Tag Archives: innovation

Disruption and (non) Innovation, Part II

April 17, 2012 Fred McClimans 5 Comments

The words “Disruption” and “Innovation” have become lexicons of our current business vocabulary. But while they are closely linked, they are (as mentioned in my post Disruption and Innovation, Part I) two very different beasts.

Not surprisingly, I increasingly hear people speak of their organizations as being disruptive in a market, of having a disruptive strategy (that is often further described as being “innovative”).

Granted, there are some strategies that are, in and of themselves, true innovations that lead to the disruption of existing markets and the creation of new markets. For example, Ron Popeil’s televised take on the “But wait, there’s more!” product marketing strategy was arguably an innovation that created new markets, created market value that previously didn’t exist, and was ultimately disruptive to others.

“Disruption creates chaos. Chaos cannot be controlled.”

By definition, a strategy is not the same as an innovation. But a strategy can be innovative, and it can also be disruptive, and there are no shortage of organizations out there today that love to talk about their disruptive strategies.

But is being disruptive in a market, or towards a competitor, a viable strategy? Is it sustainable? Or is it merely something that is best used in an opportunistic manner?

“Chaos cannot be controlled, but it can be leveraged.”

Personally, while I almost always caution clients against relying upon disrupting their competition, or a market, as a business strategy, there is a part of me that understands the value of leveraging an opportunity to disrupt the flow of a competitor.

THE SEVEN DISRUPTIVE SINS

How an organization attempts to disrupt its competition is often tempered by the depth of their pockets, the desperate nature of their situation or their willingness to push (or even outright cross) the lines of the law. But, putting aside graft and corruption, most organizations tend to gravitate to the same Seven Disruptive Sins when it comes to disrupting their competition.

I call them sins, for while they may have their virtues or desired effect, they may also come back to bite you. Hard

“To every action there is always an equal and opposite reaction.”

~ Sir Isaac Newton

So let’s take a look at the most common strategies I see used, misused and abused by organizations to disrupt their competition…

1. Talent Acquisition: pulling key personnel away from a competitor, in an attempt to limit their competitiveness.

Pro: Acquiring great talent in any area of your business is always a good idea (top sales reps, developers, executives, support staff, etc.). And when pulled from your competitor, can limit, or at least disrupt their footing for a period of time.

Con: Pulling top staff from a competitor usually means offering a sweeter, more costly deal. It also opens the door for your competitor to potentially find a new, more creative or hungrier, replacement. Add in non-compete agreements (especially where customers or IP are concerned) and ultimately you may have just overpaid for talent AND given your competitor an opportunity to lower their own operating costs.

2. IP Acquisition: buying patents, or even entire companies, in an effort to keep (or take) the technology away from competitors. For example, during the dot-com boom, larger firms were buying up smaller firms left and right – not just because they needed the technology but to take it out of the market (a great example today would be the recent sell off of Nortel patents, or the likely interest a sell-off of RIM patents would generate).

Pro: By locking up a piece of technology that your competitor may rely upon or leverage in the future (a good example would be buying a smaller firm that resells product through a competitor), you can take away portions of their product/services portfolio.

Con: Buying anything costs money. And who isn’t to say that your competition will, as a result of your action, be forced to rethink their product/service strategy and develop a new one that isn’t more in touch with customer demand? More importantly, companies need to be nimble in today’s market. Technologies change fast, and you don’t want to be left holding outdated product.

3. Flooding the Market: selling products or services well below market price in an effort to take away customers and revenue from your competition (something we see often at the international trade level). Interestingly (thanks to Alan Berkson for this example), we see this all the time in the Cable TV and Mobile sectors, where vendors undercut their competition (through special contract pricing) to win customers that they know they will lose after their 12/24 month contract is up.

Pro: You can’t argue with the value of taking away market share from your competition.

Con: Every time you underprice your product, or give away an extra service, you are taking profit out of your pocket – something that few firms can afford to sustain for any period of time.

