Read an Excerpt
The Invisible Advantage
How to Create a Culture of Innovation
By Soren Kaplan Greenleaf Book Group Press
Copyright © 2017 Soren Kaplan
All rights reserved.
ISBN: 978-1-62634-321-4
CHAPTER 1
SO YOU WANT TO BE A DISRUPTIVE INNOVATOR?
Be careful what you ask for. You might actually get it!
In today's buzzword-laden business world, we're enamored with the language du jour. Words and catchphrases like lean in, enable, platform, and, of course, disruption are all the rage. Given this book is about how to create a culture of innovation, I felt it necessary to dispel a few assumptions about disruptive innovation specifically, right out of the gate. These assumptions can impede our understanding of innovation itself — and how to shape culture around it — unless we put them into a broader context.
Why are so many of us looking for disruptive innovation? It's simple. Because we want the type of breakthroughs that transform industries, create new business models, and drive growth. Nothing wrong with that! But do we really want everyone in our organizations to be disruptive? No way.
Here's the issue: Although disruptive innovation is important, it isn't the only type of innovation that's necessary to survive, thrive, and win in today's rapidly changing world. Other types of innovation are equally essential. And you need everyone doing them.
The problem is that most companies either go for only the big bets or get stuck in a single-minded focus on the small stuff. If we only swing for the fences, we'll miss the opportunity to score on singles, doubles, or triples as well. And if we only go for the singles, we'll never win the Home Run Derby. The challenge is that we need a balanced approach, one that's focused on all types of innovation.
Disruptive Innovation's Dirty Secret
I believe it's important to understand the context of buzzwords, so we can fully appreciate both their value and their limitations. Let's start with a little story that goes back to the very source of disruptive innovation itself to understand today's state of innovation — and how we can rise above the buzz to create a true culture of innovation.
In 1998, when I was running the strategy group at Hewlett-Packard (HP), we invited Clayton Christensen, the iconic Harvard professor who wrote The Innovator's Dilemma and coined the term disruptive innovation, to come speak to us.
We asked him a simple question, "How do you do disruptive innovation?"
Christensen shared compelling examples. He argued that companies, and entire industries, can be "disrupted" by unforeseen competitors — new entrants that offer up products or technologies at a fraction of the cost yet with equal or greater benefits compared to current options. The result? Customers abandon the old way and move to the new. Industry-leading companies die. New leaders arise. Wealth is destroyed and created all in the same breath. Disruption occurs.
Although I left HP a few years after that, Christensen's words stuck with me. Fast- forward to today — disruptive innovation is business's biggest paradigm. Just about everyone wants it or thinks they need it.
Disruptive innovation is an easily graspable concept, mostly because we've seen the recent casualties of disruption: Kodak, Blockbuster, Borders, Black-Berry. And most of us want to avoid a similar fate or, better yet, reap the benefits associated with being the disruptor, as Netflix, Amazon, and Apple have. Disruptive innovation — or avoiding its consequences — is now a widely embraced business imperative.
What most people don't realize is that there's a dirty little secret behind the concept, and that today's disruption frenzy has started to undermine the balanced approach that's needed to create a culture of innovation.
Old Idea, New Language
Few people know that the fundamental concept of disruptive innovation wasn't new when Christensen introduced it. In 1942 economist Joseph Schumpeter described the dynamics of "creative destruction," essentially the same thing as disruptive innovation.
Jump forward to 1994. The Massachusetts Institute of Technology's James Utterback published a groundbreaking book, Mastering the Dynamics of Innovation, which described how the ice-harvesting industry was displaced by "ice boxes" (a.k.a. refrigerators), how manual typewriters were stamped out by IBM's Selectric electric typewriter, and how something called electronic-imaging technology could pose a big threat to film-based photography in general and to Kodak in particular (it did).
All this was years before The Innovator's Dilemma made it onto the scene. What this previous research didn't have, however, was a catchy term like disruptive to tag onto the word innovation. The rest is history. Disruption is our lens.
Most people familiar with the research on innovation also know about paradigms. Paradigms are mental models that contain unquestioned assumptions about how things work. The world is flat. The sun revolves around the earth. These assumptions are accepted as truths, until they're turned upside down and replaced with an alternative paradigm. Paradigms have always existed, and they always will. Just as quality and reengineering were the business world's lenses in the 1980s and 1990s, disruptive innovation is one of today's biggest paradigms.
