

Disruptive innovation is a framework that helps us analyse how new products, technologies and behaviors can rise from the low end of a given market to the high end, while causing a redefinition of the market along with it .

What is Disruptive Innovation?

Clayton M. Christensen is the father of disruptive innovation. He describe the concept in his seminal work The Innovator’s Dilemma from 1997.

Typically the current players in a market will have started out with a simple product. Over time, the company will gravitate towards the high-end of a market, as they innovate and deliver more and more of what the highest paying customers are asking for.

It can also be used to point out which new entrants, technologies and trends pose existential threats to companies in a given market.

Seeing the world through the lens of disruptive innovation, Yahoo might have said yes to buying Google for $ 1 million when they had the chance in 1998, Blockbuster might have acquired Netflix in 2000, and Kodak might have been the dominant player in the digital camera market – before that market was disrupted by smartphones.

Moving towards the high-end will open up a strategic vacuum, leaving space for smaller entrants to compete for customers with lesser demands, who can accept lesser, cheaper products. Think about how Netflix initially had less movies to rent than Blockbuster, and a much smaller footprint in the market. However, the core customers didn’t mind the smaller selection of movies. They didn’t have to leave their house to watch a flick, and began turning their back to Blockbuster. Blockbuster was being disrupted. Before they realised this, the company went bankrupt. Meanwhile, Netflix has been moving up market, in producing their own movies and award winning tv shows. Also, Netflix has been hiking prices over the last three years, which corresponds well to moving up market.

 

Key terms

Disruptive Innovation change the traditional way an industry operates, and displace the existing market or technology with a new and more effective way of function. 

Jobs to be done. Typically, a company will define its’ competitive status by benchmarking against the nearest rival. While this is obviously competitive, it can also lead to an overly simplified understanding of the market and the customer. Therefore, try to understand what people “hire” a product to do. Understanding consumer behavior at a deeper level can open new playing fields. A classic example of this is Coca Cola. Using the Jobs to be done method, the company realised that their biggest competitor was not Pepsi – It was tap water. This can open up a new playing field and a new set of strategic plays to make.

The incumbent. The established, more complex competitor in the market, typically reaching the high end of the market, i.e. the customers that are willing to pay a premium for a premium product. The incumbent is vulnerable to be disrupted because it serves a smaller market.

Overshooting. refers to products that are too complex and most likely too expensive for the low-end of the market.

 

Theory in action

Trello understood what the customers were missing from the existing product on the market. Either a company have to buy the startup disrupting their market, or rather have the same approach as Facebook and find the new entrant that would otherwise pose a threat to the company.

Procter & Gamble, the consumer goods manufacturer, is a great example of how to disrupt the market, even if you are the incumbent. After all, it’s an enterprise that has been around since 1837. They have to invent and reinvent their products all the time to keep dominating the market. P&G are doing so by taking part of their customers everyday life, not only by talking to them but also work with them. By doing so they see how people actually use P&G’s, or similar, products and in that way understand how they can make a better experience for the customer based on what job the customer want to get done. P&G developed their successful product Swiffer, not depending on a demographic or psychographic study of people who mop, but from “the job” of getting the floors clean. What jobs are your customers hiring your product to do for them?

 

An idea campaign for disruptive innovation

We believe Trello’s textbook success in causing a disruption can be put into action, not just by startups and smaller companies, but by enterprises as well.

Nosco are proponents of idea campaigns, because we believe that ideas and products get made better and faster when tens, hundreds or thousands of people get a structured and goal oriented process to contribute their knowledge, experiences and ideas. Here is an idea campaign that can help you find and understand potential disruptive innovation.

 

Who to invite:

In short, such a campaign should be open to everyone. We would argue that the closer people are to the practical use of your product (ie. people in the field), the more likely they would recognise what “jobs to be done” people are trying to solve with your product, which in turn could provide valuable insight to your disruptive innovation strategy.

Duration:

3-4 weeks. Follow up with an evaluation and selection panel, aiming to turn the best ideas into projects.

Communication:

This campaign is for identifying potentials for disruptive innovation within our existing products and offerings.

After understanding the basics of disruptive innovation, think about the following potentials. With the Nosco platform you can share ideas about how the company can understand the product and market to come up with possibilities for disruptive innovation;

Identify potentials:

  • Jobs: What “jobs” are customers hiring our product to do?
  • Segments: Can our customer base be split into segments, based on the “job” they hired our product to do.
  • Atomize: Can the current product be split into smaller, cheaper parts?
  • Low cost alternative: If we were to strip down our current products to appeal the lower end of the market, what could that look like?

Evaluation Criteria:

  • Market size of disruptive innovation (1-5)
  • Fit with existing capabilities (1-5)
  • Gut feeling: How much do you believe in this idea (1-5)

Here’s how the campaign would look on Nosco’s internal idea platform.

 

We hope you find this useful, and that an idea campaign such as this can be a first step to making your company even better at identifying and harnessing the potential of disruptive innovation, so you can be the Netflix or Google of your industry, not the Blockbuster or Yahoo.

Become an idea campaign pro

If you’re interested in learning more about designing, developing and deploying idea campaigns, feel free to download the Field Guide to Idea Campaigns. It contains the best practices and handiest hacks we’ve learnt from 10 years of idea campaigning and working with innovation management.