4. Supplier Acquisition: controlling the supply of parts, either through exclusive deals or acquisition, to restrict competitor’s access. If everybody in a market relies upon Company X for certain technology, bringing that supplier under your umbrella can force competitors to shift their own strategies (note: this is not the same as developing your own in-house alternatives to parts/components that are universally used within a market, such as Apple building their own chip fabrication facility).

Pro: Controlling the supply of commonly used products in a market can certainly be a competitive strength (imagine if Apple bought Intel…). It can provide (after the cost of acquisition is recouped) lower cost of goods sold.

Con: You buy it, you’re stuck with it. Take something away from somebody and they’ll find a way to engineer something better. Just as nature abhors a vacuum, so do markets. Pull a key component out of a market and somebody will find a way to replace it (with something faster, better, cheaper). Lesson: don’t force your competition to become innovative.

5. Distribution Acquisition: controlling the distribution channels for your product – a great example being the exclusivity agreements that restricted food chains from selling both Coke and Pepsi products.

Pro: If you can prevent your competitor’s product from ever appearing on the shelf, you’ve clearly got an advantage.

Con: Linking yourself to a particular distribution channel is great, until that distribution channel falls to deliver, or has competitive challenges of their own (think McDonalds/Burger King and Coke vs Pepsi).

6. Legislation/Regulation: pushing the enactment of laws and regulations that favor you, or restrict your competition is a practice as old a government and provides for a thriving lobby economy at the state and federal level. A similar example is the tactic that government contractors employ to “shape” government procurements in such a way that the specifications of the requirement can only be met by their product or service.

Pro: If you can control the playing field, you can control the game. By enacting legislation (or bid specifications) in such a way as to preclude your competition, you’ve given yourself home-field advantage.

Con: Putting aside the issues of potential corruption, laws and regulations are usually enacted in a particular context to address a specific requirement. But laws and regulations rarely go off the books, and all too often they are applied in ways totally unintended. For a great example, check out Wickard v. Filburn and the Agricultural Adjustment Act of 1938 which was intended to stabilize US wheat prices but is now being used to restrict a variety of activities, including the personal growth of medicinal marijuana in states where such use is allowed.

7. Creative Marketing: taking a bit of poetic license when talking about a competitor’s product. In politics, we’d call this a smear campaign.

Pro: Highlighting weaknesses, or shortcomings – especially when documented by others – can be a great way to position your competitor’s product in a dim light.

Con: Nobody likes to be misled or fed partial information, and while spreading Fear, Uncertainty and Doubt is a mainstay part of both business and political culture, in the age of Pervasive Communications, fact checking is available 24×7. Even if your data about a competitor is true, ultimately, the continued use of this approach will be viewed as “dirty politics” and reflect poorly on you, not your competition.

SOME THOUGHTS

Disruption is a part of nature, and it is no surprise that we see it often in markets. But intentionally trying to create a disruptive strategy carries its share of risk and can take away from the value proposition of a company’s own product and services. In the end, if a company doesn’t focus on their own products and services first, disrupting a competitor won’t add any value as they won’t be in a position to leverage the (often temporary) disruption to their advantage.

Photo of EMI Album by Hans Thijs, Licensed under Creative Commons

Articles, Business

Disruption and Innovation, Part I

April 1, 2012 Fred McClimans 1 Comment

Over the years, as an analyst, advisor and even as an entrepreneur, I’ve heard the phrase “Our strategy is to disrupt ” far too often. It’s a bit disheartening at times, because what I really want to hear is how your strategy is going to “innovate” rather than disrupt.

Why? I’ve always believed that the fastest way to success is to avoid trying to knock somebody off the ladder and, instead, build your own ladder. You control your future. You shape the market. You let the people on the other ladder pursue their evolutionary strategies while you quietly create a revolutionary strategy.

THE RELATIONSHIP BETWEEN DISRUPTION AND INNOVATION

To be clear, there is a definite relationship between “disruption” and “innovation” not to be confused with Clay Christensen’s “Disruptive Innovation”. Often, they feed off of each other – one leading to the other (or at least providing an opportunity for the other to take hold).

