Ever since Clayton Christensen first published “The Innovator’s Dilemma” over 20 years ago, companies have struggled to identify and develop products that are “disruptive”. Likewise, academics have argued about the definition of “disruption” along with the constraints and application of the theory. Because of the sheer volume of papers and the animation of those debating the topic, we can assuredly know that disruptive innovation is important!
In short, Christensen noted that large, incumbent firms tend to develop new products that serve existing customers with higher and higher levels of performance. These are called sustaining innovations. At the opposite end of the spectrum, entrepreneurial firms with no profit margin or expectations tend to design new products that meet the needs of niche customers. As the product performance characteristics of these new designs improve, mainstream market adoption occurs which “disrupts” the incumbent’s position.
Certainly, not all innovations or new products should be disruptive, yet if a company ignores new technologies and business models, it stands to lose to the up and coming competitors. One element of disruptive innovation that is often overlooked is the strategic orientation of the firm which informs the innovation culture. Understanding this linkage – and any deficiencies – can help a company better balance a new product portfolio between sustaining and disruptive innovations.
A company can follow one of two broad strategic approaches, the choice of which will lead to a cultural tendency toward sustaining or disruptive innovations.
Customer-Led Strategic Orientation
First, many organizations maintain intimate contact with their best customers. These consumers and end-users regularly participate in lead user forums and focus groups. The firm relies on these customers to test new product prototypes and to provide feedback on new product concepts. Such customers may be more innovative than the average consumer and can offer insights into product usage, features, and characteristics.
Companies that utilize a customer-led strategy often are focused on improving existing product performance and gaining market share. As a result, these firms resort to sustaining innovations more than disruptive technology introductions. The company’s culture is driven by quality improvements, cost reduction, and customer satisfaction.
On the other hand, many firms follow a market orientation in their strategic approach. Companies with this focus will follow trends and readily adopt new technologies and platforms. Such firms will seek to understand and empathize with customers to identify unmet needs. They will visit and observe customers in the consumer’s own environment to identify challenges and pain points with product usage.
Companies that follow a market-led orientation support an internal culture of curiosity and creativity. Failure is accepted – on an appropriate scale – and is valued as a learning tool. Being first to market with a new technology for a new market is highly valued. Performance is measured by market penetration, sales volume growth, and new customer acquisition. Such firms will create many new products and a few of these will become disruptive innovations with a mainstream customer base.
Disruptive Innovation and Strategic Orientation
Strategic orientation, whether a company is customer-led or follows market trends, influences the degree of innovation sought and generated in new products. Companies that seek deep understanding of existing customers tend to support sustaining innovations while firms that seek to understand new market insights tend to yield more disruptive innovations. The firm’s strategic orientation creates internal cultures and practices that confirm customer satisfaction or design processes for learning by experimentation.
Neither culture or strategic orientation is “right” and, of course, neither is “wrong”. Instead, what senior management must ask is if the balance between customer and market orientations will allow the firm to meet its strategic objectives. Some companies will lean too heavily in supporting performance improvements for existing customers while others will sacrifice product support to chase the next shiny object.
To better understand your firm’s new product strategic balance, you can do a simple exercise. Take a sheet of paper and draw a dividing line down the vertical middle. Label the left half “Customer Orientation” and the right half “Market Orientation”. Now, simply list your current new product development (NPD) products in one of the two columns. Don’t elaborate too much and don’t spend too long on this exercise – no more than five minutes. Your “gut feel” will suffice for an early strategic assessment.
When you are finished, you will see if the projects listed are evenly distributed or if there is a distinctive imbalance. For example, a conservative, risk-averse firm may find no projects that are market-led disruptive technologies. This signals a long-term threat if competitors introduce new technologies or business models that change how customers interact with the product. The simple strategic analysis leads the company to take steps to create fundamental research opportunities within their accepted cultural norms (e.g. a low-risk partnership with a university to conduct R&D).
It is important in a fast-changing, globally competitive environment to understand how strategic orientation and the resulting cultural practices impact your innovation characteristics. Is your firm customer-led or market-oriented? Is your NPD portfolio balanced between sustaining and disruptive innovations? Will the innovation portfolio deliver both short-term and long-term strategic objectives?
To learn more about disruptive innovation, check out our on-line class and you will earn one hour of professional development credit. We also discuss how to implement a disruptive innovation strategy in our self-study and other NPDP Workshops. Feel free to contact me at firstname.lastname@example.org or 281-280-8717. At Simple-PDH.com where we want to help you gain and maintain your professional certifications. You can study, learn, and earn – it’s simple!
One of my favorite new books on the debate between sustaining and disruptive innovation is The Power of Little Ideas. Of course, anyone interested is disruptive innovation should read Clayton Christensen’s The Innovator’s Dilemma and Geoffrey Moore’s Crossing the Chasm (affiliate links). I also have a section on disruptive innovation in NPDP Certification Prep: A 24-Hour Study Guide and additional references at https://globalnpsolutions.com/services/npd-resources/.
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