Big Companies Striking Back: Disruptive Innovation No Longer Only the Domain of VC-Backed Startups

LEXINGTON, MA--(Marketwire - Dec 7, 2011) - Startups beware. In addition to a tight economy, they now must contend with big companies' encroaching on their domain of disruptive innovation, the kind that drives growth by transforming what exists and creates what doesn't. This is according to new analysis by Innosight, an innovation consulting firm that helps companies develop new growth strategies and build innovation capabilities.

"Disruptive innovations -- developments that make the complicated simple or the expensive affordable, for instance -- have almost always been launched by startups, the rebel forces in the business world. Today, many incumbents realize that they need to do more than streamline core operations or open operations overseas. They are using a new language and set of tools that allow them to reach new customers and markets by thinking and competing in fundamentally different ways," said Innosight Asia-Pacific managing director Scott D. Anthony.

Mr. Anthony is the coauthor with Harvard Business School Professor Clayton Christensen of "The Empire Strikes Back: How Xerox and Other Big Corporations are Harnessing the Force of Disruptive Innovation" in the new issue of MIT's Technology Review. Mr. Anthony is also the author of the forthcoming The Little Black Book of Innovation: How It Works and How to Do It (Harvard Business Review Press, January 2012).

Disruptive Incumbents

A key example of the "empire striking back" is the transformation of Xerox -- which was on the brink of irrelevance a decade ago. It has morphed from a copier and printer company being beaten down by rivals with cheaper products to a disruptive powerhouse that profitably handles complex, burdensome document management processes for corporations and law firms, according to "The Empire Strikes Back."

A number of other incumbents are forging disruptive innovations. Microsoft created Kinect, the gesture interface system for consumers who don't like joystick gaming controls; GE has developed very low-cost electrocardiogram devices for rural China and India; Qantas launched Jetstar, one of Asia's leading discount airlines; eBay acquired PayPal and turned payments into a legitimate second core business, finding a new market major banks and credit card companies hardly knew existed.

How the Incumbents are Doing It

According to Mr. Anthony and Mr. Christensen, incumbents successful at disruptive innovation are putting more effort into...

• Intense market focus. Market-based insights supported Xerox CEO Ursula Burns's strategy to shift the company from organizing around product lines to organizing around customers and the jobs they needed to get done.
• "Holistic" innovation. Driving disruptive innovation requires moving beyond purely technological innovation to develop new ways of creating value. While Apple has introduced innovative technologies, its success also comes from iTunes, the App Store, new pricing models, innovative retail stores and novel marketing approaches.
• Managing the old and the new differently. Where U.S. airlines like Delta and United struggled to create airlines within airlines in an attempt to compete with discount carriers, Qantas created a completely separate business that leverages some Qantas capabilities but is not swamped by them.

"We are clearly entering a new era where innovation energy is shifting from VC-backed startups to big companies. It is probable, based on our research, that big companies will be the place to go to impact big problems -- overly expensive healthcare, depleting natural resources, the dearth of clean water, etc.," Mr. Anthony said.

To arrange a conversation with Scott D. Anthony of Innosight and/or receive an early copy of The Little Black Book of Innovation: How It Works and How to Do It, contact Katarina Wenk-Bodenmiller of Sommerfield Communications, Inc. at 212-255-8386 or katarina@sommerfield.com.

About Innosight
Innosight is an innovation and strategy consulting firm with offices in Boston, Singapore, and India. It works with companies to devise growth strategies, discover new, high-growth markets, and create disruptive new products and services. Its comprehensive, end-to-end approach converts the quest for innovation and growth into a predictable and reliable process. For more information, visit www.innosight.com.