What is disruptive innovation?
I like to use the metaphor of cooking when I'm talking about disruption because innovation is nothing more than a willingness to seek an arrangement, a new arrangement of the ingredients that you have available. And the ingredients could be your value
proposition, could be customer segments that you serve. It could be the channels you use to deliver value to the customers. It could be that relationship you have with your customers. It could be the key activities that you do as an organization
to create the value, could be the partners and supplies in your network. It could be the assets that you have available, whether it's your brand, your capital, could be the cost structure of the business, the revenue model. All of those
things are ingredients that can be re-mixed in an infinite number of ways. Economic growth and business growth does not result from more cooking. It results from better recipes. And that's all innovation and disruption is. It's the
willingness to seek a new arrangement of the ingredients you have available to make them more valuable.
How can large businesses approach disruption?
A lot of people like to talk about disruption in terms of start-ups, small scale enterprises. And that's certainly true. Outsiders can have a certain advantage because they're not constrained by the typical core strengths that an organization
thinks they have or core competencies that an organization have so they're free to see the future of the industry from a different vantage point because they're not starting from the same asset base. But it's a mistake to think
that disruption is only something for start-ups or small scale nimble enterprises. Innovation treats ideas and knowledge as what economists define as non-rival goods meaning there's no inherent scarcity. Even if the new ideas I come up
with aren't as successful as the ideas I'm currently using in my business and industry, that doesn't mean they're worthless. It means they're still valuable because you learn something from every new experiment. With every
new idea, leads to another new idea. So even if they fail, they still have value because you're building what we refer to as innovation capital.
What is innovation capital?
Start to think of ideas as currency. If you have one idea, you can purchase another idea. And that's what I mean by building innovation capital. Treating ideas as currency starts to get you into the mindset of believing that every new arrangement
of ingredients, every new concept that we develop has value. Once its advantages are proven and clear, so you have proof of concept, it's no longer high risk. What you're risking is the time to get it to that point.
How can leaders improve innovation efforts?
You need to reward effort and not result. When people are actually told that it's not return on investment that you should be focused on--you should be focused on what we call ROL, meaning Return On Learning. That is the value of a disruptive idea.
It's what you learn from it. I caution people to think, ah, it's all about disruption. We're got to change everything we're doing and completely destroy it to create something new. Never do that. That's a bad idea. You've
got to keep what I call the existing engine going, which is a system of continuity. Every organization needs a counterbalance to this wheel that's constantly turning. You need a wheel turning in the opposite direction. And this is the
wheel of disruption, meaning you're building up a portfolio of unconventional strategy options to balance out your portfolio of incremental strategy options.
Disruption: Beyond the buzzword. New York University Professor Luke Williams breaks down the steps businesses can take to stay innovative.