Disruptive Innovation - How Sustainability Objectives will Be Realized
Updated: Nov 21, 2018
Blog by Gary Robinson, SYNAPTIC Packaging, June 1, 2018
Today, we are exploring the topic of disruptive innovation (DI). In this BLOG we will talk about what is disruptive innovation, why it is important, and how it will be a significant component in advancing sustainability.
Synaptic Packaging is doing considerable development in the field of disruptive innovation and we are encouraged by what we see. For this BLOG today, we will stop short of making our typical Forward Lean// into specific technology discussions. Rather, we will reserve that dialogue for another day and spend this time together simply establishing a foundation of understanding on the topic of DI and why it is important in the context of sustainability.
Let’s start with a little fun experiment. Below is a collection of common household products from the not-too-distant past. Have a look at each and see how many you can identify. Then, have your children, or younger work colleges read this blog and see how many they can identify.
At first glance, we look at these pictures from a consumer perspective. The product memories tend to bring a smile on our face, and a degree of pride. It is clear, and almost comical, to see how far we have progressed with modern innovation. It is frankly hard to even image life today if we still used these products.
[Images (L/R): Popcorn popper, fax machine, cassette audio-player, hair curlers, computer disk drive]
Let’s take a shift, and look at these images from another perspective. Imagine if you will, that you are the product manager for one of these companies. Sitting outside your office you have a full team of engineers, supply chain, operations managers, and marketing managers. You are accountable for the profitability and reporting earnings for these products. With this product manager perspective in your mind, here is the question…. Did you see the change coming? If so, how did you respond?
Each of the products demonstrated above were once tremendously successful and common items found in our homes or offices. Yet, they were all rather suddenly displaced with the emergence of a new technology that entirely changed consumer behavior, and brought about a new wave of category innovation in its wake. These are some classic examples of disruptive innovation. As a result of that disruptive innovation, these products, and often their parent companies, are now non-existent.
According to a 2018 study by Innosight (2), in 1964 a Fortune 500 company had an average tenure of 33 years on
the listing. By 2016 that tenure had dropped to 24 years and it is forecasted to continue to decline to just 12 years by 2027. So what does this tell us? It tells us that no one is safe from disruptive innovation, not even the big brands.
So what is disruptive innovation, and how do we recognize it? Let’s start by looking at what DI is not. Disruptive innovation is not adding a new feature to your existing product line. Disruptive innovation is not a line extension. It is not part of a Good/Better/ Best strategy. These types of advances might be innovative. Yes - indeed they are innovative; however, they are not to be classified as disruptive innovation.
Not Disruptive Innovation:
[Going from a pen with a lid to a retractable pen is highly innovative, and value-add, however, it is not a disruptive innovation.]
Disruptive innovation changes the way business is done, it tends to change consumer behavior, and how their fundamental need's are serviced. It often involves a completely different manufacturing process to solve the consumers needs. Disruptive innovation makes the existing way of doing business obsolete, and frankly moves the existing business from relevance to nostalgic. Below are some of the signature characteristics of disruptive innovations from Harvard Business Review.(1)
Characteristics of Disruptive Innovation
A different way of thinking - likely does not fit into your existing methodologies
Often a different way of doing business
Disruptive innovations tend to be produced by outsiders and entrepreneurs
Often do not look financially attractive to established companies
Have high failure rates and often take longer to commercialize than incremental adjustments
Disruptive innovation is generally produced by outsiders, and for good reason. See, disruptive innovation typically does not fit well into an existing company's business model. Existing businesses are built like layers of sedimentary rock. Year-over-year they have refined their operations, established layers of subject-matter-expertise, and built tightly knit systems that are stream-lined and hyper efficient. Disruptive innovation breaks that model by tackling the challenge (read opportunity) from a holistically different perspective.
