How organizations of the future will innovate
Disrupt or be disrupted
Innovate is one of the watchwords of our time. There is no company, organization or person who does not like to present themselves as innovative. The word "innovation" must appear in our strategic plans and budgets, usually next to "sustainability" and "inclusion," to reassure shareholders and institutional stakeholders. We grew up with the mantra "innovate or die". Which in the language of innovation sounds like this: disrupt or be disrupted.
The question of innovation becomes a little more interesting, and less obvious, if we associate it with a word like disruption. Literally, it means an interruption, a disturbance that prevents the normal course of a process or event. And so a concept usually perceived as negative takes on a positive meaning, when viewed from the perspective of innovation.
The dilemma of innovation
Clayton Christensen was the first to talk about disruptive technology. He did so in 1995, in this article, and then in his most famous book, The Innovator's Dilemma.
The innovator's dilemma Christensen discusses is the question faced by every company manager as they begins to have a solid business, defined processes, and, most importantly, customers who are accustomed to buying a certain type of product or service: should I continue to serve my customers and meet their current needs, or should I pursue new technologies and create new products and services that can meet their future needs?
The first path seems the safest, but it almost inevitably leads to stagnation. If new disruptive players succeed in gaining the attention of the mass market and our customers, the conservative choice turns into planned suicide. By staying true to ourselves, we are swept away by the market: Do Blockbuster or Kodak ring a bell?
Choosing the path of disruption, however, is extremely laborious and complex. First, because no one can guarantee it will work. Second, because the mere thought of jeopardizing what we have painstakingly built frightens us, it is foreign to our culture.
But is it, really?
Destroying is good
Come to think of it, destroying is as much a part of people's lives as building.
Just watch a little boy or girl play.
Children destroy things as easily and creatively as they build them. Drawing a picture is just as good as destroying a sheet of paper into a thousand pieces; stacking a tower is just as good as tearing it down; indeed, children often make it precisely to destroy it in new ways, again and again. Building something with Legos is as good as separating the bricks and starting over.
Legos in particular talk about the relationship between creation and destruction in the right way. Because we can start building, buy new pieces, improve the construction, make it more beautiful and bigger, but we cannot add bricks endlessly. To endlessly build something new and different again and again... we need to destroy it! We need to disassemble our construction and reconfigure it.
The Law of Legos
Perhaps Christensen would not have minded using Legos as a metaphor to explain his theory of innovation, as it works well.
Our Lego set is our company. The building blocks are the people, processes, products, and assets in general of our organization. We spend time putting them together and assembling something that pleases those who look at it - our mom who compliments us on what we have built is the customer who buys our products and services to their satisfaction.
However, we are not satisfied. We know we have to innovate, it is written in the strategic plan: we invest in new bricks -- people, resources, technology, assets -- to make our building better. We do the kind of innovation that Christensen calls sustaining, which is innovation that improves the performance of our products and services and increases the satisfaction of our current customers. It has a faster payback, carries less risk, and is therefore easier to choose.
Things are going great, until...
Our younger sibling not far behind us is bent on creating something that does not resemble what we have built. He even tries to invent bricks that are different from ours. He doesn't seem to care about getting compliments from Mom. He is all about his alternative construction, which only interests him and a few of his nerdy little friends. Until, one fine day, he comes up with a unique construction that moves, lights up, and interacts with other constructions. He has brought what we call disruptive innovation into our home - aka the marketplace. In the face of that creation, our construction - aka our company - has become hopelessly obsolete: we will never catch up; we are too big and structured, and therefore slow, to catch up. By now, Mom only has eyes for our brother's construction: if only we had paid attention to what was happening in brick technology, if only we had cared about how Mom's needs and tastes and those of everyone who loves Lego constructions might change!
In short, as children we have a wonderful relationship with destruction.
Then, we are educated to a culture of preservation: we are taught that destroying is harmful, painful, sad, unacceptable.
Fortunately, some adults manage to hold on to their inner child who is not afraid of destroying. And that inner child can accept that what we have built may cease to exist, to make way for something different.
In 1984 Zhang Ruimin, CEO of Haier, rounded up all the company's employees and destroyed dozens of defective refrigerators in front of them with a hammer. The gesture has become a manifesto for the quality of Haier products, but more importantly for the organizational culture of the Chinese company, which is now an ecosystem of 4,000 independent micro-companies working together to respond to the evolving demands of their customers.
When Meta was launched, Mark Zuckerberg said: "If we don't create the thing that kills Facebook, someone else will." I don't know what's going to happen with the Metaverse, let alone Meta’s Metaverse, but certainly Zuck represents a living manifesto of disruptive innovation. And the criticism normally moved against his products - investors not rewarding the company, detractors talking about "too few users in the Metaverse" - are the same criticisms that Christensen identifies as signs of potential disruptive innovation on the horizon.
Buddhist monks spend days building their mandalas, only to eventually destroy them, to remind themselves that nothing lasts forever and there is no point in getting attached to earthly things.
Nike’s 50th anniversary campaign by Spike Lee says: "We thought we’ve seen it all, but we haven’t seen anything yet." This too is a good manifesto for innovation: the company knows that if it wants to help build the next 50 years of our history, it cannot stick to what it has done so far.
If it’s corporate, it’s not innovation
Apparently, 81% of large Italian companies does open innovation.
Now, if I were told that four out of five companies in Italy simply do innovation, that would already seem like a lot. And I wouldn't believe it. And downright open innovation!
Open innovation theorized by Chesbrough in 2003 involves a twofold movement of innovation:
- from the outside in: the company acquires skills, technologies, know-how from the outside and integrates them into its own processes;
- from the inside out: the company shares its know-how and technologies with others in a transparent and systematic way.
What we call open innovation in Italy is limited exclusively to the first process, and results, in most cases, in a collaboration between a large company and a startup, motivated more by newsworthiness reasons than by real innovation needs.
The truth is that the word innovation next to the word corporate sounds like an oxymoron and brings us back to Christensen's dilemma. How can one truly innovate, that is, research and introduce something different, future-oriented, and completely disinterested in mainstream market favor, in an environment where everything conspires to maximize current business and quarterly results?
A new class of unprejudiced entrepreneurs and leaders, free from the fear of challenging the status quo, will arise. This class of leaders will create new organizations designed to scale disruptive innovation, rather than short- or medium-term profit.
Innovation will stop being a buzzword for budgets and strategic plans, and will become a word to be used sparingly, to mean anything that is different, new, and useful, not simply something that improves a process, product, or service that already exists.
Successful organizations of the future will be:
- Transparent: anyone will be able to access key information at any time, both inside and outside the organization;
- Places of experimentation: they will reward initiative, celebrate failure as an opportunity for growth, recognize that knowing how to adapt is better than trying to meticulously plan for the future;
- Autonomy and entrepreneurship accelerators: they will give everyone the tools to organize their work, build teams and set goals freely and autonomously, by indulging everyone's personal motivations on one hand, and by calling everyone to the responsibility of pursuing a purpose greater than the individual, on the other:
- Ecosystems: they will know how to orchestrate the autonomous work of individuals and teams within the organization and relationships with other organizations outside, which is a key resource for scaling good innovation practices.
The challenge between conservatives and destroyers will become more and more acute, and the time will come when we will have to choose if we want to side with one faction, or the other.
Whose side are you on?