Innovation: Gains, Risks, and the Grey In Between
Innovation is everywhere. It always has been. From the discovery of fire through advances in weaponry, healthcare and industrialisation, humanity has always found a way to adapt to the latest grand alteration; the next big thing. Invariably, once something as profoundly groundbreaking as the aeroplane or the internet comes along, change is wrought. Old practices are overhauled, then quickly shunted into the annals of history to be either forgotten or roundly mocked – can you believe we used to…?
And yet, to trudge through the mastheads, web blurbs or corporate video montages of almost any organisation today is to see and hear the word innovation endlessly. It’s wielded freely and often vaguely, to the extent that its meaning is diluted if not lost entirely. You’d be forgiven for thinking, given its overwhelming prevalence, that innovation itself was a 21st century innovation. Some of the companies claiming to be innovators are indeed just that – Apple can justly lay claim to having changed the way the majority of people operate in their day-to-day lives. Others simply know how to cash in on a buzzword when they see it.
But what actually is innovation? What does it offer businesses? How should it be used? What are risks and tradeoffs of pursuing the oft-discussed “innovation mindset”, and can they be side-stepped?
What is innovation?
Innovation is a bit of a catch-all term, but generally it just means finding a better way of doing things. That doesn’t necessarily mean inventing something new, though that is of course included. Innovation is just as much about fostering improvements to existing processes and ideas as it is about designing some groundbreaking new product.
When Alexander Bell first communicated with someone on the other end of the phone line, that was an innovation. When industries moved in their droves from the traditional in-office 9-5 to a hybrid working system just a few years ago, that was an innovation too, albeit one forced by global circumstances. It can be too easy to believe (the self-promotion of self-proclaimed) innovators and think that innovation must be cut-throat: the death of the old way; the birth of the new. In practice, things are rarely so straightforward. Which is a helpful reminder of what innovation is not.
Innovation ≠ disruption
Innovation and disruption have come to be seen as one in the same. This is understandable as some innovations are disruptive. Naturally, the more disruptive the innovation is, the more coverage it will receive, thus developing an associative bond between the two in the mind of the public. Uber and Amazon would be prime examples of disruptive innovators. Almost overnight, industries that we took for granted were irrevocably changed. Many taxi drivers, as well as booksellers both commercial and independent, lost their livelihoods. Similarly streaming’s impact on the entertainment industry has seen a total upheaval in how multi-billion dollar organisations now operate, whether that was Netflix’s obliteration of Blockbuster or Napster and its contemporaries’ shake-up of the music industry that paved the way for Spotify’s ascendency.
But there exists a far more gentle (and far more prevalent) form of innovation; W. Chan Kim and Renée Mauborgne, authors of Beyond Disruption: Innovate and Achieve Growth Without Displacing Industries, Companies, or Jobs, call this “non-disruptive creation” [1].
Non-disruptive creation is defined as a means by which new industries, new jobs, and profitable growth come into being without destroying existing companies or jobs [2]. The obvious benefit of such forms of innovation are that they can “foster economic growth in a way that enables business and society to thrive together” [3]. Chan Kim and Mauborgne are swift to differentiate between this non-disruptive creation and disrupting, noting that, “Disruption imposes a clear trade-off between winners and losers…That’s because the leap in consumer surplus provided by the disrupter can nearly wipe out the existing industry and its incumbent players” [4].
Non-disruptive creation, on the other hand, “provides no evident losers and only minimal painful adjustment costs,” while having “a positive impact on growth and jobs” [5]. They cite Kickstarter as a good example of non-disruptive creation. The users were able to fund projects that otherwise would have struggled to accumulate backing; they could choose which projects they wanted to give their money to, as well as how much and how often, and artists on the site were able to realise their dream projects. No livelihoods were displaced. Everyone emerged a winner.
Chan Kim and Mauborgne argue that there is an increased demand from the public for capitalism to give back to society, rather than simply chasing the profit-at-all-costs ideology first theorised by Nobel Prize-winning economist Milton Friedman [6]. Non-disruptive creation, they say, is in-step with such demands.
Social defence
Whether an innovation is disruptive or not, it is still at the mercy of social defence. For innovators, social defence is the great nemesis, stifling their dogged pursuit of progress at every turn. As a definition, social defence is the – quite natural, and often unconscious – attempt to preserve the more traditional aspects of an organisation [7]. Essentially, the “legacy structures, strategies, or cultures that make leaders feel proud and their followers feel safe” [8].
To the innovator, such blockades to all things new and shiny can be sources of great frustration. They argue that change is on its way, if not already here, and that attempts to slow its approach are as futile as they are jurassic. But it’s easy to understand why legacy employees at a large and successful company would be reluctant to rock the boat. The old approach has carried them to such heights; it looks a dangerous game to turn around and bite the hand that has fed them so well. After all, new is not a synonym of better.