While I'm in full agreement that disruptive innovation is a natural part of the evolution of organizations and industries, the "movement" has created a big problem for business. Here's the issue: If we're overly concerned with disrupting or being disrupted, we neglect other types of innovation, innovation that can actually lead to disruption! That's why we need everyone innovating — but doing it in a way that makes sense for their job function, which may mean simply focusing on process improvements, tweaks to current products, enhancing the customer experience, or anything else that may support today's business.
If Steve Jobs Didn't Try to Do It, Why Should You?
The reality is that most "disruptions" don't start out that way. Steve Jobs, arguably one of the greatest disruptive innovators of all time, said the same thing. "When we created the iTunes Music Store, we did that because we thought it would be great to be able to buy music electronically, not because we had plans to redefine the music industry."
Looking back, it's probably not too strong of a statement to say that Apple disrupted the music industry. But did Jobs know that's what he was doing at the time? No. Was it part of Apple's strategy? No. Apple created iTunes because it felt like the right thing to do to add value to customers and the world. Simple as that.
Take two other modern-day disruptors. Larry Page and Sergey Brin didn't start Google (now renamed Alphabet) with the intention of transforming the Internet, buying YouTube, or launching Android. Their very first step — and what kicked off their journey — was finding a way to more effectively prioritize library searches for academic research papers online. Yes, library searches. From there, they realized they could also index web pages. And, at first, they resisted including advertisements next to the search results. Good thing for them (and Alphabet shareholders), they changed their minds.
When we set our sights on creating a disruptive innovation, we can place unrealistic expectations on our organizations, employees, and ourselves. We lose sight of the realities that are inherent in the innovation process. It's like seeking fame for fame's sake versus simply having a great talent that leads to great performances, which then results in fame. It clouds our sense of what we're really doing.
If You Only Swing for the Fences, You Won't Score on Singles, Doubles, or Triples
The theory of disruptive innovation can indeed be helpful for understanding how technology has played a disruptive role in shaping the business and competitive landscape. But when this is your dominant lens and you're obsessed with hitting home runs (or being homered upon), you miss a lot of other opportunities to score. Just take Kodak, for example. About ten years before filing for bankruptcy in 2003, the company hired the head of HP's ink-jet printer business. This move was a "big bet" intended to help Kodak jump into the printer business as a response to rapidly falling 35-millimeter camera and film sales. The company took a single swing for the fences by trying to enter a billion-dollar industry and become the low-cost provider of both printers and ink — the classic disruptive-innovation strategy. It missed. Goodbye, Kodak.
Unlike disruptive innovations, incremental innovations are minor tweaks to existing products or services. Such innovations are fairly quick and easy to do; examples include new colors, flavors, features, benefits, or aspects of the customer experience. The principle behind incremental innovation is much more strategic and goes much deeper than the term suggests. Small tweaks, jelled with the right mindset and approach, oftentimes add up to bigger breakthroughs.
Dave Levin and Mike Feinberg, two former teachers with the Teach for America program, founded KIPP and created a network of a hundred inner-city charter schools with more than 27,000 students, and the schools are producing off-the-charts results. Just as Steve Jobs had wanted to do something basic yet great (i.e., to sell music electronically), so did Levin and Feinberg. They set out to create a school that truly works, and they built it through incremental innovation, one tweak at a time.
These two ex-teachers paint a simple slogan in the hallways of their schools: There are no shortcuts. School starts at 7:30 a.m. and ends at 5:00 p.m. Homework is usually about two hours per night. Teachers vow to make themselves available to any student at any time of day or night, and most students don't hesitate to call teachers at home for help, since teachers freely dole out their personal numbers. Kids attend school two Saturdays a month and the KIPP school year extends three weeks into the traditional summer break.
Nearly every KIPP school in the country is located in an inner-city neighborhood. More than nine out of ten KIPP students are Hispanic or African-American. Seven out of ten of them live below the poverty line. Most enter the program performing well below grade level. Typically, less than ten percent of children with such backgrounds go on to finish college. KIPP students boast a ninety percent graduation rate — not from high school, from college. All this through hard work, determination, and incremental innovation.
Between incremental and disruptive innovation lies sustaining innovation. Sustaining innovations aren't necessarily about big bets. But they're not about little tweaks either. Sustaining innovations involve trying something that feels like a bit of a stretch and then seeing what happens. If they work, they can "sustain" the business (and ideally grow it) into the long term. Sometimes they flop. But, now and then, they go big. When they do, sometimes the storytellers look back and call them disruptive.
