Should businesses stop focusing on disruption as the only way to innovate? Speaking about their recent article, Nondisruptive Creation: Rethinking Innovation and Growth, Chan Kim and Renée Mauborgne, authors of the bestseller Blue Ocean Strategy, want to dispel the myth that innovation must be disruptive.
Photo credit: Francine Fleischer.
IM: Why do you feel disruption has become the ultimate goal of corporate leaders?
Renée Mauborgne: Increasingly, companies equate innovation with disruption. We’ve all heard the cry ‘disrupt or die’. The trouble is that this is not only misleading and flat-out wrong, but it leads to what we refer to as innovation myopia. Why? Because market-creating innovation is actually a two-sided coin. On one side is disruption. Think Uber’s disruption and displacement of taxicabs.
That’s the side most organizations are focused on. But on the other side – the so-far overlooked side – is what we call nondisruptive creation. That’s where powerful new markets are created that don’t lead to shuttered companies, lost jobs, and market displacement. Think online dating, health clubs, or men’s cosmeceuticals as just a few of the myriad examples of nondisruptive creation.
So by treating innovation as synonymous with disruption, organizations overlook the broad opportunities this other side offers, which no organization can afford to do. In our research, we articulate a holistic model of innovation and growth that embraces both sides and show what strategic actions lead to one form of market creation over the other.
IM: Are they right to aim for disruption?
Chan Kim: Our question is why aim to disrupt when you can create new markets without displacing existing markets and players? Disruption is one way to go about innovation. But it imposes a trade-off. With the leap in value consumers get comes painful adjustment costs on society including hurt companies, lost jobs and often hurt communities. Just look to the case of taxi drivers in NY, some of which have been driven to suicide with the decline in sales following Uber’s disruptive move.
Nondisruptive creation, by contrast, breaks this trade-off and gives corporate leaders a choice. A choice to solve brand-new problems never solved before or create and seize brand new opportunities never available before. Microfinance, ringtones, men’s cosmetics, life coaching are just a few of the scores of multi-billion dollar nondisruptive industries that have been created.
IM: What exactly is nondisruptive creation? How does it differ from incremental innovation?
Renée Mauborgne: When Kickstarter creates a platform for artists to raise the funds needed to realize their artistic dreams – something banks and venture capitalists had long refused to fund as rarely are artistic projects linked to large payoffs in reasonable time frames –, nondisruptive creation is unlocked.
Kickstarter created a brand new opportunity that had previously not been available to almost all artists and opened a new pool of financial backers, those who were interested in helping people realize their artistic dreams, not earn a financial return for their support.
Kickstarter wins through its profitable growth; artists win, backers win through the positive kickback they get in knowing they helped bring art to life, and not a single banker or venture capitalist is hurt. That’s nondisruptive creation.
It is creative, but not destructive. It is a new paradigm built on a win-win approach to innovation and growth in contrast to the zero-sum game that has always been offered up.
Incremental innovation is about solving an existing problem in a better way, hence making marginal improvements to what is. Nondisruptive creation is about identifying and solving a brand new problem or seizing a brand new opportunity. It opens a whole other universe of market-creating opportunities where social good and economic good go hand in hand as there is no displacement. And isn’t that what all of us want to create at one level or another?
IM: What are the advantages of nondisruptive creation?
Chan Kim: There are several important advantages to nondisruptive creation, but let’s zoom in on one. When organizations create new markets that displace existing industries and established players, social interest groups and governments are often lobbied to intervene, as the short- to medium-term social disruption that occurs can be very painful in terms of lost jobs and falling earnings, as we have seen in the case of the taxi industry versus Uber and other ride-hailing services. Today, as a result, new rules and regulations are being introduced in an effort to curtail this social cost, which crimps Uber.
Nondisruptive creation, by contrast, largely gets around these costly and hurtful public relations issues for the precise reason that new markets created here produce new jobs that do not replace other existing jobs or companies. So the interest of governments and organizations are in solid alignment, causing less friction and smoother sailing with governments and social interest groups. Nondisruptive creation is a positive-sum approach to innovation and growth.
IM: How can leaders create these new market spaces and promote nondisruptive creation within their organisations?
Renée Mauborgne: Our recent article in MIT’s Sloan Management Review Spring 2019 issue lays out the three basic steps to get started. Essentially, you want to begin by identifying burning issues you are passionate about and that people are struggling with. Next, you want to understand which organizations or industries would typically address the problem or opportunity and assess why they have overlooked it.
Understanding why an issue is overlooked will often provide insight into what your innovation must address to unlock a nondisruptive market.
The third step is to look for new technologies, platforms, and/or methods that allow you to solve the problem or seize the opportunity in a high-value, low-cost way.
We are super excited about the new book we are currently working on as it addresses how any corporate leader can build a culture of innovation that fosters nondisruptive creation. With so many new problems emerging in the world and across industries and the need for new jobs and business opportunities for people being displaced by technology growing, we see this as key for the prosperity and growth of our economies and the health of society.
Chan Kim and Renée Mauborgne are professors at INSEAD and co-directors of the INSEAD Blue Ocean Strategy Institute. Their original article, Nondisruptive Creation: Rethinking Innovation and Growth, Sloan Management Review, Spring 2019, can be found here.