Let’s talk disruptive vs. incremental change. Earlier this quarter, my team and I exhibited at Shoptalk in Las Vegas. It was a really busy few days. Lots of conversations with people that walked by, 1:1 meetings, and trying to find just the right place to sit for lunch and dinner to also capitalize on the possible connections that could come from having a quick meal together.
There was one conversation that stood out and made me step back and look at the exhibition hall as a whole rather than just thinking about my 10x10’ square. When Matthieu walked up, I threw out a benign “How’s the conference going for you?” question to open the conversation but instead of getting the expected fine or great or good, I got “so so”. This intrigued me and I appreciated this very authentic response. It turned out that he travels to conferences all over the world in search of disruptive solutions. His “so so” response reflected the ratio of booths he felt were providing solutions that offered incremental improvements vs. those offering opportunities for disruptive change.
Incremental change, also referred to as sustaining innovation or change, is beneficial to the bottom line. These types of solutions offer 20% faster searching, 10% cheaper shipping costs, 15% faster payment processing, etc. They are valuable and are often simpler for companies to determine the ROI and make a purchasing decision when compared to adopting a disruptive technology.
Disruptive solutions by definition significantly alter the way consumers, industries, or businesses operate. They often replace entire systems or processes with a new experience that has a significant impact on the people they are built to serve. Entry points for disruptive solutions often involve overlooked customer segments or focus on new entrants into a given market. According to the Harvard Business Review, Uber’s offering would not be considered a disruptive innovation for two reasons. The first is that it didn’t begin with appealing to underserved customers and then expanding into the mainstream market. The second was that they didn’t begin with a ‘good enough’ product and then continuously improve to surpass the performance requirements of the incumbent solution, which in Uber’s case was taxi services.
With the rate of entrepreneurship hitting all-time highs in 2022 according to the Global Entrepreneurship Monitor Report and the availability of platforms that enable even the smallest companies to reach a wider audience of potential customers, are we entering an era where mainstream companies will need to pay more attention to disruptive innovation during earlier stages or development and adoption than they have in the past?
Is this already happening? We’ve seen large companies start or support incubator and accelerator programs. Techstars runs programs in collaboration with companies such as Western Union, J.P. Morgan, and United Healthcare among others. Johnson and Johnson provides its JLabs program. Microsoft started the Pegasus program. Barclays launched Rise and the list goes on.
We’ve also seen increasing numbers of acquisitions by large companies of startup companies. An article in Yale Insights, cited that the percentage of venture-backed startups that get acquired vs. those that go public has risen from 10% to 90% over the last 3 decades. Does this rise in acquisition activity mean large companies are paying more attention to disruptive solutions and wanting to get in earlier and more frequently on the action? Or just a mechanism to stifle competition?
No matter which side of that argument you sit on, or whether you think Uber qualifies as an example of a disruptive innovation, we are in an age where business models and the status quo are being challenged at an increased rate.
Here’s a few questions, I would encourage you to consider if you lead a company big or small as you’re thinking about adopting new solutions:
Do you regularly do customer discovery and get out there to talk to your current and potential customers about their biggest challenges? When you learn about challenges, what happens? Do you have a mechanism to act on this valuable information?
When you attend conferences or tradeshows, do you browse around the exhibitors or go straight to talk to vendors of solutions that you know you are looking for in the near term?
Do you have a culture that can support disruptive (or incremental) innovation?
Are your team members on the lookout for solutions that could change your industry or customer experience and is there a mechanism for them to bring those to your organization?
Do you have an innovation strategy?
We’ve all heard the sentiments about the speed of technology development and how change is coming at what feels like an increasingly rapid pace. Getting a customer’s attention in a crowded marketplace is a challenge and offering a truly unique experience or process that catches your customer’s by surprise (in the best way possible) is a place where brands can create alongside disruptive technology partners to drive future growth and stand out from the competition.
Don’t be afraid to test the water. Engage in pilots. Become an early adopter.