Innovations within a market can ultimately lead to the disruption (or devastation) of an existing or adjacent (but different) market (example: iPhone’s App store devastating video games, wrist watches, cameras). Note that true innovations don’t just offer better versions of existing products, but offer better alternatives to existing products – they ultimately replace them.

Similarly, disruptions within a market (or a vendor if they dominate that market) can often provide an enhanced opportunity for new and innovative vendors and products. The more disruptive a market has become, the greater the opportunity for innovation to create a new, better alternative market. But there are differences.

And far from being singular events, disruptions and innovations can often be associated with long-term evolutionary trends, rather than singular events (Pervasive Communications is a great example of two trends (technology and human behavior) leading to a disruption of both social structures, technologies and global markets (check out Alan Berkson’s framing of Pervasive Communications and a video chat with Brian Reich on the global implications of Pervasive Communications).

DISRUPTION

Disruption, like the stuff that hits the fans, often just happens. It can be caused by any number of different conditions. Disruptions to supply chains. Technological advances. Corporate mismanagement. Natural disasters. All can result in a market (and its vendors) being disrupted. In the extreme, the disruption devolves into a state of chaos – and chaos (while it may offer opportunity for those able to restore order) is usually not a characteristic of a market you want to enter.

To this last point, the notion of “disrupting” a market of a vendor to gain a competitive advantage is more often than not simply the wrong approach (a great example being the often asked question in the analytical/advisory space: “Why hasn’t anybody been able to disrupt Gartner’s business model”). To disrupt an entrenched vendor’s business model means to disrupt their market, which may be extremely difficult/impossible to achieve without disrupting your own chances of stepping in to take advantage of the opportunity (an issue we’ll discuss in Part II).

INNOVATION

Innovation, on the other hand, is more often the result of a “spark” or idea that transcends the products, services and strategies of an existing vendor or market. It creates something new: its own ladder. Rather than competing head to head against an existing market or vendor, it offers an alternative that, if done correctly, is often unnoticed by other vendors. It doesn’t (initially) compete for the same budget, nor does it require a “magic quadrant” or an “us vs them” comparison.

A true innovation stands alone – it is its own product and market replacing the need for existing products and markets. It obsoletes prior structures (an issue we’ll discuss in Part III) and represents – in both the short- and long-term – a new market opportunity.

While a new innovation may ultimately compete for overall corporate/consumer dollars, it is often differentiated enough that it can initially sit along-side existing products and simply blend into the landscape. In fact, the best innovations are the ones that existing market players don’t deem as viable – very different from a product evolution that may be considered cannibalistic if they were to implement it themselves.

Taking it deeper, a true innovation will ultimately replace the need for existing products, vendors and even markets. All though not common, the “existing products” *may* not actually exist (although the need for them may – the case of the impractical market), or if they do exist, they *may* under-perform or not currently meet market demand (something that may not be obvious or intuitive to either consumers or vendors).

Take, for example, the iPhone (introduced only five years ago in 2007). In and of itself, it wasn’t a true innovative product, but rather an evolutionary extension of existing multi-media phones (like the Blackberry). But the Apple App Store – when combined with the iPhone (in 2008) – was a true innovation. It created a new market, obsoleted others and forever changed the way that hundreds of different products (as applications) were brought to market.

MOVING FORWARD

In the next few posts we’ll discuss the different types of disruptions and innovations that commonly occur, and the risks and rewards that accompany each (here’s a thought to ponder: most disruptions – especially man-made – offer more risk than reward, while most innovations offer tremendous reward with very little risk).

Have a different perspective? Toss it out. There are plenty of opinions on this subject and I’m looking forward to the debate.

