In another epic scene – Miracle Max and Inigo discuss the distinction between MOSTLY dead and all dead:
Miracle Max: He probably owes you money huh? I’ll ask him.
Inigo Montoya: He’s dead. He can’t talk.
Miracle Max: Whoo-hoo-hoo, look who knows so much. It just so happens that your friend here is only MOSTLY dead. There’s a big difference between mostly dead and all dead. Mostly dead is slightly alive. With all dead, well, with all dead there’s usually only one thing you can do.
Inigo Montoya: What’s that?
Miracle Max: Go through his clothes and look for loose change.
Insulation and the Leader
I had a long conversation recently with a colleague from a large international banking group. I was going on and on about my Elastic Innovation Framework (EIF) and how it dictates that the organization’s ability to manage disruption relies on fully insulated “edge” organizations (a concept from Exponential Organizations by Salim Ismail — a unit that operates outside and independent of its core organization, setup to explore emerging business opportunity that has the potential to create a new market or product area.). She had two objections that made me understand an important distinction:
- “it’s not clear that a department head can ensure this ‘insulation’” — of course the level of insulation depends on the owner’s position inside the hosting organization — if it is a leader of a division he might not be able to keep them completely insulated.
- Complete Insulation may be counter productive for value capture — the organization must keep some connection to facilitate future absorption.
My immediate responses to these two objections were:
- The Elastic Innovation Framework (EIF) is designed to help organizations manage disruption and is best applied at the most senior level. A division manager will probably need something different because: 1) Disruption entails a significant change in the corporate strategy and therefore enabling it will probably not be aligned with her KPIs and 2) It is not clear that she will have the authority to venture so far out.
- Complete Insulation is paramount BECAUSE it many times needs to be counter-productive to the organization’s normal value creating strategies….
And then it downed on me – she was confusing Innovation (Sustaining Innovation) with Disruption (Disruptive innovation). Its easy to confuse the two because of the word Innovation. However the distinction is as important as Miracle Max’s. In a nutshell, if all you are doing is (Sustaining) Innovation – your track record will show mostly incremental innovation improving your market position. In that case you are likely to be surprised by disruption and then the only thing we can do is “Go through his clothes and look for loose change”. To be clear — this type of innovation will almost always yield incremental improvements that generate a justifying added value (yes, there are sexy exceptions to the role — but they are exactly that — sexy exceptions). However, sustaining innovation is useless in case of disruption (useless for preparation and for coping with). The challenge we are dealing with is different — it is a “what-if” game that is all about exploring what most executives in the corporation consider unlikely, immaterial or a passing fad.
That is why when we consider Disruption Management we are normally talking to the highest echelons in the organization and we demand that in those conversations they divorce themselves from their existing product or service lines.
I am not saying you shouldn’t invest in Sustaining Innovation. You should! I have spent most of my career helping companies generate incremental revenue through incremental innovation. I am saying that if this is the only thing you are doing or if you are equating disruption with your traditional perception of organic innovation or even if you are equating it with external/open innovation you are in trouble. Open innovation challenges for example many times miss the mark of coping with disruption because the metrics used to evaluate the entrants are based on the existing product/service lines and value creation strategies. In fact, a good criterion for judging an application should be “how far removed is this idea from the way we do things today”.
Are you fooling yourself?
It is difficult for me to overstate the importance of this point. Companies feeling confident they are proactive in keeping up with the Age of Disruption might be fooling themselves. The tough question to ask – and that can be done by very few people at the top leadership or the organization – is how committed are we, in our actions, to exploring what we think is stupid? That is also why I contend that Disruption Management initiatives such as open challenges should not be run from inside the company – they should be external and mostly insulated (use the brand to attract people but that’s about it).
More about that in future posts.