Want to survive in an economic downturn? Be disruptive
Innovations that fail often are the result of managers having used the wrong structure and process
HR Managers need to be sure there are positions within the company through which employees can be rotated to learn critical innovation skills
Disruptive innovation as change management approach is the key to success in an economic downturn, says Dr Clay Christensen, Harvard Business School and co-founder of Innosight
You have been described as one of the world’s leading experts in innovation today. What spurred your interest in this topic?
My first career was building and running an advanced materials company with several MIT professors that has become quite successful. When I left the company to begin my academic career, and looked back on our innovative success and failures, I just wondered whether innovation was intrinsically that hard, or that unpredictable.
What new areas of opportunity do you see for disruptive innovation?
Recently, I have focused the lens of disruptive innovation on social issues such as education and health care, This is adequately reflected in the researches I’ve co-authored as my recent research has built a case for an innovation-based framework for reforming both sectors. Disrupting Class: How Disruptive Innovation Will Change the Way the World Learns describes how disruptive processes make the highest quality education products services more conveniently accessible to the vast majority of learners. The Innovator’s Prescription: A Disruptive Solution for Health Care recognizes health policy expert and presents a unique method for reducing costs, increasing affordability and minimizing the economic impact of health care. Next we’re going to examine renewable energy.
Stiffer competition and dizzying technological advances often force companies to change course. But most change initiatives backfire. How should corporates brace for a proper change management?
Innovations that fail often are the result of managers having used the wrong structure and process. When it is disruptive, the change effort must be housed in an autonomous business unit. When it entails creating a fundamentally different product or service architecture it needs to be done in a heavyweight team. And in turbulent, fast-moving times, it is critical to manage projects with a method such as discovery-driven planning, to ensure that the assumptions upon which success are repeatedly examined for their veracity.
In your book The Innovator’s Dilemma, you’ve argued that disruptive technologies have forced many organizations to die because they have either failed to see the disruption coming or didn’t act until it was too late. To what extent do you foresee this kind of changes to affect business interests in the current downturn?
In my opinion, the downturn will actually have a positive effect on innovation. Organizations highly-committed to innovation give their innovators huge sums of money to spend, and that’s where they flater as if they start off in the wrong direction, they end up pursuing the wrong strategy for a very long time by not having restrictions on resources. However, when resources are tight, companies have to think of innovations very quickly and that too at low cost. This kind of environment makes the probability of success much higher as it forces innovators to get to the market faster, see what works and what doesn’t, and adjust accordingly. Companies can actually thrive in a down market as firstly, business leaders can invest to build capacity as prices will be at record lows. Then, when the industry picks up again, they can capitalize on it. They can catch the increase in the demand and grow the business. Secondly, they can disrupt. Disruption always brings to the market the products that are more affordable. That’s just what’s needed during a recession. Low-cost products will have much more demand in a downturn than when the economy is strong.
In your book, The Innovator’s Solution, you’ve dealt with ways to promote innovation inside corporations. In today’s context of hypercompetitive markets, shortage in critical talent, fear of generalized economic recession and outsourcing of non-core activities, what would you prescribe to the corporates?
I would say, don’t layoff the wrong people. Make sure you keep the people who are involved in developing the next generation products so that when the economy recovers, the organization is prepared to offer breakthrough products and grow the business. Also, sales people are very important. They cannot (and should not) only keep customers invested in the business, but must learn how customers are being affected by the downturn. This way, innovation efforts can respond to their needs.
Businesses may be well managed, customer-friendly, and technologically advanced, yet they are susceptible to being overtaken by upstart competitors. Is it practical to focus on low-end and new markets?
It is practical, but the focus on low-end or new-market disruptive opportunities needs to be the responsibility of a distinct, separate business unit. That way the company’s core business can thrive, even while the new ones focus on disruption.
There is little doubt that technology has had the most profound effect on altering the tasks that we humans do in our jobs. What could be an ideal paradigm for HR managers in today’s changed environment?
HR Managers need to be sure there are positions within the company through which employees can be rotated to learn critical innovation skills. If there are no positions in the company with responsibility to create new markets, employees will never learn how to create new markets. HR managers need to ensure that there are enough such positions to enable employees to learn how to innovate.
Positive elements may help in adapting to disruptive changes in business successfully. What would you suggest to preserve the best attributes of corporate culture when this kind of change must be constructively faced?
Culture can be a critical barrier and at the same time, a true enabler to innovation. Culture can in fact change rapidly, but only if management aligns the hard aspects of organizational change, including variables, such as how ideas are sourced, opportunities are evaluated, risk is measured, success and failure are rewarded, and initiatives are staffed and executed.
To what degree do you think disruptive change can affect adversely the positive attributes of corporate culture?
Disruption only adversely affects the culture of a business unit if you demand that it simultaneously meets the needs of current customers, as well as the disruptive customers at the low end.