August 2016 Newsletter – Is Economic Disruption Knocking at Your Company’s Door?

Is Economic Disruption Knocking at Your Company’s Door?

Various thought leaders say we have moved from the Information Age to the Innovation Age and companies that innovate faster than their competition will be the future winners. We see that all around us. New innovative companies are springing up almost overnight, while other, more established organizations are struggling to survive.


A key component of this new Innovation Age is “Disruption”, which has become a major force in the business marketplace. What is disruption?

According to innovation expert, Clayton Christensen, disruption is caused by an innovation that so completely changes an existing market so as to displace established market leading firms or totally unbalance existing products and alliances. Below are some examples of disruption:

  • The cell phone/camera disrupted Kodak basically out of business
  • Internet video streaming and companies like Red Box and Netflix killed once venerable Blockbuster Video
  • Online retailer Amazon has created massive problems for retailers with physical stores
  • The new Apple Watch threatens to disrupt the personal medical equipment industry
  • Uber has disrupted the taxi cab and shuttle bus marketplace

“Disruption Won’t Affect Me”

But you may be thinking, “disruption won’t affect me, it only affects big companies”. A very interesting article by Geoff Small Business Planning in Atlanta, GeorgiaColvin, Senior Editor-at-Large of Fortune Magazine said even if your model has worked for decades, even if it’s working okay right now, odds are that soon it won’t be. Business models are suddenly becoming obsolete, almost in the blink of an eye. Below are some industries that are currently facing disruption:

  • Education industry – With the advent of Massive Online Open Courses (MOOCs) and the internet in general, the education industry is wrestling with how they can lower the cost of learning and provide greater value in an increasingly competitive industry
  • Banking – In talking with various banking executives they are very concerned about the explosion of non-traditional banking options including Apple Pay and Android Pay. Many concede they could be out of business in the next 20 years from these upstart companies
  • Music – Artists are able to by-pass the traditional recording industry and release and manage their music themselves which has thrown a big monkey wrench in the recording industry’s business model

Disruption not only affects large companies, it impacts smaller and mid-sized ones. For instance, one of our clients is one of the oldest sod companies in the state of Georgia and they are facing disruption due to new organizations that are buying up small sod operations, consolidating them, and deriving cost savings and efficiencies from combining them. They are then cutting the price on sod and using social media and other mass advertising to increase their sales volume. This is proving to be a huge challenge for our client.

Two Possible Responses to Disruption

There are only two possible responses that an organization can opt for in the face of this looming challenge of disruption. First, just put one’s figurative “head in the sand”, ignore the disruptive forces, and hope they just go away. Second, acknowledge the disruptive influences, stay abreast of their ongoing development, and embrace one’s own use of innovation as a counter offensive. This second strategy involves trying to overcome the tidal wave of disruption battering a business by the company itself creating game changing innovations.

If an organization did follow this second approach, how would this impact the company? Obviously the innovations would form a bulwark against the disruptive effects and allow it to grow revenue, attract new customers, and generate more profits.

But there are additional benefits to doing this. If an innovative environment is developed, just like Amazon, Zappos Shoes and Google have done, your employees couldn’t wait to get to work each day. Or you could end up being like Apple, whose customers will buy its new products “sight unseen”, and customer loyalty could become your company’s greatest asset. You could establish an exciting, fun and rewarding business to come to every morning. An organization in which every one of your employees becomes a fountain of innovation.

There are three primary steps that can be taken to foster an innovative environment:

Proactive Leadership is a Main Ingredient for Innovation

Small Business Planning in Atlanta, GeorgiaYour employees need to know that innovation is important to your organization and that you want them try to develop innovations. A leader’s role should be to articulate, support and promote innovation. This results in clarity of objectives, an emphasis on staff participation, and nurturing of innovation. The goal of this leadership is to establish a creative environment within your organization.

Active leadership is a main ingredient in creating an environment where innovation thrives. The need for innovation has resulted in a new focus on the role of leadership in shaping the nature and success of creative efforts. Studies show that an innovative climate is positively correlated to the presence of proper leadership.

A leader should challenge their followers to take ownership for their effort and its outcome, thereby causing the staff to align and regiment their daily activities with the company’s overall vision.

The proper leading of an organization’s innovation initiative contributes to both idea generation and idea implementation. Using patent awards as a measure of innovation, studies have shown that proactive leadership was linked to effective innovation and the support and development of new ideas.

Develop a Strategy for Innovation

An organization should develop a strategic, long term approach to innovation by looking outside itself to determine what markets, sectors, applications, product types, and technologies have significant growth potential. Ideally, these areas are at least somewhat adjacent to existing markets in which it currently participates.

Then an assessment can be performed to determine the company’s core competencies. This includes identifying the unique capabilities of the business that can be leveraged to advantage in other markets, applications, and sectors. The goal is to work from an organization’s strengths and base of knowledge, as compared to starting from zero in an entirely new market of which nothing is known.

This is exactly what Corning did when it leveraged its knowledge in glass and related materials to create a product usedSmall Business Planning in Atlanta, Georgia for the flat LCD displays (for cell phones initially, then laptops and desk top monitors, and lastly for LCD TVs and larger displays). This type of thinking led to major innovations that were developed in each of Corning’s business sectors over the past decade, including the creation of four new product lines. These efforts literally turned the company around from having loses to huge profits.

Once the strategic areas for innovation have been identified, they should be communicated to the firm’s employees so that they know areas you want them to focus on. Thereafter, during the year leadership and management should provide encouragement to their personnel and share stories and examples how they have been successful with innovations in their areas of strategic focus.

Provide Training on Innovation

The third piece that needs to be put in place is innovation skills training for your staff. Training is necessary because people generally don’t recognize opportunities for innovation without education on how to think in such a way to spot these “golden nugget” ideas. Training should include on how to come up with ideas, which is called ideation, how to develop the ideas into innovations, and how to commercialize innovations.

This training should include how to use appropriate innovation “tools” because various innovation processes and tools have been developed to enable the effective and rapid creation of innovations. These tools include both hi-tech and low-tech items like standard development procedures and systematic testing processes.

Ideally, the training is provided in a live setting so that the participants can practice using the tools. Thereafter, an intranet portal can be made available to provide employees with ongoing learning and innovation skill set development.

Part of the innovation education initiative can also utilize specially trained internal innovation mentors to keep people on track with their efforts. Also, bringing in outside experts can speed the entire innovation process.

By taking these steps you will be able to overcome the disruptive influences that may be threatening your company and enable you to grow revenue, attract new customers, and generate more profits.

Additionally, by taking these actions you will create an innovative environment where your employees can’t wait to get to work each day, customer loyalty could become your company’s greatest asset, and every one of your employees becomes a fountain of innovation. As a result of this you would establish an exciting, fun and rewarding business to come to every morning.

If you need assistance with how to use innovation to overcome potential disruptive forces in your marketplace, please contact us so we can show you how to do this by using innovation to transform your organization.

Fountainhead Consulting Group, Inc. is an Innovation and Business Planning firm. During the past 17 years we have shown over 1,200 companies how to achieve the goals for their business by using our unique, comprehensive and systematic business planning and growth methodology, the Structure of Success™ so they can Work Less, Make More and most importantly Have Fun in Their Business. Using our Structure of Success™ methodology each month we examine one of 12 areas of a business or organization.

Office phone: (770) 642-4220

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