Incremental vs. Disruptive
When we talk about business innovation there is some much needed further clarification that is required. Business innovation can actually be of two sorts: it can be either incremental or disruptive. Incremental innovation involves product and service improvement (applying lean continuous improvement principles for example). Disruptive innovation on the other hand, corresponds to the creation of new products or services which can re-shape an entire company or the industry business model.
Based on these distinctions, it would be fair to say that what we call 'design thinking' would be better suited for creating incremental innovations. The design thinking approach relies on empathising with customers in order to understand how to make their lives easier with existing services, products, etc.
However when it comes to disruptive innovation, it would be easy to see that this would not work as efficiently. As Henry Ford said: "If I had asked people what they wanted, they would have said faster horses". Indeed, customers cannot desire something that does not yet exist.
This view has been shared by Harvard Business School Professor Clayton Christensen’s best-selling book: 'The Innovator's Dilemma'. Christensen explains that incumbent market-leading companies which focus too much on solely their customers tend to fail and be outmatched by younger and more innovative companies which can skilfully leverage new technologies as well.
What therefore does a company who is willing to develop disruptive business innovations need to do in order to survive against new tech-savvy competitors?
As part of Capgemini's ‘Applied Innovation Exchange’ (AIE) network, we have developed a clear framework allowing organisations to quickly develop radically innovative ideas:
In this article, we’ll focus on the first two phases of this process: the ‘Discover’ phase and the ‘Devise’ phase. The reason why we will focus on these phases is because they are critical in defining the level of quality, relevance and creativity of the ideas that will be ultimately prototyped and then built. Here is what companies need to consider to successfully develop disruptive business innovations:
The first thing a company needs to understand is where are the existing or emerging business opportunities, not only in their own industry but across all industries. In other words, they need to start by scanning business opportunities instead of starting with customer insights. These opportunities are not only stemming from new technologies (even if technology has been the main driver for business opportunities since the first Industrial Revolution).
They can be of a many different sorts: socio-economic, political, etc., and a good way to identify all these opportunities is to use the 'PESTLE' framework (Political, Economic, Social, Technological, Legal and Environmental).
Nevertheless, customers still have a critical role to play in the success of any disruptive business innovation. The ability to create an innovation by linking an opportunity to what people really care about is key to ensure that this innovation will be widely adopted by consumers.
The main pitfall is that during ethnographic research, designers tend to focus too much on what people do or say, instead of trying to understand what they actually think or feel. Or if they do, it is often quite superficial in terms of understanding people's real expectations. In order to do this properly, experts such as psychologists or sociologists would need to be involved to unveil people deepest needs and aspirations (see Maslow’s Needs Pyramid for example). A true disruptive innovation must resonate with people’s core values.
Disruptive innovation ideas will be the result of matching opportunities with key customer needs or values (this approach was explained by Peter Drucker in his book: 'Innovation and Entrepreneurship'). For that, brainstorming sessions are very powerful generators of innovative ideas. The purpose of brainstorming sessions is to develop as many ideas as possible by articulating the opportunities identified and the deep customer needs to develop a new customer value proposition.
To maximise a sessions’ efficiency, it would be recommended to follow the principles defined by the Stanford ‘d.school’ Institute of Design and IDEO (a design agency) for brainstorming. These principles state that a brainstorming session must follow 4 steps in order to be prolific:
- Warm up
Different tools and techniques can also be used to stimulate the creativity of the attendees. For example, in one brainstorming session, we developed a deck of themed cards we used to nudge attendees to generate different ideas. During these sessions, allow attendees to go for the most extreme ideas. Challenge what is common sense or what is taken for granted. And more importantly, imagine something that people could dream about.
Once a set of disruptive business ideas has been carefully designed and matured, the company will need to conduct some introspective analysis in order to understand each idea’s feasibility and profitability. Finally, they finally need to design a robust business model around each idea and quickly test it using a simple prototype with a small number of hand-picked customers. The targeted customers must be early-adopters so the company can fairly estimate if the idea is will be a success or not.
Following the ‘Design’ and ‘Devise’ phases properly will allow a company to quickly come up and validate new disruptive business ideas. Moving from these ideas, the final two process phases, ‘Deploy’ and ‘Sustain’ will:
- Help a company scale up its disruptive ideas and bring them to the market
- Build the governance, culture, processes and ecosystem to embed this innovation process within the organisation and make it sustainable
In the end, companies which are able to execute these last phases may achieve to create and maintain a competitive edge becoming a permanent market disruptor.