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THE CASE FOR DISRUPTIVE INNOVATION

INNOVATION IS THECATALYST THAT PROPELS ORGANIZATIONAL SUCCESS

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“10-30% OF AN INNOVATION PORTFOLIO SHOULD FOCUS ON DISRUPTIVE INNOVATION.”

- A. G. LAFLEY, FORMER CEO OF P&G

Small changes are not enough in today’s hyper-competitive business environment.

New regulations, tougher competitors, and changing consumers are impacting the way organizations do business.

Organizations will need to change the game; in their industry, for their customers and consumers, and in their culture.

LET’S DISRUPT THE WAY ORGANIZATIONS INNOVATE.

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01 02 03 04DISRUPTIVE VS

SUSTAINING INNOVATION

WHY ORGANIZATIONS NEED TO EMBRACE

DISRUPTIVE INNOVATION

BEING DISRUPTIVE – STORIES OF INNOVATION

HOW DO ORGANIZATIONS

SUPPORT DISRUPTIVE

INNOVATION?

TABLE OF CONTENTS

Innovation comes in two forms. Both types of innovation are vital to maintaining a competitive edge in the marketplace but, in order to attain unanticipated growth, disruptive innovation is required.

01DISRUPTIVE VS.SUSTAINING INNOVATION

Disruptive Innovation

Sustaining Innovation

1 Source: Christenson, Clayton. The Innovator’s Solution, 2003.

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Disruptive Innovation

Sustaining Innovation

Re-define or establish new markets by looking at customers/consumers, products, and business models in an entirely new way. True disruptive innovations offer new forms of revenue with minimal competition at the start; as a result there is room for ample growth. While they are rare, disruptive innovations increase the odds of creating a successful growth businesses by 30%.1

Whey protein powderAdvilNetflix

Enhance a company’s current business performance and market success by making incremental improvements upon known market offerings. These are those “year-by-year” improvements made by most good companies (e.g., many line extensions).

Sustaining innovations seek to compete in established markets with offerings that offer little differentiation. Enhancing profit margins is the name of the game.

Flavor or fragrance changesiPad Mini

There are many benefits of being a first-mover in the market – a new consumer base, brand recognition, and a market lead. Disruptive innovation allows for an organization to be a first-mover, not a fast-follower.

02WHY ORGANIZATIONS NEED TO EMBRACE DISRUPTIVE INNOVATION.

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The Disruptive Innovator is first to enter the market. This innovator sees exponential growth over time.

Disruptive Innovator “First Mover”

The Sustaining Innovator enters into this new market late. Even though the offering may be better than all other competitors, there is less opportunity to grow.

Sustaining Innovator“Fast Follower”

VA

LUE

TIME

Source: Rogers, Everett. Diffusion of Innovations, 1962.

03BEING DISRUPTIVE - STORIES OF INNOVATION

WHEY, a byproduct of the manufacturing of cheese, contains protein, lactose, and fat. Although the protein within whey has been known to reduce the risks of heart disease, cancer, and diabetes, many felt whey contained too much sugar and cholesterol to be consumed regularly.

In the 1940’s, mass production of dairy led to an excess of whey, which had no commercial value, and the whey went into rivers and animal feed.

Meanwhile, body builders were discovering the

on muscle gain. For many years, the small community relied on bitter-tasting or fat-filled supplements to boost their performance.

WHEYPROTEINPOWDER

WATER

WHEY

SUGARSFATSPROTEINS

– =

WHEY

WH

EY

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IN WHAT WAYS WAS WHEY PROTEIN INNOVATIVEWhey protein was a good-tasting, easily-digestible, healthy protein versus the bitter or fat-filled supplements the fitness industry was originally using.

Whey protein innovators utilized new separation technologies to separate whey protein out of the remaining less-healthy components of whey.

Whey was used in disease prevention, but Next Nutrition used additional benefits of the product to capitalize on the needs of a growing fitness industry.

In 1993, Next Nutrition focused their attention on a protein now available because of new separation technologies: whey protein. Compared to previous body building supplements, whey protein was tasty, easily-digestible, and healthy.

Once whey protein became available, demand for it expanded. Next Nutrition capitalized on a growing interest in fitness and bodybuilding in the general population to make whey protein a booming business.

Currently, whey powder, proteins, and protein factions have global sales in excess of $5 billion and projected sales of $6.4 billion by 2014.

$6.4BILLIONBY 2014

I wantWHEY!

Within a year, 100 million people had been treated by ibuprofen in over 120 countries, and manufacturing couldn’t keep up with the demand.

By 1988, the improvements resulted in production of over two million Advil tablets per day.

OTC

100M People in120 CountriesEUREKA!

LOOK,NO HANDS!

BEING DISRUPTIVE - STORIES OF INNOVATION

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Within a year, 100 million people had been treated by ibuprofen in over 120 countries, and manufacturing couldn’t keep up with the demand.

