Disrupt or Be Disrupted
How Great Companies Out-Execute AND Out-Innovate Their Competitors
Randy Ottinger has a keen eye for business and an interesting perspective on what he’s seen as the best practices of successful companies. Here he offers his most recent observations of how organizations are succeeding while keeping pace with the increasing speed of today’s world.
Business disruption has become a hot topic – and it’s not just a passing trend, it’s the new normal. Whereas a decade ago business disruption was the rare exception, it is now a reality that companies face on a regular basis. The major cause of disruption is the rapid advancement of technology and globalization, which allows new business models to be introduced at an ever-increasing rate and with rapidly declining costs. The truth is, at this very moment your company is most likely either disrupting other companies or being disrupted.
One key to surviving in a world of disruption, where the external environment is changing at lightning speed, is to change the game internally. This requires accelerating your speed-of-execution as well as your agility to seize new opportunities. When a company can do both, it goes from just surviving to thriving. The capability to out-execute and disrupt is quickly becoming a critical competitive advantage for the 21st century company.
The Innovation-to-Execution Cycle
Innovation by its very nature is the domain of entrepreneurs. Entrepreneurs thrive in an unstructured environment. They shun management structure because it impedes creativity and slows them down. Instead, they are most successful in a highly networked world where a free-flow of information provides the ability to invent, learn, and adjust at a very rapid rate. Entrepreneurial networks are most often seen in early-stage companies with innovative founders. As these companies grow, however, they hit a certain point where they require structure to scale.
Scaling is less about innovation and more about management structure, systems, and processes. Great managers realize that growth and scaling require accountability, reliability, and predictability, which cannot be achieved through an unstructured innovation network. As a result, great managers build highly structured management hierarchies.
The diagram here shows the natural progression of a company moving from being high on “the ability to innovate” with a networked structure (top left quadrant) to high on “the ability to execute” with a hierarchical structure (bottom right quadrant). During this progression the management structure and systems typically overwhelm the entrepreneurial culture, slowing down innovation until it dies off.
The impact of the disappearance of innovation is often imperceptible to leaders since it can be years before it has any effect on financial performance. In other words: Innovation leads to growth that continues for a period of time. Then markets become penetrated, competitors jump in, and revenues slow down. It is only at this point that many companies realize they are at risk due to a lack of continued innovation. And, by that time, the innovation engine that led to the company’s initial success has often been killed by increasingly adept management. With the death of innovation, a company becomes highly susceptible to disruption.
So how does a company execute on today’s opportunities while constantly innovating to avoid – or even lead — disruption?
Dual Operations: A Disruptor’s Competitive Advantage
The key is to create a dual-operating structure that combines the best of both worlds. This is described by my colleague, Dr. John Kotter, in a recent article published in the Harvard Business Review. In short, a dual-operating structure allows the management hierarchy to execute on the opportunities of today without being burdened by the free-flowing nature of an innovation network. At the same time, an employee innovation network provides an engine for new innovation that is not limited by the structure of the management hierarchy. In the Kotter model, the same employees live in both worlds within the same organization. (The top right quadrant of the diagram above).
Ultimately, great companies execute and disrupt at the same time. Often they disrupt themselves. In a previous blog, I discussed how Apple disrupted itself, which led to accelerated growth and stock price performance. Truly great companies like Apple, Google, Amazon, and Starbucks constantly find new ways to become relevant to us and remain an essential part of our lives. When analyzed closely, you can see that they are simultaneously executing and innovating.
As a leader, a key to your organization’s long-term success is its ability to balance the management discipline to achieve short-term financial results with the agility to quickly seize new windows of opportunity. If there is not enough management in the organization, crucial breakdowns occur in the day-to-day operations. If there is not enough innovation, changes do not occur quickly enough, your people can lose their passion, your products can become outdated – and worse, your business can become irrelevant. Great leaders maintain the balance between achieving results today and innovating to seize new opportunities in the future.
So if you want to avoid disruption – or even lead disruption — then you need to greatly accelerate the way you operate internally to keep pace with a rapidly changing world.
About the author
Randy Ottinger is an Executive Vice President at Kotter International, a firm that helps leaders accelerate strategy implementation in their organizations. John Kotter is the chief innovation officer at Kotter International, and is the Konosuke Matsushita Professor of Leadership, Emeritus, at Harvard Business School.
Kotter International helps leaders accelerate strategy implementation in their organizations. We employ the knowledge and research of Dr. John Kotter, the Konosuke Matsushita Professor of Leadership, Emeritus at Harvard Business School. Kotter International helps organizations become more agile and move faster, with alignment and acceleration. Combining deep business acumen and experience, we provide the guidance that helps our clients implement their strategies through the 8-Step Process for Leading Change.
This article was originally published on Apr 3, 2013 on Forbes.
The author is a Forbes contributor. The opinions expressed are those of the writer.