IBM On Disruptive Innovation

Jasper Maskelyne was a British stage magician. At the advent of World Word 2, Maskelyne rapped on the door of the British Army and volunteered his services. “We need soldiers, not entertainers,” the desk sergeant quipped. Nevertheless, Maskelyne joined the Royal Engineers and was responsible for creating some of the greatest disappearing acts in history.

Maskelyne’s team—they called themselves The Magic Gang—employed painted canvas and plywood to make jeeps look like tanks and tanks look like trucks. They created illusions of armies and battleships and masked the Suez Canal to such effect that confused Nazi bombers dropped their payloads off-target.  At the Battle of Alamein, Maskelyne’s team created an imaginary force of 2000 tanks that threatened Germany’s General Rommel from the South. So that British General Montgomery was able to deliver a smashing attack from the North.

Although critics suggest that Maskelyne’s story may be apocryphal and itself an illusion, it contains all the elements of disruption. Surprise. Cunning. Shattered preconceptions. The sad hammer of defeat on one side, the delicious crown of victory on the other.

The essence of disruption is that you don’t know when it’s coming until it’s already there. You plan for it the way you plan for hurricanoes: try to predict a perfect storm of events, personnel, resources, and systems and hope you’re on the right side of storm wall.

And yet. Without hope there is only despair.

To remain competitive (and prevent their platform from burning), companies try to capture and institutionalize the dark powers of disruption. The latest effort to squeeze the storm into the bottle is The Dynamics of Disruptive Innovation, sponsored by the 2012 CEO Study from IBM.

A panel led by IBM’s strategy and transformation leader Anthony Marshall, who is also program director of the biennial Global CEO Study of IBM’s Institute for Business Value, was made available for screening this week.

While sounding out the difference between disruption as a market force and disruption as a business strategy, themes emerge.

One theme is the notion that disruption comes from companies who don’t care. What if somebody offers your services for free? “When Google came in with free email and large storage, that was it,” says panelist Joshua  Gans, professor of strategic management, University of Toronto. “There was no more money to be made selling web-based email.”

That disruption didn’t come from a competitor entering the market with a less expensive service, but from a company that didn’t care about that side of the business at all, so simply gave it away. “That’s where the real risk of disruption is,” warns Gans.

A second theme is that disruption comes from emerging markets. A new global culture and economy is emerging and accelerated disruption is predicted to come from India, China, Brasil, and other developing markets. “If you are surprised by disruption at this point, you are not paying attention to emerging markets and the rest of the world,” says Rita J. King, evp and director of business development at Science House. “And that’s to your company’s detriment.”

One example may be Tata cars, a low-cost car manufactured in India, perhaps destined to undercut Toyota, Ford and Volkswagen in markets outside the Western hemisphere on the one hand. And at home on the other.

Disruption happens. So let it. If disruption is a fact of life, says Gans, perhaps the optimum response is to let it happen. An example. When photographic film had to be taken to the drugstore to be developed, Polaroid was a disruptor. When digital picture-taking was developed, the Polaroid category was disrupted in turn. Rather than waste a lot of shareholder money investing in countering their defeat, Gans suggests, take the hit and move on. (A notion adopted by sponsor IBM when it eventually sold its personal computer division to Lenovo.)

Collaboration can be disruptive. According to IBM’s study, about 70% of CEOs use partnering for purposes of innovation, either to move into new industries–or create entirely new industries and value chains. Collaboration across cultures uniquely blends cultural thinking with and melds contributions

“The inevitable result of big data,” says [girl], “is that greater intelligence will emerge [that] gives us a global commonality.” Rather than focusing on differences, it allows greater consciousness of our similarities.

Disruption can be dissipating. “An organization cannot explore every opportunity,” says Gans. “That’s what we have the market for. One of the reasons for increased collaborations is that organizations can stick to their knitting. A large, established firm may not be the best for finding these new opportunities. What you need to be looking for are the firms that have actually done these things and that are successful, especially when meshed with the things that you currently do well.”

There are two sides of the coin: There is the disruptor and those who have been disrupted. A question Gans poses early on is whether companies—by trying to pre-empt disruption—take themselves away from those things that have made them successful in the first place and ultimately find themselves playing defense rather than offense?

The conversation also points to simple things marketers can do to evolve internally. One is to develop an employee culture that celebrates collaboration, communication, creativity and flexibility.

Develop a culture of experimentation. Google, for example, experiments constantly to decide what its technology can and can’t do. Organizations have to experiment to realize their boundaries.

Develop a culture that listens. Chinese washing machine manufacturer Heier sent a technician to a remote agricultural region in China where they had been receiving numerous breakdowns. The technician discovered that farmers were not only washing their clothes in the washing machines—they were also washing potatoes, which clogged the water pipes. Instead of scolding customers, the company realized they had a potential business opportunity. Heier had already created a network of teams devoted to responding to market needs—an organizational adaptability that allows rapid innovation.

Today Heier sells machines able to clean potatoes.

Disruption alone does not guarantee success. Nor does innovation. “What remains constant,” says Ravi Radjou, a fellow at Judge Business School at the University of Cambridge, “are companies who aspire to longevity by being built for adaptability. Next generation companies [like Google] may have an ingrained ability to adapt more quickly, which older companies did not need because their product life cycles were longer.”

The next disruptive idea? Perhaps this notion posed by Navi Radjou. “What I see with growing scarcity of resources, is a no tech revolution, rather than high tech. Can you deliver more with less? That’s a big shift for companies who try to push the technology envelope in trying to create the next big thing.”