Month: August 2016

Disrupting The Enterprise

No one wants to be disrupted. But when it comes to business innovation, being disruptive is a good thing; a very good thing. Most businesses aim to be competitive, yet aim to be just a little bit better than their competitors. Being a lot better than competitors is, frankly, hard work. On the contrary, disruptive businesses take their competitive nature to a whole new level. They introduce technological advances that not only position them more competitively, but to such a degree that they fundamentally change the baseline of competition for their entire industry. Often times competitors scoff at and dismiss the potential of the disruptive technology until it is far too late.

The technology landscape is littered with the winners and losers of disruptive technologies. The PC disrupted the typewriter. The laptop disrupted the PC. Smartphones and the mobile Internet are disrupting the laptop. Google disrupted traditional sources of knowledge, and Amazon disrupted bricks and mortar book selling and retailing. The list is practically endless, but here are just a few more classic examples: Facebook vs. MySpace; iTunes vs. CDs; Uber vs. taxis; email vs. the post office; Airbnb vs. hotels; Priceline and Kayak vs. travel agents; Wikipedia vs. encyclopedias; the Internet vs. newspapers. I could go on and on.

It’s obvious that you want to be on the winning side of the disruption equation. Most disruptive innovations are brought to market by nimble startups that focus exclusively on their niche technology. Increasingly, that technological advantage is custom software created specifically to dominate the competitive landscape. Startups don’t have the burden of the legacy of their former success and are free to innovate rapidly as they create their future. Certainly startups are best positioned for innovation and disruption.

But that does not exclude existing large companies, enterprises, from participating in disruptive innovation. It is very difficult for an enterprise to do what startups do. Enterprises are often beholden to the legacy technology that got them to where they currently are. Their culture, rightfully, is to protect what they’ve built.

There are two primary ways in which an enterprise can innovative.

Incremental Innovation

The goal of incremental innovation is to keep up with the times – to sustain what is already in place. This means updating your product to be cooler, easier to use, and to have more features. In my world that means updating and replacing software to incrementally improve the product’s user interface or back-end programming. Incremental innovation is relatively safe and is critical to staying competitive. The team to perform this innovation is typically comprised of in-house staff knowledgeable of the existing business model, coupled with contractors who possess modern skill sets and experience with specific disruptive techniques. It requires new thinking, but it’s relatively easy to plan and execute. In other words, it’s not rocket science.

Disruptive Innovation

Unlike incremental innovation, to be disruptive you don’t take the easy and safe path. You have to break with the status quo.

Why bother – why not just protect what you already have? Disruption is going to happen whether you like it or not. The only questions is, Will you disrupt or will you allow others to disrupt you?

The most successful businesses position themselves to disrupt their own business model. Think about when Amazon, who initially sold paper books, introduced the Kindle. If they had stuck with paper books then they surely would have lost ground to competitors who around the same time came out with their own electronic readers. Or what about when Netflix started streaming movies in addition to mailing DVDs. What seemed like a crazy business move at the time – cannibalizing its own business model – turned out to be genius. Now, DVDs represent only 14% of the Netflix’s revenue. If they wouldn’t have converted to streaming then a competitor surely would have been happy to take that 86% of revenue from them.

To be disruptive you must create a new operating paradigm. The disruptive team should be walled off from the existing business as much as practicable. New blood and outsiders are required to ensure the world is not viewed within the constraints of the existing business’s blinders. If it’s feasible to completely repurpose existing staff, they have the skills required of the disruptive technologies, and the staff are eager and willing, then segregate them from operations and physically move them to a research facility to focus on the new business venture.

For most companies, this is not feasible and outsourcing is a better option. In my world, in the software world, this is what happens when we are hired to create a new product. We are provided a high level vision and then largely walled off from the existing staff as we implement to the client’s vision. Doing so ensures that we focus exclusively on the disruptive innovation, and not on the normal operations of our clients.

This kind of innovation won’t fit nicely within an established business. It is not easy for existing staff to basically ignore normal operations while innovating on what some deem as unnecessarily hard work. This makes it difficult, if not impossible, to accomplish inside the safety of a big company especially within the confines of a protective culture.

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