Most commonly disruptive innovation is a completely different way of doing business that does not fit well into the incumbent’s operations. It is typically awkward and threatening. Guy Raz hosts a pod-cast on NPR called ‘How I Built This’(3), and I highly recommend it. It is a great podcast where Guy interviews the CEO’s of highly disruptive companies. Time-after-time you will hear testimonies of how the founders of these global leading companies discovered a novel idea, presented it to their incumbent employer, and were rejected. So, why is that? The simple reason is that it doesn’t fit with the existing business model…. And that is a key indicator that you are looking at a disruptive innovation.
The reason disruptive innovation does not fit with an incumbent operation is rooted in what is often called the managers dilemma. In this context, another expression of the managers dilemma is the old saying of a ‘Bird in Hand, or Two in the Bush’. In business we are taught that a ‘Bird in hand’ is lower risk and higher valued than a theoretical ‘Two birds in the bush’. When a disruptive innovation is compared to an incremental product enhancement, the DI will always look more risky, more costly, and more uncertain of success. Managers at incumbent companies will most always choose the lower risk, incremental innovation.
As described above, disruptive innovation has a high failure rate. By nature of the novel way of doing things, the path and learnings are highly uncertain. While that is a risk, it is also the reward and the reason why disruptive innovation can be so very dangerous to incumbent business holders. While the incumbent business is working on an incremental innovation, the team working on disruptive innovation is blazing a new-to-world trail, securing learnings, and most likely locking up intellectual property. The challenges tackled by disruptive innovators tend to be quite difficult. By the time the innovator has solved the challenge and commercialized, it is typically too late for the incumbent to respond. Not only does the incumbent need to start back at the beginning of the innovation cycle (often several years behind), they also need to do so in a space that is now highly restricted by intellectual property rights.
Going back to the analogy of sedimentary rock, disruptive innovation will dislodge everything in the supply chain
that sits above it. This creates a massive upheaval for innovators and generates tremendous space for new innovation to emerge. After the initial commercialization, the disruptive innovator tends to quickly move into this new space and further expand their web of novel innovations into the adjacencies. That rapid expansion moves the innovator into the next phase of advancement while the incumbents are still in the phase of initial discovery.
At Synaptic Packaging, we are working with major brands, micro-entrepreneurs, and packaging converters to help build sustainability strategies and advance novel ideas to commercial scale. We see sustainability as a business opportunity that is ripe for disruptive innovation. There is a growing divergence between the environmental problems (opportunities), the customer’s needs, and the solutions being offered by suppliers. This creates a tension and a gap that is attractive for the disruptive innovator. Further, we are seeing quickly advancing novel innovations and a market where capital is accessible. The core challenge will be for the innovator to make sustainable packaging, economically sustainable (profitable). We believe they will, and we intend to help them achieve that objective.
Synaptic Outside(In) Perspective-
Synaptic Packaging Helps you Identify & Respond to Disruptive Technologies
Research and identify disruptive innovations in your space
Look for convergence and strategic opportunities for synaptic connections
In future BLOGs and reports we will explore our Forward Lean// and some of the top packaging segments that we feel have the potential to be disruptive. A look back at our BLOG on ‘Built to Last - but really, should your packaging last forever?’ from December 2017 will provide some insights into the technologies we are closely engaging.
[Challenger Question: What if Kodak had defined their mission as ‘Preserving Life’s Memories’? Perhaps the shift in perspective on their mission might have helped them advance through the disruptive innovation and they could have been the Facebook, or Pinterest of today. Strategic mission is extremely critical to survive when confronting disruptive innovation.]
Clayton M. Christensen, ‘Disruptive Technologies: Catching the Wave’, Havard Business Review, 1995
Scott D. Anthony, S. Patrick Viguerie, Evan I. Schwartz and John Van Landeghem, ‘2018 Corporate Longevity Forecast: Creative Destruction is Accelerating’, Innosight Strategy and Innovation at Huron, 2018
Guy Raz, ‘How I Built This with Guy Raz’, National Public Radio, 2016