A New Innovation Paradigm for Corporates (1)

A careful look at how and why disruption happens will reveal many patterns of behaviour in the market as well as in the management styles of incumbent companies. But some of the most dangerous characteristics of companies that get disrupted are sometimes subtle and easily negligible. One of such can be found in the way and manner corporate organisations view new entrants in their industries.

The usual management reaction to a new industry entrant will be one of either negligence or pure competition – where the management sees a new entrant as a competitor to polarise by deploying more efficiency and best practice activities. While I have always believed that companies should never cease to analyse competitive threats especially those that seek to disrupt legacy systems, it is worthwhile to note that seeing an entrant ONLY as a competitor may be the bane of incumbent players. Here are 2 reasons:

Emerging capabilities: Trends drive disruption. Trends can be grouped as either drivers or solutions. Further analysis of “drivers” will categorise them as new capabilities or new substitutes. Hence, while disruption may ultimately push traditional systems into obsolescence, they reveal emerging capabilities or substitutes that incumbent players could have capitalised on, and explored further, if they were willing to pay a closer attention (with a new paradigm) to the new entrant rather than just the usual competitive mindset. New entrants reveal new capabilities in terms of technology, skill and other competencies. If figured out early enough, incumbents usually will have the bandwidth to develop or leverage on these new capabilities and prevent their own suicide.

Uncovering new customer behaviours : This may sound obvious, but is it? New entrants are usually swift to discover and capitalise on consumer trends, buying behaviours and use patterns. Incumbent companies on the other hand may have developed a comfort in the status quo that allows little room for new discoveries especially in industries where assumptions about consumers are very easily reached. But if carefully looked into, they (incumbents) can learn something about their own industry in terms of new jobs-to-be-done and buying patterns from analysing the activities of the new entrants and the customers’ response.

The point here is simple, when companies focus solely on tackling the challenge of competition by viewing a startup, new entrant or disruptive company ONLY as a competitive threat, rather than a “discovery agent” than uncovers new contexts and trends that can be explored, they delay their response to the disruptive tendency of the new entrant.

This comes down to the simple truth that even bigger organisations have something to learn from the startups in their industry. But are managers and executives ready for this new paradigm?

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