Taco Bell's Doritos Locos Taco is a taco with a giant Dorito tortilla chip as its shell. Sound crazy? In the taco's first ten weeks on the market, Taco Bell sold a hundred million of them. To date, Taco Bell has sold more than half a billion, generated more than $1 billion in sales, and has had its new product called the most successful fast-food menu item of all time. The Doritos Locos Taco wasn't meant to "disrupt" the traditional taco. And it didn't involve just an incremental tweak, such as adding a new spice to the taco meat either. It was a decentsized experiment that took a great deal of effort and that expanded the definition of taco for the world. And like most things that, in retrospect, look a lot like disruptive innovations (especially to McDonald's and Burger King), its success surprised even the person at Taco Bell who developed and introduced it, Steve Gomez, who admitted, "I was blown away with how immediately popular Doritos Locos Tacos became."
Another company that has steered clear of disruptive innovation by going after modest- sized opportunities is Fujifilm. Fifteen years ago, the company stood at the same starting line as Kodak. Today, Kodak is bankrupt while Fujifilm has a $20 billion market cap. We don't think about Fujifilm as a disruptive innovator. It isn't. But by most measures of success, it has weathered the storm and come out the other end quite successfully. The company has continued the march toward adapting to the digital world by getting into 3-D photography. They've entered dozens of new businesses, ranging from television cameras to medical products to thin-film packaging for candy. Disruptive innovations? No. Sustaining innovation was the savior — and the company's growth engine.
In today's innovation-obsessed world, disruption encapsulates the holy grail. Incremental and sustaining innovations are the all-too-often overlooked steps that lead you to the grail. The original theory of disruptive innovation is fundamentally about technologies and products. The real world rewards those who build new business models, extend brands, create new channels, find new markets, redesign customer experiences, reinvent business processes, and do the other work that most seasoned innovators know truly shapes the future.
And that's what creating a culture of innovation is all about. Yes, such a culture can lead to the disruptive stuff, but it can also foster other types of innovation — which are equally necessary for improving today's business and adding value in everything you do, all while you're trying to transform the future.
CHAPTER 2
THE INVISIBLE ADVANTAGE
The soft stuff is the hardest stuff for competitors to copy.
Most people become intimately familiar with the concept of culture when they travel abroad. They experience unfamiliar customs, food, music, art, language, and attitudes. If you've ever been to Paris and ended up waiting forever for the check in a French restaurant, you may know what I mean — the unwritten rule is that you have to proactively ask for the check at the end of a meal, otherwise you'll never get it! Why? There's a shared value in French culture that meals should be enjoyed and contribute to one's joie de vivre. Even the stereotypically snippy French waiters respect this norm, so it's up to you to decide when you're finished and ready to turn over your table to the next guest (quite the opposite of customers' experience at many bustling American restaurants).
Just as countries have cultures, so do geographic regions, organizations, and subgroups and teams within organizations. When I work with my clients, I often find that starting with a slightly bigger picture of culture can help clarify what many people see as an ambiguous concept.
Silicon Valley's Innovation Culture
Let's start with Silicon Valley — a place where I've both lived and worked — as an example of innovation culture. Mark Zuckerberg moved Facebook from his Harvard dorm room to "the Valley." Steve Jobs grew up there. The stereotypical image of the entrepreneurial garage comes from the real one in Palo Alto that housed HP.
Other regions and countries have tried to replicate it. But Silicon Valley's unique culture makes it a global innovation powerhouse that can't be copied over to other eager cities, states, or countries. What's happening in the Valley provides a great example of how norms, values, and behavior all merge to reinforce innovation.
Smart people stream into the Valley from Stanford, the University of California at Berkeley, and other Bay Area universities. Venture capitalists sprinkle funding across the most promising start-ups. Companies collaborate while competing. Experienced employees remain on the never-ending lookout for their next big opportunity — and frequently jump jobs across industries and markets, even to competitors. Silicon Valley's fertile ground — which literally started out as farmland — has become the ultimate fertilizer for growing some of the most innovative companies in the world.
In a recent discussion I had with a senior executive at Netflix, for example, I asked if the company had an innovation strategy. He gave me a little puzzled expression and said that Netflix itself is a disruptive innovation. Innovation is so embedded in the company's culture that it doesn't need a specific strategy to make it happen. It is innovation.
As a result of the region's inherently innovative environment, entrepreneurs make the pilgrimage to set up shop in the Valley. Established companies like Comcast and Wal-Mart plunk down their new ventures here. Even the governments of countries like Denmark, Finland, and Ireland have established incubators to help their compatriots from home tap into the secrets of Silicon Valley culture.
(Continues...)
Excerpted from The Invisible Advantage by Soren Kaplan. Copyright © 2017 Soren Kaplan. Excerpted by permission of Greenleaf Book Group Press.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