“Oops!” Broken Lightbulb photo courtesy of Kyle May licensed under Creative Commons

Note: Post updated to highlight and clarify distinction between “disruption and innovation” and “Disruptive Innovation”

Articles, Business, Social

Mentoring, Networking and Innovation – Revisited

October 24, 2011 Fred McClimans Leave a comment

History is filled with examples of linkages between networking, mentoring and innovation, but over the centuries the knowledge acquisition ecosystem has changed considerably. There was a time when this process was slow and rooted in tacit knowledge, but as the needs and wants of society progressed and evolved, the process became more refined—moving faster— and rooted in the exchange of explicit knowledge.

TACIT KNOWLEDGE – SHOW ME!

Regrettably, as society and technology continue to explode at a pace that stretches Moore’s law, it translates to the current knowledge acquisition ecosystem being broken; in fact, we may be at risk of losing a generational exchange of knowledge and innovation.

Following is a fast-paced tour through related history, plus a prescription for 21^st century mentoring, networking and innovation.

IN DAYS OF YORE

Centuries ago, the path to gainful employment often required apprenticeships. If you wanted to learn a trade, you had no other option: you needed to find somebody who was already doing it.

Through practice and much coaching—especially if it involved tacit knowledge—you could eventually master a particular craft or art. This was a one-to-one relationship that benefited both the master and the student. Students learned a trade that would serve them for life, and masters acquired young, cheap talent to keep their businesses alive. If you wanted to learn a trade, you had to find a person who was willing to teach you how to do it. And, if you were lucky, the master provided you with paid employment at the end of your apprenticeship.

In this type of direct one-on-one learning process, a master could only have a limited number of apprentices at any one time. This not only limited the ability of the master to educate the masses in their skill, but it also limited the ability of the young student to ask questions or bring new ideas to a wide audience.

While the collaborative sharing of knowledge occurred, the resulting by-product—innovation—was a slow process measured in decades, not years or months.

THE AGE OF MASS

EXPLICIT KNOWLEDGE RULES

During this period, the master/student apprenticeship process evolved into—particularly at the management level—a mentorship process. The master/student relationship remained intact, but it became less about passing along tacit knowledge and fundamental skills and more about the refinement and guiding of the student’s careerpath.

Throughout this revolutionary period, the one constant in the apprenticeship and mentorship processes was that both the master and the student benefited from the relationship. It was a two-way street that helped advance both experienceand new ideas.

In essence, it helped foster innovation.

THE NEXT “NEXT”

In the 21^st century, we’ve shifted into a post-industrial, information-based economy that once again has resulted in a requirement for both educational change and a shift in the type of workforce required. Unfortunately, some things have changed (not necessarily for the better) along the way; namely:

the master/student mentorship process quickly is becoming a casualty of the global availability of information; and
there is a shift in the way society learns and how we reinforce our decisions.

THE “HYPER-CONNECTED” GENERATION

Technology, pervasive communication and the global availability of “any information everywhere” have had a negative impact on the state of mentorships.

Photo of sign at Newton-Lee Elementary School in Ashburn, Virginia by Fred McClimans.

Twenty years ago we had a culture where peers still relied upon personal face-to-face (or voice-to-voice) real-time communications. As we “graduated up” from high-school to university or college, we were introduced to a new level of peers and potential teachers/mentors. As we left our institutions of higher education and moved into the work-force, each new job opportunity brought with it a “new” level of contacts.

This change in contacts and peers wasn’t necessarily by choice. It was a by-product of the way we communicated and the limitations that geography placed upon our network of “on-demand” peers.

Today’s generation (some may call it Gen Y or Millennials—we’ll use the phrase “hyper-connected” here) faces an interesting conundrum:

As they move from high-school into the work-force, the hyper-connected still encounter the same “new contact” opportunities as their predecessors. The complication is they also bring with them a collection of trusted peers, with whom they remain connected through pervasive communications.

As a “trusted” group, and taking into account peer pressure, it is no surprise they rely heavily on this group of peers when it comes to making lifestyle or career decisions. Rather than seek out the advice of those with experience in their new-found field of employment, the hyper-connected often are likely to seek the counsel of their long-term friends.

