This is the third blog as part of a six-part series.
Why ‘business as usual’ is often the biggest obstacle to changing the future
“The Innovator’s Dilemma” by Clayton M. Christensen is a classic text that outlines the challenges faced by innovators, and the impact of disruptive technologies on markets. One of the most instructive aspects of the book is that it dispels the myth that existing businesses are blind to ‘the next big thing’ that might ultimately transform their industry. Instead, it is the filter of their existing business that makes them powerless to act, rather than unable to see.
Looking at the world through the lenses of existing products – existing customers and the scale of existing operations – the business case to pursue an innovative approach all too often just doesn’t stack up. Small, emerging markets simply do not serve the growth needs of large companies, which causes them to wait – often until the moment they can act effectively has passed. This is compounded by the fact that progress in technology usually precedes demand, and even awareness of the need by the consumer, resulting in customer conversations that reinforce the status quo rather than break it.
Breaking the status quo requires a point of view uncolored by any of these factors and this is an advantage both start-ups and small businesses often possess. Their outlook and the scale of their operations means that what makes sense to them simply does not add up to large scale market leaders.
The question for those of us who work in larger organizations is how to bring that same disruptive world view into our business. Addressing this usually starts with organizational structure, though as we will see, if it ends there the outcome is unlikely to be a successful one. IDC identifies four specific organizational models and tracks the level of adoption of each of them in their DX Leadership Survey. They map closely to the ‘maturity of digital’ in the organization, from describing the mission to creating disruptive offerings.
Setting up a dedicated group with its own resources is not particularly difficult for most large organizations, but incubating disruptive technology is more challenging. Even incubating non-disruptive products and services that differ from the company’s traditional offerings can be tough. An example of a personal experience of this would be when a software company was acquired by a much larger technology provider. The main business of the acquiring company was referred to as ‘core’ and even though it was a dedicated business, with a senior executive at the helm, it was selling into a similar pool of prospects and customers. So when it came into contact in the field the core agenda would typically prevail. The reason for that was that the metrics used to run the business favored core offerings.
IDC include metrics in their list of considerations and they are a vital addition, as metrics and KPIs are linked to definitions of success and often to remuneration – which drives behavior. If the review of a digital initiative, team or business is based on misaligned metrics, the chances of success are greatly reduced. This is yet another example of where the practices of the past, deeply embedded as ‘business as usual,’ can present a significant barrier to progress.
There are, of course, more factors to consider beyond the organization structure and metrics. In addition, IDC goes on to describe three additional pathways to digital transformation: roadmaps (to prioritize use cases); capabilities (to reshape business and technology expertise); and platform (to re-architect at scale). To succeed, the teams driving these will have to contend with and overcome at least an equal and opposite force posed by the status quo.
But the struggle is worth it. The full title of “The Innovators Dilemma” includes the rather chilling phrase ‘When New Technologies Cause Great Firms to Fail.’ We all have our own stories of once powerful companies that held on to the world view that got them to the top so tightly that they missed the market when it changed. That said, the majority of the burden therefore rests on leadership and their ability to address the innovator’s dilemma. Thanks to Christensen and his identification of “The Innovators Dilemma.” While it still isn’t an easy problem to solve, it is at least, a well-documented one.