That said, change is inevitable, and there are plenty of examples of companies who fell by the wayside because they failed to see it coming, or outright ignored warnings it was on its way. Reactions of major industry players to large-scale innovations have been compared to that of grief, with denial and defensiveness featuring heavily [9].
The music industry’s reaction to the initial emergence of MP3 and streaming is a prime example. Unsure how to fold this game-changing new technology into its existing offer (or at least how to do so and still reap the major profits they were raking in at the time), they went on the offensive, suing the free streamers into oblivion. They won in court, but as Justin Timberlake’s smug grin tells you in The Social Network [10] (where he plays Napster founder Sean Parker), the major labels emerged from the affair as anything but winners. “You wanna buy a Tower Records, Eduardo?” Timberlake smirks, like the fourth horseman of the old industry’s apocalypse.
How should businesses approach innovation?
Writing in Harvard Business Review, Gianpiero Petriglieri, associate professor of organisational behaviour at INSEAD, argues that, “Leadership, at its core, is an argument with tradition. As a leader, you are always relating to a tradition that you are trying to preserve, expand, or change. That means, as a priority, that you must care about the tradition. Or, more precisely, you must care about what the tradition is trying to accomplish” [11]. This is where those desperate to innovate at all costs can go wrong. They see change itself as the destination, not the means by which they’re getting there.
Still, an openness to change is vital. This is at the core of the fabled “innovation mindset”. That mindset can be established in-house or it can be forced upon businesses by external circumstances. The Covid pandemic was a clear example of this. Workplace practices were altered almost overnight; overlong vaccination protocols were streamlined – only possible because the whole world was in step, a rare instance that likely won’t roll around again any time soon.
Susan Rienow, Country President of Pfizer UK, wrote as much in the New Statesman, saying of the incredible innovations and the speed with which they were introduced [12]:
…these kinds of breakthroughs don’t happen by chance. It takes the right environment, support and conditions for science and innovation to thrive. It is not just about expertise; it’s about mind-set and how we come together in pursuit of a shared mission. This mission-led approach and entrepreneurial spirit, coupled with collective and powerful collaboration, helped us achieve what had previously been unthinkable. This shouldn’t begin and end with Covid-19.
Risk vs return
The key, as is often the case, is balance. Genuine openness to change paired with an understanding of what your business is and why – as well as what would happen to it were that to alter. And it’s not solely about whether the business itself is fine to change. Equally important are the circumstances around the business, and its users.
All innovations change the trade-off between risk and return, and “many of the risks associated with an innovation stem not from the innovation itself but from the infrastructure into which it is introduced” [13]. What ardent innovators can miss is that the rate of innovation is often so high that it becomes counterintuitive to invoking systemic change – companies cannot restructure according to each new innovation because by the time they’ve done so the next innovation will have emerged to displace the one they’ve just changed to accommodate. Innovations can possess the most hurrysome of expiration dates – store in the fridge and use within 24hrs of opening, etc. – and so the urgency to adjust with haste feels palpable to the innovation driver. But if you were told the best way to store a bottle that’s soon to go off is to buy a new fridge, well, you can understand the reluctance. Especially when the next bottle is just a day away.
Which innovations are worth adopting or adapting for is a difficult call. Some will alter life as we know it forever; others will fade faster than last summer’s T-shirt tan. To an extent, it’s a gut call and a leap of faith. One that if you get right, can pay huge dividends. Approach with cautious openness, and do not fear the inevitable overhauls. Business, after all, is no more or less predictable or ephemeral than life itself.
References
[1] https://hbr.org/2023/05/innovation-doesnt-have-to-be-disruptive?ab=hero-main-text
[2] https://hbr.org/2023/05/innovation-doesnt-have-to-be-disruptive?ab=hero-main-text
[3] https://hbr.org/2023/05/innovation-doesnt-have-to-be-disruptive?ab=hero-main-text
[4] https://hbr.org/2023/05/innovation-doesnt-have-to-be-disruptive?ab=hero-main-text
[5] https://hbr.org/2023/05/innovation-doesnt-have-to-be-disruptive?ab=hero-main-text
[5] https://hbr.org/2023/04/driving-organizational-change-without-abandoning-tradition
[7] https://hbr.org/2023/04/driving-organizational-change-without-abandoning-tradition
[8] https://hbr.org/2023/04/driving-organizational-change-without-abandoning-tradition
[9] https://www.ericsson.com/en/blog/2018/5/5-key-steps-to-creating-an-innovation-mindset
[10] APA. Fincher, D. (2010). The Social Network. Columbia Pictures.
[11] https://hbr.org/2023/04/driving-organizational-change-without-abandoning-tradition
[13] https://hbr.org/2013/04/innovation-risk-how-to-make-smarter-decisions
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