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10.3 Disruptive innovation

When companies have to name their most daunting competitor, they often point to the leading incumbent in their market-place. Thirty years ago, General Motors would point to Ford Motor Corp. [...] Harvard Business School would point to Stanford Business School.

These are all sustaining rivals, where companies are fighting for existing customers in existing markets. These battles are important, but companies also need to watch for disruptive innovations incubating outside of the core market.

(Anthony and Christensen, 2005, p. 41)

The term ‘disruptive innovation’ was coined by Clayton Christensen in a seminal article for the Harvard Business Review (Bower and Christensen,1995). The premise is plausible: large companies or significant players in their field may be quite good at innovation that fits within their existing paradigm, but are often vulnerable in the face of radical changes that challenge their worldview.

No one is really going to offer management any form of reliable crystal ball, but there is merit in examining innovation history in an attempt to avoid repeating the same mistakes. Many critical failures arise because a management team has been to some extent ‘blind-sided’ by developments that lie outside their previous experience. Therein lies the peril of organisational orthodoxy; the ‘way we do things around here’ may be a key ingredient in current success, however, it can lead to blinkered vision (concerning what might be possible, or what might be just around the corner). Core competencies are often inextricably linked with ‘core rigidities’ (Leonard-Barton, 1993; Tushman and O’Reilly, 1996).

Smaller, younger, and more agile organisations tend to have fewer traditions to define the ‘right way to do things’. The lack of conventional wisdom often makes it easier for a smaller organisation to create something radically new; in Christensen’s terms, to produce disruptive innovations.

Large organisations sometimes set up skunkworks (groups of innovators charged with developing a new product outside standard systems) to get around the potentially inhibiting effect of standard reporting procedures. These groups often report directly to top management. The term ‘skunkworks’ was originally coined to describe an initiative at Lockheed Aerospace where key staff were deliberately isolated from the day-to-day constraints of company bureaucracy in order to foster innovation (Rich and Janos, 1994).