By 1988, the improvements resulted in production of over two million Advil tablets per day.

OTC

100M People in120 CountriesEUREKA!

LOOK,NO HANDS!

IN WHAT WAYS WAS ADVIL INNOVATIVEAdvil was the first over-the-counter ibuprofen. It was also more effective than other pain-killers at the time and produced fewer side effects.

Advil expanded its customer base from rheumatoid arthritis patients to anyone with pain, resulting in millions of new customers.

Michael Dryden and his team developed an automated manufacturing process to keep up with the growing demand of Advil.

04HOW DO ORGANIZATIONS SUPPORT DISRUPTIVE INNOVATION?

Often, innovation metrics drive behavior to produce more and more sustaining innovations, leading to SKU proliferation. Metrics that focus on disruptive innovation are required.

THE RIGHT METRICS / TARGET

Ex. 20% of innovations from the ideation process should be categorized as disruptive.

Organizations must adopt a mindset of learning and adapting in order to set the right strategy, metrics, processes, teams, and culture enable delivery against its growth targets. These changes will lead to behaviors across the organization that support disruptive innovation.

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Leadership must champion the idea of disruptive innovation as the driver of success and brand recognition.

SUPPORTING LEADERSHIP

Ex. Incorporate disruptive innovation into the annual strategic plan and personal leadership objectives.

The organization must promote innovation-friendly skills. Disruptive innovation relies on people with both discovery (to identify the opportunity) and delivery (to execute the business concept) skills.

INCENTIVIZE THE RIGHT BEHAVIORS

Ex. Incentivize skills such as associating, questioning, challenging the status quo,risk taking, networking, observing, and experimenting.*

Encourage different thinking patterns by adjusting the ideation process.

RE-INVENT THE INNOVATION PROCESS

We have included best practice approaches to the innovation process on the following pages.

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*Source: Dyer, Gregersen, Christensen. “The Innovator’s DNA”, The Harvard Business Review, Dec. 2009.

Strong insights are often stimulus enough to inspire a steady stream of creative ideas.

Applying the four “lenses” of innovation to an ideation process allows innovators to see the same world from diverse perspectives.

DISCOVER INSIGHTS AND INNOVATION VECTORSST

RA

TEG

IZE

Identify InnovationGoals and Guardrails

Generate Discovery Insights

Translate Insights to Innovation

Vectors

Build Innovation Strategy Around Vectors

IDEA

TE

EXEC

UTE

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Be the contrarian. Orthodoxies are the mindsets that become ingrained in the way companies and industries do business. Disruptive innovators break the mold; they find new, unexplored pathways to what drives success.

Disruptive innovators spot the patterns of trends that no one else noticed. They take seemingly unrelated data and infer connections that can be used to change the rules of competition and create new opportunities.

Disruptive innovators are able to get inside the customer’s skin; they can translate the customer’s thoughts and feelings into needs that even the customer could not identify.

Redefine your company as a pool of diverse skills, knowledge and experience rather than a maker of things. Disruptive innovators can generate new opportunities by understanding the individual skills and assets in their company and by bringing together the right people.

ChallengeOrthodoxies

HarnessMarket

Trends & Dis-continuities

LeverageCompetencies

DiscoverUnarticulated

Needs

Source: Gibson, Rowan. Innovation to the Core, 2008.

Lens

es o

f In

nova

tio

n

GENERATING THE RIGHT IDEASInnovative ideas are not just a new product or service in the marketplace. Innovation can occur in processes and approaches to the marketplace too.

When generating and filtering ideas, it is important to encourage ideas that encompass different ways of innovating.

CUSTOMERS

Find benefits of the offerings that would satisfy the

needs of new customers

CUSTOMER EXPERIENCE

Enhance customer interaction at all points of contact with the company

VALUE CAPTURE

Re-think the business model

of capturing revenue

PROCESSES

Re-design core operating processes for

greater efficiency and effectiveness

ORGANIZATION

Re-think the scope of the company’s

functions and activities

SUPPLY CHAIN

Change how the offerings get to the customer

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PRESENCE

Create new places where offerings can be bought by

customers

NETWORKING

Enhance information

transfer through technological innovations

BRAND

Re-define the core promises of a company into

new areas

OFFERINGS

Create new products and services that

address needs of customers

PLATFORM

Streamline development of

offerings through use of a common

factor

SOLUTIONS

Create integrated offerings to address the customer’s

needs.

Source: Sawhney, Wolcott & Arroniz. “The 12 Different Ways for Companies to Innovate”, MIT Sloan Management Review, Spring 2006.

STR

ATE

GIZ

EFrame

Ideation Initiative

Get Smart Gap Analysis

Generate and Prioritize

Ideas

Develop Concept

IDEA

TE

EXEC

UTE