Disruptive Innovation, Managing your Portfolio

“Disruption,” “is the process by which a small, resource-constrained company is able to successfully meet traditionally established companies.”

Occasionally, a disruptive technology comes to dominate an existing market, either by filling a space in the new market that the old technology could not meet, or by successively moving up the market (such as digital cameras replacing the cameras by film).

The year-to-year viability of a company depends on its ability to innovate. Given today’s market expectations, global competitive pressures, and the extent and pace of structural change, this is truer than ever. It´s time to think about much more if the goal is wanted to be successful. After all, there’s no point in developing a strategy that ignores competitors’ reactions.

Companies rarely fail because they change very fast, but often die by moving too slowly. It’s really hard to get strategy right. Most important is to move to accurately predict what customers want before it’s too late.

Fig 2. Differences between Sustaining Innovation and Disruptive

Inside the Company

Level 1: REINVENTION

A very good vision of the future is needed in business management, In addition, it can be difficult to figure out which trends to ignore and which to react to as soon as possible. “Focus is to say ‘no’ to a hundred good ideas”.

“It requires the company to challenge its own history and its longstanding beliefs about how to make money in the market in question.” Value that everyone in the company shares and takes as an inviolable truth regarding customers’ preferences. Until someone comes to change it.

Level 2: CHANGES:

The company must ensure that its new ventures, that is, its disruptive initiatives, have autonomy in relation to core business, even if the objectives conflict in some way. Over time, actions are needed. Change takes over, and there must be a commitment from leaders to structure a sequence of initiatives that contribute to the desired disruption.

Level 3: TRANSFORMATION:  

At this point, the future is knocking on the door. The new business model shows itself to be more promising than the old one, at least to a critical mass of the public, and the market moves toward it.

Level 4 : READAPTATION:  when the business finally scales and its growth stabilizes (FIG 1)

The disruption has reached a point where companies have no choice but to accept reality: the industry has changed radically. For traditional companies, profit and revenue are giving way, and they are seen to take a strong position in the market.

It is important to note that innovation do not come from by lessons learned.

It makes sense to survey the company’s current innovation landscape. A comprehensive analysis will reveal how much time, effort, and money are allocated to core, adjacent, and transformational initiatives.

For many companies, innovation will remain a sprawling collection of activities, vigorous. For the best managers with open mind, it represents the most exciting and important challenge of all. By figuring out how to manage innovation as an integrated system within overall portfolio goals, they can harness its energy and make it a reliable driver of growth.

It’s not just a matter of being better at what you do. it’s a matter of being different at what you do.

When Netflix began disrupting in 2011 by shifting the focus of DVDs to streaming, the value of its shares fell about 80%. Bradley and O’Toole explain: “Few executives and investors are able to cope with this type of downfall when short-term needs are at stake, that is, there are sources of income to protect. In addition, managers feel more comfortable developing strategies for companies that know how to operate and are reluctant to enter a new game with rules they do not know. “

Increasingly, the companies that will be the true leaders will be those that don’t just optimize within an industry, but that actually reshape and redefine their industry. The important thing is to try to shape the nature of competition, to take control over your own destiny.

Every company contains people with creative and innovative ideas, not just the R & D department. Creating the free environment and sponsoring a model in an organized way for these ideas to emerge is the key to a new business.

By delivering Value, a good strategy makes the company different and gives it a unique position. This involves the delivery of a particular mix of value to some array of customers which represents a subset of the industry.

The fact is that the new ‘pools of profit’ may not be as deep as the previous ones. The challenge is to adapt and realign the cost bases to the new reality of profits, and to accept that the ‘new normal’ probably includes much less gold.