Reinvention is bloody hard, rarely has a big business managed to pivot wholesale to a new them without causing a catastrophic collapse of their core along the way. History is littered by once great corporations hollowed by their failure to recognise the need for reinvention.
But this isn’t a cautionary tale featuring Kodak and their resistance to the Digital age, although that is a good story! This cautionary tale concerns those businesses that recognise the need for change but fail, fail because their big company DNA rejects the wide eyed organism growing within.
Clayton Christiansen describes the issue as the Innovators Dilemma. The central theme of his argument is that big businesses innovate within the constraints of their own expectations. Big business’ expectations demand an aggressive and predictable return on capital as well as a degree of polish that small businesses and startup entrepreneurs happily live without.
Those expectations limit their ability to innovate to the Sustaining kind only, meaning incremental improvements that result in incremental bottom line impacts. The new breed of competitor, i.e. startups, don’t live with those constraints and can therefore galvanise their new business around an untested way forward.
Innovation favours the brave and startups are certainly brave. Entrepreneurs often leave themselves with little to lose and can afford to turn existing models on their head in a effort to break through. And breakthrough they do.
In the past big corporate goliaths still won though, regardless how stilted their innovation; barriers to entry and scale benefits afforded them a dependable lead against newer foes. But today’s David is better equipped. They have the triple whammy benefits of low cost of capital, cheap scalable technology and affordable access to a large audience; also, this new wave of Disruptive Innovation is easily embraced by customers so should be feared by slow to move businesses and their shareholders alike. Boardrooms have too much as stake to stay ignorant to the Breakthrough Innovation occuring around them, so breaking through the innovators dilemma will have to happen eventually. But there is a great risk of too little too late.
Corporate leaders have to do more to embrace breakthrough thinking and create structures to do so. Establishing a mini startup fund and incubator for internal entrepreneurs and staff incentives to encourage broader thinking are essential steps. Communicating to the broader business the importance of supporting those innovations by accepting the quick and dirty necessity of breakthrough thinking is also essential if rejection of the new organism is to be avoided.
- Workshop: The Lean Entrepreneur with Brant Cooper & Patrick Vlaskovits (startuplessonslearned.com)