Innovation
has always been a hot topic of conversation in organizations, cultures and
ethnicities. You call it either a radical change or a breakthrough; it has been
so influential that it is been able to transform the lives. Be it the Six
thinking hats of Edward de Bono; DNA principles of Clayton Christensen or
theories of Min Badasur, many organizations are using them in different combinations
to fetch the revenues and profit out of industry. These organizations are so
dependent on it that they do not talk of anything else. But the excess use or
the improper use of anything may be harmful. And sometimes the reason is top
management. Yes, top management which is responsible for a driven fruitful
change in the organizations.
We
always talk about the positive side of the management fiascos and rarely get
acquainted with the negative side. Let us now talk about the flip side of the
coin; why even top management is not successful.
Let
me tell you the reason why leading companies in three different industries
(fast-paced disk drives, slower-paced mechanical excavator industry, and
process-intensive steel industry) which frequently innovate get stumbled or
failed. It was not because of the engineers who got stuck upon the technology
paradigm or ignored innovations. No doubt, these problems affected some of the
companies. But there is core strong evidence which is found beneath the
surface. As long as the new technology is required to address the needs of the
customers, establish firm must able to muster the expertise, capital,
suppliers, energy and rationale to develop and implement the requisite
technology both competitively and effectively. And the most important outcome
of the problem was ruled out which was top management a root cause. With no
reason the top management here had a good track record of understanding the
un-articulated needs of the customers, finding which technology can address best
to their customers and could be capitalized. It was only when confronted with
disruptive technologies in which they failed.
Here
comes the role of disruptive technologies. And this is one of the reasons why
good management can lead to failure. There are three parameters which can lead good
managers to a bad dawn.
1) The
first one is strategically important that is unable to identify what I call sustaining and disruptive technologies.
The concept is way different from incremental change or a radical change.
2) Technology
progress map. There may be an unmatched behavior between different technologies
which may outstrip the market needs. This will surely be a hindrance to
identification of un-articulated needs.
3) Customers
and financial structures of various companies color heavily the sort of
investments which appear to be attractive to them, relatively to other entering
firms.
Sustaining technologies
always foster an improved performance. These can be discontinuous or radical in
nature while other may be incremental. Products associated with sustaining
technologies always have an improved performance factor.
While
sustaining technologies believe in
enhancing performance, disruptive
technologies lead to innovations that is the worst product associated with
disruptive technology is likely to outperform.
Disruptive technologies
bring a unique value proposition to market. Generally, disruptive technologies underperform in mainstream markets but as a
whole they create value to the customers. Products based on disruptive
technologies are simpler, cheaper, smaller and convenient to use. Examples
could be the small off-road motorcycles introduced in North America and Europe by
Honda, Kawasaki, and Yamaha were disruptive technologies relative to the
powerful, over-the-road cycles made by Harley-Davidson and BMW. Transistors
were disruptive technologies relative
to vacuum tubes. Health maintenance organizations were disruptive technologies to conventional health insurers.
Let
us talk of second cause of failure that is technology progress map. Technology
can progress at very high pace which is not required by the market demands.
This is illustrated in the figure below.
Source: Harvard Business School
Because
of this sometimes suppliers give customers more than what is needed. This means
the disruptive technologies which are under performing today may outperform in the same market tomorrow leaving a
bridging gap between technologies. For example many who once needed mainframe
computers for data processing, no longer need or buy mainframes. That is
mainframes performance has surpassed the requirements of original customers.
The
last and the final cause which leads top management towards failure is that
companies making aggressive investment in disruptive technologies are not a
rational investment. This has three different bases. Firstly disruptive
products are simpler and cheaper and hence offer low margins and not great
profits. Secondly, disruptive
technologies are sometimes commercialized in an insignificant emerging
market. And lastly most of the leading companies initially can’t use the
products based on disruptive technologies as they promise lower margins.
Thus
it is not the case that top management will bring a radical change every time.
Excessive use of innovations may create an unmatched gap between technologies
which thus leads failure of the decision of the top management.
-----Vaibhav Sharma
