Disruptive Innovation

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Hello, I'm Paul Michelman, Director of content for harvardbusiness.org and we are joined today by Scott Anthony. Scott writes the Innovation Insights blog for HarvardBusiness.org, and he is the lead author of the new book the Innovator's Guide to Growth. Scott, thanks for joining the program.

Thank you, Paul.

So today, Scott, we're going to talk about disruptive innovation, what it means, who's responsible for it, and how you can identify disruptive opportunities for your organization. So first off, what is disruptive innovation?

Well, Paul, disruptive innovation is a particular type of innovation that occurs when an innovator brings to a market an innovation that is simple, that is convenient, that's accessible, that's affordable. Changing the game. Contrast this to sustaining innovations, innovations that take what exists and make it better. A disruptive innovator transforms existing markets and creates new ones by playing the innovation game in a fundamentally different way.

Does disruptive innovation have to be big? Does it have to be a major change in the landscape?

Disruptive innovations will result in major changes, but they don't often rely on technological breakthroughs. In fact, many times the technology is quite trivial. It's the business model, the way a company organizes and acts, that drives disruption. Think about discount retailing for a minute. When Walmart opens its first discount retailer in 1962, it's not selling goods that are different than its competitors. But what it's done is created a new way to organize and act that allows it to make money at low price points. Drives change in that organization. It's oftentimes not the technology, it's the business model.

Okay, so can you give us another example that shows the difference between disruption and sustaining innovation?

There are dozens of examples throughout history of this pattern taking place. Whether it's the personal computer, Google's auction model, Ebay's online model, what PNG has done with Swiffer and Febreze. But a real interesting recent one is from the video game industry. Contrast the Sony PlayStation 3 to Nintendo's Wii product. The PlayStation 3 is a technological marvel. The best gameplay you can find, great graphics, a Blu Ray disc in the player. It's aimed at the hardcore gamer, the most demanding consumer in the market. Now, Nintendo has innovated in a very different way. Instead of introducing games with better graphics, Nintendo's made it simpler, made it more accessible. The Big innovation is the controller. I actually happened to bring my Wii controller with me because I'm a pretty big fan. This controller has an accelerometer in it which allows it to measure motion along multiple dimensions. So if you want to play baseball, you pick it up, you go like this. You want a bowl, you go like this. Nintendo is consciously trying to target the non gamer, and by doing so, it has greatly expanded the market for video games by reaching people that Sony wouldn't even think about targeting. Not winning by doing it better, but winning by doing it differently.

So who's responsible for coming up with disruptive innovation ideas? Should companies have a disruptive innovation department?

We really think everyone within an organization has the ability to come up with disruptive ideas. For it really to work inside an organization, senior management does have to lead and create appropriate organizational space for disruption to flourish. Because if there isn't that space, corporate antibodies will take even the best idea and force it to look like what has been done before. So you do need to have senior leaders create space for disruption. But really, any innovator inside a company and outside a company can come up with a spark that turns into a disruptive idea.

So help us get our minds really around the how tos here. How does a manager start thinking about disruptive innovation? What are the questions he or she should be asking now?

There's a couple questions that we found to be really helpful to begin to identify opportunities for disruptive innovation. First, look for markets where there's some kind of constraint that inhibits consumption. Where is there something that makes it difficult for people to solve problems in their lives? Sometimes they don't have skills, sometimes they don't have money, sometimes they can't access the solution, and sometimes it just takes too long. Find one of those barriers to consumption and see how you can obliterate it. Second, try to identify where people have important, unsatisfied jobs to be done. Where is there a problem that a customer faces that they can't adequately solve? Today, if you can find that frustrated customer and ease their pain, you oftentimes have the ticket to disruptive innovation. Then, after you've looked for constrained consumption and targeted that job to be done, think about how you can play the innovation game differently. Remembering it's not about doing it better, it's about making it simpler, cheaper, more accessible, more affordable. That's what disruption is all about.

Do you always have to satisfy a need, or can part of this be creating a need? For instance, I don't see the we satisfying a hole in the market?

It's a really good question. So you don't oftentimes have to be able to target something that a customer tells you they want. In fact, the customer can very rarely articulate the specific things they want or need. What the Wii does is make it so much more accessible and so much more affordable for people to enjoy video gaming that the market begins to expand. Sometimes you can't even talk to the customer. You've got to trust your intuition and judgment. Put something in the marketplace and begin to see how it plays out. This can be a very scary concept for managers who are honed to rely on data. Data, unfortunately, only exists about the past. Sometimes you need to use intuition to identify an opportunity and go create your own data.

Okay, so I think we've established the planes you should be thinking on. Now. Let's look at how we within our organizations uncover these jobs that need to be done. These opportunities. Can you walk us through some of the areas we should look at for the biggest opportunities?

There's a couple tips that I could provide to help people get this right. The first is to think about the markets that they're going to analyze. Looking not necessarily at the most demanding customer today, but thinking about people who are relatively undemanding or, or people who are not consuming anything at all. Look to those markets to begin the exploration for disruption. Then as you begin that exploration, use a bunch of different techniques to understand those pain points in the market. Focus groups can be a simple way to begin a conversation with customers. Customer observation can be really powerful because sometimes the customer simply can't tell you what they want. Sometimes you've got to give customers something early prototype and let them co develop the product or service with you. Sometimes you've got to do more detailed quantitative research to really pinpoint what are the points of frustration in the market and where are there opportunities to do things differently. The key is always putting the customer and their problem at the center of the innovation equation.

Do you always have to be daring to be successful in disruptive innovation?

That's a really good question. A lot of times organizations hesitate to push for disruptive innovation because it sounds kind of scary. They think they've got to invest hundreds of millions of dollars. There's lots of risks. They might rip their organization apart. But what we found is the best way to get to a disruptive endpoint is to take a simple, small first step. Invest a little, learn a lot. Don't spend a huge amount of money up front because the only thing you can be sure is that your first strategy is wrong. So if you invest too much too soon, you're locking into a path that is fatally flawed. So, in fact, you can move forward in ways that don't require huge amounts of money, that don't require huge amounts of risk, and then iterate your way towards success.

Scott Anthony, thank you very much.

Thank you.

For more of Scott's ideas on innovation, visit his blog, Innovation Insights, at harvardbusiness. Org. We hope you've enjoyed this week's program. For more great ideas from Harvard Business, please visit our website at www.harvardbusiness. org. Thanks for listening.