S. Shyam Prasad PhD
Introduction
Yes, It is possible! It’s a long-held myth that innovation must be disruptive. I hope that after going through this article the myth would be cleared.
The credit for the concept and data for this article are attributed to an article titled “Nondisruptive Creation: Rethinking Innovation and Growth” by W. Chan Kim and Renée Mauborgne which appeared in MITSloan Magazine February 21, 2019; the same can be accessed by the link given at the end of this article.
Let us begin from the beginning. Joseph Alois Schumpeter, an Austrian economist is considered to be the founding father of entrepreneurship and innovation. He did something unique. The thing that only great thinkers can do and get away with. He propounded two different, even contradictory theories of innovation. They are known as Schumpeter “Mark I” and Schumpeter “Mark II” (Hartigh, 2017) . To be brief, Schumpeter in his early days formulated “Mark I”; here he talks about the function of the entrepreneur as someone who makes new combinations of resources. Later in his career, he formulated “Mark II” where he talks about the function of the large enterprise and says that innovation mainly comes from large enterprises. He being a economist, he argued that at the core of economic growth, an innovation creates a new market and replaces an existing product or service or technology thereby creating destruction. Thus he advanced the idea of creative destruction. Since then it is deeply ingrained in the character of innovation.
Innovation
As mentioned in my earlier blog, the extant literature is replete with the different definitions of innovation. A definition given by Crossan and Apaydin considered to be the most complete is as follows (Edison, Ali, & Torkar, 2014) :
Innovation is production or adoption, assimilation, and exploitation of a value-added novelty in economic and social spheres; renewal and enlargement of products, services, and markets; development of new methods of production; and the establishment of new management systems. It is both a process and an outcome.
Though the definition does not talk explicitly of creative destruction, it is conjectured that it is natural to innovation. Let us see some examples.
The development of digital photographs rang the death knell for film photographs and led to a large destruction. The effect of this destruction was immense in Rochester, New York, Kodak’s long time headquarters. The city lost more than 55, 000 well-paid jobs along with a significant effect on vendors, retailers, real estate values among others. The impact of bankruptcy of Kodak is considered as large enough to decimate a small community.
Another example is that of Uber. The evolution of taxi-on-demand has ruined or ruining the normal taxi services. In a span of nine years, more than 75 million riders have used Uber. In New York City alone, the value of taxi medallions has fallen from more than $1 million to as low as $175,000. Sadly, six taxi drivers too committed suicide as their earnings fell by over 20% since the appearance of Uber.
Michael Raynor in his book “The Innovator’s Manifesto” says that all disruptive innovations stem from technological or business model advantages.
“History is replete with examples of disruptive innovation, dating back to ancient times. Examples include the compass, the printing press, currency, gunpowder…Imagine that you are Kodak, a company based largely on film, and someone develops digital imaging, or that you are a mainframe computer company like IBM or DEC, and advances in processors lead to the development of inexpensive but powerful personal computers. In our own lives, we recognize how cable or satellite TV has displaced air antennas and how cell phones have displaced landlines.”
– Disruptive innovation as a driver of science and medicine, J. Larry Jameson
Management thinkers and academicians have been advocating ways to overcome disruptive innovations and how to safeguard their businesses. Corporates constantly remind their staffs about the danger of disruption which might strike them anytime and the only way to stay afloat is to create disruption themselves.
Non disruptive innovations
In fact, if we observe the market, one would quickly realize that non-disruptive innovations are everywhere around us. It is a fact that non-disruptive creation is as important factor as disruption has been to the innovation and growth (Kim & Mauborgne, 2019) . In spite of this, non-disruptive phenomenon has not been properly recognised. While the term – non-disruptive innovation – may be new, non-disruptive innovation has been happening all the while. Let us see few examples. Before X-rays, no X-ray market existed; surgeons operated with plenty guess and prayer. Before phonographs and musical recordings, one had to go by one’s memory. If these are old example, some modern example are Microfinance, Viagra, life coaching, Post-it notes, health clubs, and environmental consulting are all prime examples. Very recent examples are online dating, crowdfunding, and smartphone accessories. In all these examples no market was destroyed; only the market pie was expanded.
Microfinance came in to being about 35 years ago and today it is a thriving industry. Muhammad Yunus, a Bangladeshi social entrepreneur, banker, economist, and civil society leader solved an unaddressed problem; the lack of access to capital for billions of people who are too poor to qualify for traditional bank loans. The market of microfinance came into being with the founding of Grameen Bank; he was awarded a Nobel Peace Prize for his efforts.
Viagra is another multibillion-dollar business that arose not on the rubbles of an another business or industry. Non-destructively it has opened up altogether a new market for lifestyle drugs which hitherto did not exist.
