Monday, June 19, 2017

Disruptive Innovation and Organizational Culture

One of the key takeaways for me after reading the excerpts The Innovators Dilemma by Clayton M. Christensen and “Cisco’s CEO On Staying Ahead of Technology Shifts,” by John Chambers was the intersection of organizational culture and the ability to respond to market disruptions.  The reasons Christensen outlines for why top firms lose their leading position when disruptive technologies and innovations change the market – in their early stages it is too small of a market share, low margins, doesn’t yield the profitability growth necessary to satisfy shareholders, etc—can in some ways be mitigated by having a strong organizational culture that supports innovation (in action, not just name) and gives employees the freedom to be flexible. 

Two of the examples discussed demonstrate this idea well—Honda and their small motorbikes and the Kitty-Hawk disc drive.  With both examples, they thought they knew who their market was and created an entire project around that audience.  However, they did not build flexibility into that project if the results did not line up with the preconceived objectives and forecasts for both of these efforts.  They were not able to respond to real-world occurrences as they should have been able to, such as is with adjusting the functionality to meet another market segment than they had originally identified.  Additionally, because of the focus on profitability rather than innovation and product development, both projects were not able to fully engage in the development phase on the front end.
 
While these are technical aspects of the individual products, for me they speak to a broader idea regarding how organizational culture can either support or hinder a firm’s ability to deal with disruptive innovations.  Culture is rooted in an organization’s leadership, and for disruptive innovation to grow a company rather than shutter it, it is necessary for leadership to a) acknowledge that disruptive innovation  is a thing that can occur and b) foster an organizational culture that allows to staff to innovate and, if necessary, be afraid to fail.

So how can this be applied to my work moving forward?  In my line of work, we do not develop products for consumers; rather, we respond to economic factors and the housing market that have the opportunity to positively impact residents we serve through homeownership or, as noted in the Great Recession, the need to shift our services to focus almost exclusively on foreclosure mitigation services.  So I struggle to find immediate application.  The best I can say is to try and not fall into the framework that prevents organizations from responding to disruptive innovations. 

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