The battle to counter disruptive competition: continuous innovation vs “good” management Stephen Denning

Citation

Gorrell, C. (2012), "The battle to counter disruptive competition: continuous innovation vs “good” management Stephen Denning", Strategy & Leadership, Vol. 40 No. 4. https://doi.org/10.1108/sl.2012.26140daa.003

The battle to counter disruptive competition: continuous innovation vs “good” management Stephen Denning

Article Type: Quick takes From: Strategy & Leadership, Volume 40, Issue 4

For many companies on the Fortune 500 – the ones that listen to existing customers, assume that current market trends are reliable guides to the future and that focusing their resources on their core products was the safest, smartest plan – disruptive innovation has been a killer. Many firms in the Fortune 500 have been blindsided by disruptive startups in recent years. Clayton Christensen – whose book, The Innovator’s Dilemma, describes this reality – has come to the conclusion that for market leaders “doing the right thing will kill you.”

In “good” traditional management thinking, as new entrants to the market begin their “upmarket march,” it makes no sense to go down and compete at the market bottom when there is much more money to be made much more easily at the top. But it is this “smart” strategy that leads to failure.

Is there a defense against disruptive innovation?Christensen has three responses to the question, “Is there a way out of the dilemma faced by the leader of the pack?”:

1. 1.

   No, the disruption by new entrants is simply the natural and inevitable life-and-death cycle of the capitalist process of creative destruction. Examples include Cisco’s killing of Lucent and Nortel with disruptive technology, and – in turn – is now be threatened by others.

2. 2.

   Maybe, the solution for established firms may be to set up separate business units with different business models, IBM being a prime example.

3. 3.

   Yes, incumbents can survive if they shift from an internal financial focus of maximizing shareholder value from existing customers to an external focus of continuously innovating around “the customers’ job to be done.” Apple is the success story cited.

The necessary change is deep and broadThe only way out of the innovator’s dilemma is to change the game being played. Instead of focusing on making money and pursuing the dumbest idea in the world – maximizing shareholder value – the goal of the firm has to shift to delighting customers through continuous innovation.

But does continuous innovation lie outside the performance envelope of your firm? It requires major changes in mind and heart. New roles for managers, new ways of coordinating work, new values and new ways of communicating are all needed. (The five required transformations are cited.)

Bottomline: There are three responses to the “innovator’s dilemma.” Based upon others’ experiences, the clear choice must be to change your approach to management, delight your customers and pursue continuous innovation or else jeopardize your long-term survival.