This may fill the need the hyper-connected have to gain confirmation or acceptance of their plans, but it diverts their attention from the value that an outside advisor or mentor can bring to the equation.

THE NEED TO MENTOR

Why do we mentor others? Like parenting, it’s motivated by both selfish and selfless aspirations.

We want to:

Bestow on others our own knowledge;
Give them the opportunity both to work with us and for us; and
Pass along our collective experience to those who we trust to continue our legacy.

At the same time, we recognize they may become our peers or even our competition—something that both forces us toraise our game to the next level and challenges us to find innovative solutions to win the game.

Where does this innovation come from? The innovation comes from the exchange of ideas with those we mentor.

WHY NETWORKING IS KEY TO LEVERAGING MENTORING

It’s often been said that it is not what you know but who you know. Today, more than ever, people recognize the value of diversity of opinion. We also recognize that a person need not have just one mentor and that mentorship needs—and mentors—may change over time; ultimately, helping to form a group of trusted advisors.

How do you accommodate this?

Mentoring is part of a larger ecosystem of networking. It requires you to reach out of your comfort zone to find those who are “where you want to be.” Unfortunately, too many people are afraid to—or don’t feel the need to—truly network and reach out to establish these long-term beneficial relations.

Simply reaching out online to ask an experienced person a question, or asking for a limited piece of advice, isn’t true networking. It often results in answers that lack context.

What many of today’s younger generation fail to realize is that networking isn’t about:

following people;
commenting on a blog; or
asking a question from a person with whom you haven’t built a relationship of trust.

While the old axiom “you may find that the most successful people make the most effective mentors” still applies, it has taken on a new meaning in the digital era. It isn’t about how many people you follow or how many people follow you, buthow many personal relationships you cultivate through your online community.

TOMORROW’S WORKFORCE

As we migrate from a world driven by process to one focused on innovation and problem-solving, we see the benefits of both data-driven components and experiential/tacit knowledge—something that is ideally suited to the:

Internship > Mentorship > Employment Model

As we create new professions (community managers didn’t exist a decade ago), we find that traditional education falls short in preparing candidates with the requisite skills and mindset to be successful.

Today’s questions are now:

“How do we bridge that gap?”
“How do we cross that functional/educational divide?”

The answers are that we—collectively—need to reach out proactively to schools and to students in the early stages of their careers. We need the hyper-connected to:

Think analytically; and
Evaluate events and circumstances and make the most effective and positive decisions they can.

And we need to:

Push them towards internship programs that foster and grow this critical skill set; and
Ultimately, lead them to mentorship programs that offer opportunities and provide for the mutual exchange of knowledge and ideas that lead to innovation.

THINGS THAT MAKE YOU GO “Hmmm…”

We invite you to ponder this mental checklist:

Are you reaching out to your local college or university community (or your summer student base) and offering internships that make a difference?
Are you willing to both educate and learn from your interns?
Do you realize the value (both for your organization and children) of helping the next generation of leaders benefit from your experience (careful – this requires a time commitment…)?
Are you willing to openly give to those that you mentor, allowing them the opportunity to learn from you, work for you and perhaps even compete against you?

If the answer to any of the above is yes, you are one step ahead of your competition.

This post, co-authored by Alan Berkson with Fred McClimans, originally appeared on October 2, 2011 in PR Conversations. It has been reprinted and updated here.

Alan Berkson is a principal at the Intelligist Group in New York, USA, where he focuses on helping businesses move past blockages, leverage unidentified or underused assets, and identify opportunities for growth. He provides provocative commentary and theories on a variety of business strategy topics on his blog, The Intelligent Catalyst. Connect with him on Twitter, Google+ and LinkedIn.

Fred McClimans is the managing director of the McClimans Group in Washington, DC, USA, where he focuses on helping businesses improve their strategic business influence and find creative ways to drive their market from a proactive perspective. Read his blog at fredmcclimans.com. Connect with him on Twitter, Google+ and LinkedIn.

