Disruptive Product Innovation – Below the ‘CUT LINE’ for Giants

Disruptive innovation is a buzzword these days. Entrepreneurial ventures always remained ahead in coming up with new innovative products. Big giants were always tried to innovate but failed mostly in really disrupting the markets. These companies did really well on sustaining innovation front. There is lot of material and management advice available to transform these bureaucratic giants into innovation power. I am pessimistic about this approach. Everybody should do what they are really good it. There are structural problems that will stop big companies to be innovators of next generation products. Instead of trying in house innovation, big companies should look outside for good acquisitions.  Google is a great example for company, which failed miserably in creating great in house products – Google+, Google Buzz, Wave, Google videos… on the other hand Google did great in acquiring great product companies – youtube, doubleclick, Android, quickoffice and many more.

To understand the process of innovation, I have come up with interesting yet natural analogy. How does living creatures improve their species? Answer to this question explains why, where and how innovation can thrive. Living creatures acquire or generate new skills among new generations by evolution. We can take examples of humans to understand the process of generating new ideas. When two individual with different sex get attracted towards each other and decide to get intimate, we see starting of new life. New life is the result of free and natural process i.e. Sex. Chromosomes decide most things in people’s life and there is no way, we can change the genetics of a person once life is created. Now once baby is born, baby learns many things at a rapid pace. Walking, speaking, acquiring new languages, understanding emotions, listening etc. are learned by a child in a very fast pace because baby is allowed to make mistakes. Baby is allowed to fall as many times as possible and then try again. On the other hand parents of baby are selflessly doing everything to help the baby to learn things. They don’t see a fall as weakness but every small step taken by baby is a celebration for them. This is the process that brings the most amazing skills, intelligence and courage to the society that we all celebrate in the form of Nobel Prize, Entrepreneurship, World Cups, Olympics and great Leaders (Like Gandhi).

Lets observe this process of creating diversity and better species closely. We can see four core principles applied to the process-

1.    Mating of diverse Ideas

Take any startup with 2 or more founders, you will find that people who founded the company were very different persons. We sometimes take diversity in very narrow terms. We see people’s background and education to define diversity. More than background and other things, personalities of founders matter the most. People, who have very different perspective to a problem, start startups together. They enjoy trust of each other. Diversity and trust helps the startups to see the future and solve problems, which are ignored by others. This is the most crucial that decides the DNA of new project or Idea.

2.    Wait for Ideas to mature

Just like pregnancy, a startup idea takes time to mature. People spend years to think and plan about starting the venture. Many a times, ideas are initially very abstract and they need time to mature. Sometimes external environment is not ready to accept news ideas. Think about iPhone in 1990’s, iPhone would have been a dumb machine as there no high connectivity networks.  That’s why founders wait patiently for right time to start a new venture. There are no shortcuts here. Entrepreneurs wait for right opportunity to work on new product ideas.   

3.    Nurturing and freedom to fail

I have seen no parent who scolds a child when child falls while trying to walk. Parents just shower praise and encouragement. Same we see in startups. Founders are focused on creating wonderful products and even if team fails, team gets nothing but encouragement of internal stakeholders as well as external stakeholders. Team shows very strong desire for trying new things and creating a useful product to customers. This is the essential part of process to create awesome product. Nobody can run when chaianed.

4.    Agility and Speed

Startups are known for agility and speed. Speed is not artificially created but it comes from the team’s motivation to try new things. Team (just like a kid) is always ready to do new things, accept change and listen to market and users. Speed is not just execution of project from learning from past mistakes and avoiding them in future. Teams work so closely in startups that title become obsolete and functional expertize goes out of window. In such environment everybody owns the product and hence the blame.

Now if we look for these core values in any big organization, we can see some of them in parts and isolation. In most of the big organization we will find anti core values for above values. Lets look at how these anti values are hurdle to innovation-

Core Values for Disruptive Innovation	Anti Core values that we find in Big gaints
Mating of diverse Ideas	Teams work in Silos, Management believes in standardize processes
Wait for Ideas to mature	Do it now or it will never be done
Nurturing and freedom to fail	Meet the Goals or get the worst rating
Agility and Speed	Do something only if you are sure

1.    Mating of diverse Ideas -->Teams work in Silos, Management believes in standardize processes

Every organization strives for standardization of process. Teams become too big and process is the only savior. Once things get standardized, new ideas have very less scope of getting noticed. Teams are focused on their own goals and hardly anybody gives preference to other teams’ priorities.  Teams always interact as adversaries and not as friends. Managements see things but takes step that further worsens the problem. Why? Because management brings new processes to kill the old processes and these steps are seen as bureaucratic and burdensome.

2.    Wait for Ideas to mature --> Do it now or it will never be done

Wait a minute? You said that we should wait for right time. In a big organization, right time is the time when idea strikes and management is convinced about the idea. People can see the ideas’ future and predict the failure of new products but they won’t speak. Promotions and rewards flow for executing the ideas and shipping the products. If you wait for right time, your colleague may convince management about the idea and run away with promotion and rewards.

3.    Nurturing and freedom to fail -->Meet the Goals or get the worst rating

All big organizations are driven by quarter and year-end goals. Shareholders pass the burden of meeting goals to higher management. Higher management adds some more buffers and passes the goal to mid management. Mid management adds some more buffer and passes the goals to lower rank employees. Now all those who will meet their goals, will be rewarded and rest will be punished. Tell me where is the opportunity to fail??

4.    Agility and Speed --> Don’t waste resources… Do something only if you are sure

Agility and speed requires flexibility to change decisions every day. This means that we have to go back on what we said as early as yesterday.  We all get resources from management after convincing them about viability of a project. If an employee shows that he/she may be wrong sometimes, management will tag him/her as unreliable or a person with low confidence. He/she may not be given adequate resources in future as he/she is seen as person who wastes resources.  All this stops employees from trying new things and asking resources from them.  They genuinely go for ROI analysis and most of the times, new products don’t have clear revenue models. Think about WhatsApp. Can Whatsapp’s business model will pass through any management’s screening ? Too much focus on ROI leaves us option with low ROI yet safe options.

We can clearly see from above analysis that Big companies inherently develop cultures and processes that throws innovation below the ‘CUT Line’ where as innovation should always be above cut line for all companies which want to survive in this highly competitive business environment.  Big companies should focus on what they are good at and be open for acquiring new product companies as soon as opportunity strikes.  We can call it – “Acquisition driven Disruptive innovation”. This should be always above the ‘CUT Line’ for a company that wants to survive.