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The innovation shift that organizations need to make to manage disruption

  • Posted on March 31, 2021
  • Estimated reading time 3 minutes
Managing Disruption In Business

The pandemic has brought into stark reality how vulnerable organizations are to disruption. While we might not have been able to predict COVID-19, it’s a wake-up call. Organizations urgently need an innovation reset to avoid being disrupted into extinction.

Organizations are typically risk-averse and loyal to current business models and margins, so disruption is a confrontational idea for most. Yet, not liking change won’t stop it or slow it down. We’ll continue to regularly face major disruptions – whether societal, industrial, or technological – and leaders have the imperative to keep their organization and people prepared through this continual change. It’s time to self-disrupt or you’ll be disrupted. The good news is that self-disruption doesn’t need to be traumatic if you have the right culture.

It’s not necessary to uncover an amazing new business idea to disrupt traditional business approaches. Instead, organizations can renew for continuous growth by adopting an adjacent possible approach. A great example of this approach is Uber, which became the top travel company in the world without inventing anything new. Uber’s innovation was identifying opportunity in an adjacent space. Even when Google put navigation on a smartphone, taxis retained a level of defensibility because drivers knew the optimal route to get people from A to B in the fastest time. However, using an adjacent possible approach, Uber was able to rethink how to provide a better service with web mapping capabilities and gig-based workers.

Disruptive innovation also requires risk-taking and unpredictability. These words tend to create discomfort in organizations, most of which have been built and measured on risk-aversion. There is a difference between risk-taking and recklessness, however. To realize benefits, it is important to abide by two principles: 1/ cause no harm to humans but see how far you can push the innovation before it breaks (metaphorically or literally); and 2/ learn from what doesn’t work – insights generated from failures are as important as insights generated from successes. SpaceX epitomizes these principles. Unlike traditional aerospace companies that have avoided explosions due to reputation concerns, rockets getting blown up is built into SpaceX’s business model. As a result, SpaceX is able to iterate at-speed and learn from unexpected outcomes.

Despite extensive evidence that taking risks in innovation yields additional resilience and differentiation benefits, few organizations have embraced the opportunity to act more boldly. Taking the time to step back and think creatively and critically about adjacent possibilities remains a rare or non-existent process in most organizations. This is how established markets and businesses are disrupted. Unless your organization is set up to self-disrupt, it will run the risk of becoming irrelevant in the next 3-5 years. Organizations should take advantage of the unprecedented change-readiness of customers, employees, and partners to rethink how they do business.

There are three steps organizations need to take to self-disrupt:

  1. Identify limiting factors: Every business has blockers to innovation, whether it’s a conservative
  2. Be self-critical: Organizations are generally loyal to how things have always been done but squeezing more margins out of existing products is not sustainable. Clarity is needed on how money will be made in the future and effort put into thinking about how a startup might deliver a better service for 90 percent less.
  3. Break down silos: If internal structural and political boundaries are not removed proactively, external factors will force change. For most, organizational surgery is needed to become more agile and innovative. Design thinking approaches combined with courageous curiosity are critical for breaking down internal silos and driving cross-functional innovation.

So how can you breed a culture of courageous curiosity and adopt adjacent possible thinking to make an innovation reset? Start with this question: Do we know how we’re going to make money in 3-5 years using capabilities like artificial intelligence, machine learning and real-time data or are we waiting for market forces to rethink our business models?

Avanade brings cross-industry insights, deep design thinking expertise, and privileged access to Microsoft to accelerate innovation powered by digital and AI technologies. Contact us to learn more.

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