Together, Alan and Fred are working on 2020F, a global community being built to identity, track and trend disruptive events that have the potential to influence long-term change in both related and tangential markets, including developing actionable solutions to both minimize the risk and maximize the opportunity of current and future disruptive events.

All

Influence and the Value of the Introduction

February 8, 2011 Fred McClimans 1 Comment

INFLUENCE. Sometimes a simple introduction and handshake is all you need.

Influence is all around us, present in almost every aspect of our lives. We live through it in school, through our teachers, mentors and friends. We see it in our family lives, as our children are influenced by our own behavior and morals. We especially see it in the broader society where people are often influenced by their favorite stars, idols or athletes – perhaps even going so far as to emulate their behavior in the misguided belief that if their idols are cool and liked, they can be cool and liked if they adopt the same behaviors or lifestyles (and no, it doesn’t work that way in real life).

INFLUENCE AS WE TYPICALLY SEE IT

In all of the situations mentioned above, we are dealing with influence from the perspective of a direct cause-effect relationship that involves an influencer and an influencee. Most commonly, we see personal influence where a person, or group of people, has direct influence over another person, or group of people (classic examples involve politics and peer-pressure).

We also often see influence in business and marketing, with companies striving to sway entire markets to purchase their products, often through educational campaigns (providing the consumer with the advantages of their product, its features and why it is a better option than rival products). In other cases, they may lean towards more subtle neuromarketing strategies, while others simply resort to blatant “value by association” techniques (if my favorite movie star uses that product, it’s probably a good product…).

We can even take a more observational view with regard to events and actions, tracking the influence that a particular event (or group of events) today, or in the past, may have on future events (witness the history of political upheaval in one nation helping to influence, or even drive, similar upheavals in other nations suffering from similar internal or regional issues).

“Influence is much more than just changing or causing a behavior”

But there is another type of influence that is more subtle, less direct, yet often more effective at achieving a long lasting impact – and all it takes is an introduction.

THE VALUE OF INFLUENCE BY INTRODUCTION

When we talk about introduction-based influence, we are referring to the bringing together of two or more people (or groups) that have the ability to complement each other for mutual benefit. In this case, there is no typical influencer – influencee relationship. Rather, the influencer is acting as more of a facilitator – an enabler of sorts – using the introduction as a way of creating an environment where ideas and collaboration can be fostered between the groups being introduced.

“Influence by introduction can produce some great, and unexpected, results”

Influence by introduction does not work well when there is a fixed outcome that the influencer is hoping to achieve (i.e., a specific course of action). Where it does work, however, is where the outcome that the influencer is hoping to achieve is less for their benefit and more for the benefit of the parties being introduced, or in situations where the desired outcome isn’t a particular action but rather a type, or level, of action.

Perhaps the parties being introduced are an analyst and a vendor – each looking for information and insight from the other. Or perhaps the parties being introduced each bring a particular strength or talent that, when combined, can create a powerful, collaborative working group, perhaps even identifying and developing solutions to problems that none of us, myself included, may have thought about on our own. It’s all about opening up new opportunities.

“Any business can benefit from influencial introductions”

From my perspective, successful introductions are definitely a form of influence. Positive influence, like leadership, is based on trust, and introductions only work well if all parties trust, and respect, the person making the introduction. Who doesn’t like to hear from a friend or advisor: “I think you two both have some great ideas and skills – you should definitely get to know each other“?

It’s more than just a pat on the back, it conveys a sense of value, potential and belonging to the people being introduced. They may not even recognize that there is a subtle form of influence at play.

So how do you or your company view influence? Most view influence as a means to drive an outcome with a specific goal in mind, and there’s nothing wrong with that. But have you taken the next step?

Are you willing to use your influence, with your name on the line, to make that introduction, acting as the catalyst to allow others to create value on their own, where the outcome is far less certain, but perhaps with the potential to benefit us all?

I value your opinion, and all comments are greatly appreciated. You can also subscribe to my posts via Email or RSS. Thanks for being part of the discussion – Fred.

analysis – innovation – execution