Another multibillion-dollar business is life coaching which didn’t exist some 25 years ago. It is there for helping people improve the quality of their personal and professional lives. It has come up without disrupting an existing industry. It has created a new market.
There are more examples; we continue to see the non-disruptive innovations happening around us and new markets being created in all walks of life. The non-disruptive innovations have certain distinct advantages over disruptive innovations besides not destroying the existing market.
Making execution emotionally and politically easier.
Innovation, particularly destructive innovation, faces plenty of hurdles. This is because of the fact that they need to destroy their own existing business. Managers and workers fear losing their jobs and hence will resist to their fullest capacity. It would be surprising to know that the first digital camera was created by Kodak. However, due to fear of disrupting their own film business it faced enormous emotional and political resistance from its people thus effectively halting the innovation. Lesson learnt from Kodak is that it does not make it any easier for organizations to embrace disruption that would kill their existing business. In contrast, non-disruptive innovation is less threatening and passes of smoothly without challenging the present systems or structure.
Offering a good counter response to disruption.
Cunard Line, which runs transatlantic passenger ocean liners, was disrupted by air travel. It started losing business to much faster and convenient form of travel. Its own venture into airlines industry failed twice. Then came a non-disruptive market-creating move by launching the business of luxury vacationing at sea for the public. It adopted a blue ocean (pun intended) strategy by shifting its business from crossing the ocean to vacation in ocean experience. Cunard opened up the entire cruise tourism industry (Cruise Lines International Association (CLIA) , 2017) .
Conclusion
From innovations, open innovations and non-disruptive innovations we have reached a point where we may need to take a broader view of innovations. The authors, Kim & Mauborgne have created a model that recognizes and embraces both disruptive and non-disruptive creation, since they are complementary engines of growth. According to them, there are three basic ways to pursue innovation. Companies can:
1. Offer a breakthrough solution to an industry’s existing probl
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2. Identify and solve a brand-new problem or seize a brand-new opportunity.
3. Redefine an existing industry problem and solve the redefined problem (Kim & Mauborgne, 2019) .
Let conclude by briefly discussing each of the above approaches.
Offer a breakthrough solution to an industry’s existing problem.
In order to solve an industry’s existing problem a firm may evolve or discover a solution. This solution would no doubt disrupt the existing businesses which albeit adjust over the time. A disruptive innovation is the outcome. Music industry is a good example. Each successive innovative products replaced the earlier ones.
Identify and solve a brand-new problem or seize a brand-new opportunity.
At the other extreme, organizations identify and solve a new problem/s or create new markets beyond the present industry boundaries. They don’t cannibalize or compete with the present industry. These firm’s approach is to look for brand new problems or opportunities instead of looking for better solution to the existing problems. This approach leads to non-disruptive innovation. Examples could be Viagra, Life coaching etc.
Redefine an existing industry problem and solve the redefined problem.
Between the above two approaches lies innovation strategies which are both disruptive in some part and non-disruptive in other. Generally, here the approach is to change the long-held assumptions and move the existing industry boundaries creatively. Example of this type of innovation could be the case of Nintendo’s Wii. Here the company redefined the problem of the video console industry from focusing on the fastest, highest-resolution graphic video console to how to deliver an easy-to-use console that had the movement of physical sports. The company partly drew from the demand for the existing video games console and shifted to every one thus moving from disrupting the console industry to non-disrupting in attracting both young and senior citizens.
The present era of fast growth and changing demography bring along a bunch of new challenges and opportunities. Grabbing these new opportunities and creating solution to them are most likely to be the source for non-disruptive innovations. Let us make the best use of it.
Works Cited
Cruise Lines International Association (CLIA) . (2017). he Cruise Lines International Association’s 2017 annual reportt. Retrieved from https://cruising.org/-/media/files/industry/research/annual-reports/clia-2017-annual-report.pdf
Edison, H., Ali, N., & Torkar, R. (2014). Towards innovation measurement in the software industry. Journal of Systems and Software , 86(5), 1390-407.
Hartigh, E. d. (2017, November 9). SCHUMPETER: THE FOUNDING FATHER OF INNOVATION. Retrieved May 24, 2019, from https://faculty.ozyegin.edu.tr/erikdenhartigh/author/erikdenhartigh/
Kim, W. C., & Mauborgne, R. (2019, February 21). Nondisruptive Creation: Rethinking Innovation and Growth. MITSloan.
(The article draws its idea and data from an article titled “Nondisruptive Creation: Rethinking Innovation and Growth” by W. Chan Kim and Renée Mauborgne which appeared in MITSloan Magazine February 21, 2019; the same can be accessed by the link given at the end of this article. Due credit to them is acknowledged.)
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