Clem Sunter

Incremental versus disruptive innovation

2016-08-29 15:02

In the last few articles I have written on the future, I have made two points:

-  Strategic decisions, as opposed to tactical decisions, are long term ones because they involve choice of direction as opposed to how to get there. This means you have to consider what the game you are interested in will look like in five to ten years’ time. The present game is not that important as the changes over the period can be substantial; and

-  In order to look that far ahead, you should identify the forces changing the present and see where they lead into the future. I call these forces flags and distinguish between the clockwork ones that tick away as trends and the cloudy ones which can have a range of possible outcomes.

Against this backdrop, I want to explore the current theory of disruption which is all the rage in the business community. It essentially says that those companies that disrupt the market with new products based on a quantum leap of technology will do the best. Those that do not indulge in disruptive innovation will go to the wall. It is a case of shoot or be shot.

This is in contrast to the philosophy that Chantell Ilbury and I put forward in The Mind of a Fox where we said that strategy has to be constantly adapted in an incremental manner in order to survive the challenges of the future. This principle does not rule out a radical change in direction in the long run, but it implies that you have to innovate over time to thrive and if you don’t you die. Differentiation from your competitors involves continuous reform rather than a big bang.

Let us now consider some examples. The one I love to give to young people is that the choice of a potential spouse is a strategic decision. You have to evaluate what that person could be like in five to ten years’ time, not what they are like now. A flag to look at is the parents! In the end, though, a successful marriage is one of constant adjustment as you get to know the person better. Yet a good decision in the first place increases your chances of happiness: so look ahead with the bright eyes of a fox before you take the plunge.

Another example of a strategic decision is emigration to another country. It is a classic form of disruption in that you and your family are starting a fresh life in a new country. However, it would not have been smart to emigrate from South Africa to Germany in 1935. The flags were going up that Adolf Hitler was a man of evil intent who could precipitate a world war with his plans of expansion in Europe. You needed to look ahead at the potential change in the game caused by Hitler’s actions before you made the decision.

Currently, one of our cloudy flags is the negative one of Russia’s annexation of Crimea and possible ambitions towards the Baltic States which could lead to a conflict with NATO. Both have nuclear weapons. Europe could be a very different place in five years’ time in a worst case scenario. Hence, emigration there now could turn out to be just as disastrous as it was in 1935. Of course, you have to weigh it up against the red flags at present going up in South Africa. It is a messy business looking at the future given its uncertainty, but that is what good judgement is all about.

I am making two contrasting points with the examples given so far. You can be successful without a disruptive philosophy in choosing to whom and when to get married; and you can be tragically incorrect when making a radical decision to leave a country which a disruptive philosophy of taking a leap in the dark might encourage. In other words, there is absolutely no correlation between success and disruption and it might even be the other way round. It all depends on your personal circumstances.

Switching to commerce and careers which is where the principle of disruption is most loudly proclaimed as the key to making a fortune, I would also dispute the evidence. I have been going to a dentist for 25 years in Johannesburg who has gradually adapted the way he takes x-rays, the way he fills cavities and the way he caps your teeth. Only the plastic toys hanging from the ceiling to calm the patient remain the same. He is just as successful now as he was 25 years ago without any massive disruption to the way he practises his profession. But he has innovated the way he goes about keeping your teeth in shape over time. He is a fox.

The industry most often cited as being associated with disruption is microelectronics; with mainframe computers giving way to personal computers and laptops which have now been superseded by smart devices. What I would dispute is that the winners and losers in this industry were determined by their willingness to embrace disruption and that the technical advances were all gigantic innovations that came out of the blue.

My take is that a lot of small disruptive companies went bust, a few survived to become superstars because they had the ability to adapt their products as they went along and some have now disappeared because complacency  replaced the incremental innovation that led to their growth in the first place. They moved into a fool’s paradise and died.

Education is much the same. The top schools and universities have been around for hundreds of years and have transformed themselves over time. They take note of the new players on the block, the new technologies and the new needs of students and they adapt their strategies and tactics to stay in prime position.

The bottom line is that success is about perseverance as well as having the light-bulb moment of a new invention. Each generation of scientists stood on the shoulders of the ones before them and evolved humanity’s knowledge to where it is today. It did not come in blistering leaps of intuition out of nowhere. I am afraid that the philosophy of disruption has its roots in the culture of immediate gratification produced by the internet and social media.

Innovation is mostly about taking steps up an existing ladder and only very occasionally about creating a new ladder itself. Even then the new ladder has rungs up which others will climb.

Disclaimer: News24 encourages freedom of speech and the expression of diverse views. The views of columnists published on News24 are therefore their own and do not necessarily represent the views of News24.



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