Why Corporate Entrepreneurship Is Your Best Tool Against Disruptive Innovations
I have had the rare opportunity of both leading corporate entrepreneurship initiatives and of working with independent startup accelerators in the high tech and medical device fields. If there is one take away I can share it is that bringing new technologies to market is taking less and less time and this rapid rate of technology evolution and of introduction of new products or services is made even more threatening by the fact that clients are increasingly willing to try new things to gain a competitive advantage.
But don’t just take my word for it. Look at what Harvard Business School professor and innovation guru Clayton Christensen recently had to say about corporate entrepreneurship in a recent Harvard Business Review article titled What is Disruptive Innovation (December 2015). I have rarely seen a stronger argument for the need for companies to master the process of corporate entrepreneurship (intrapreneurship).
Christensen’s aim in the article is to clarify the meaning of the term “disruptive innovation” and explain why it is very important for companies to be crystal-clear on what it means so as to properly prepare for it and even take advantage of it to discover new organic growth opportunities. What jumped out at me is how the article clearly points to the need for a strong corporate entrepreneurship (intrapreneurship) model in existing companies. One of his key conclusions is,
“Incumbent companies should not overreact to disruption by dismantling a still-profitable business. Instead they should strengthen relationships with core customers while also creating a new division focused on the growth opportunities that arise from disruption.”
He explains that one of the critical mistakes many incumbents do is to continue to throw all of their innovation dollars at the core business to add new features that clients really don’t care about just to try to stay ahead of the competition. In doing this, they prolong the existence of what is potentially a slowly dying core business at the detriment of investing new growth opportunities that have been created by new entrants at the fringe of their business.
Here are 4 important takeaways all existing businesses can benefit from.
1. If you have an existing core business, be sure to spend your incremental innovation dollars in the right places. When doing so you should be increasing your communications with your client base to be 100% sure that you are putting the money in the right areas and creating meaningful value for them that your clients are willing to pay a premium for. If you don’t you risk becoming the Blockbuster of your industry who underestimated NetFlix.
2. Keep a very close eye on “low-end footholds.” These new entrants come in at the fringe of your businesses by providing typically low cost solutions of adequate enough quality levels to address issues that your fringe (and heavily underserved) customer base wants addressed but that you are not addressing because you are overly focused on your core clients who are still generating most of your profits. These low-end foothold entrants enter slowly and go through a process of refining their value proposition and business model until their value proposition becomes increasingly attractive to more and more of your client base and the new entrant becomes a real credible option and threat.
3. Keep a very close eye on “new-market footholds.” These new entrants create a new solution for clients you do not currently have or for your clients but for a solution they are not yet using. However, as these new-market foothold entrants refine and evolve their solution it becomes increasingly clear that (1) this new market would have been a great market for your company to expand into by leveraging its existing core assets but now someone else is dominating it, or (2) this new entrant now has created enough breadth and depth to move into your market with a lower cost and more adaptive solution.
4. Create a separate division to address opportunities from “low-end footholds” and “new-market footholds.” This seems to be the key findings of the authors’ empirical research to ensure incumbents do a better job of successfully responding to external threats to their business. They conclude with “Our current belief is that companies should create a separate division that operates under the protection of senior leadership to explore and exploit a new disruptive model.” This is a key pillar of intrapreneurship. In the book Winning at Intrapreneurship I refer to the activities that are necessary to monetize your innovations and turn it into a profitable and sustainable business. It is about creating a separately funded group of innovators and intrapreneurs capable of tackling threats and ensuring you are not overtaken by disruptive innovations. In my experience, intrapreneurship is a business process that cuts across your organization and to be successful it must be well funded, defined, measured, allowed to evolve over time, and intrapreneurs and intrapreneurial leaders assigned to it. Your survival may depend on winning at intrapreneurship.
Comentários