Do you Know Your Disruption From Your Innovation?

If you want a rundown on what the experts think of innovation then read the summer edition of Foreign Affairs. It's an innovation special that makes many mentions of the term disruption as if the two are the same. Foreign Affairs' experts divide into two camps on innovation. One says innovation is so profound, particularly around computational change (robotics, intelligent machines) that the world will never be the same again; the other says, actually disruption and innovation are at a low ebb.

Here's why I think that both camps are wrong and what I think leaders can usefully take away from the debate.

It is very important to get the distinction between innovation and disruption right.

Innovation is, in essence, a creative, usually technological or scientific activity. It changes the form and function of products or processes; it invents.

Disruption is about behaviour - it is about people wanting different things or behaving in unanticipated ways. Done on a large enough scale it forces change onto companies; it forces them to reappraise their innovation strategy.

Today's business leaders are challenged by new ways to organise social interaction. It comes in a number of guises: social media for marketing; the use of a much wider pool of "influencers"; the use of social platforms for fund-raising (eg crowdfunding) that is now allowing smaller companies to draw on working capital through P2P platforms; the use of pooled resources like Cloud computing and SaaS that have collapsed barriers to entry in many sectors; the spread of open source software, open innovation and open design (witness BitCoin and the distributed ledger, a socially generated disruptor of finance); social market platforms like eToro that allow people to use social networks to develop investment strategies; the rise of market platforms that allow people to service each other's needs rather than go through an enterprise intermediary(Airbnb vs Marriott and Hilton); the rising importance of online community as a customer participation strategy; even the rise of user experience design, which puts the relationship between enterprise and customer in prime position, and so on.

AirBnB - Innovation or Disruption

Each of these is either a new form of social organisation that competes with the idea of the enterprise (the market vs the company) or an element of relationship development that is central business as a social activity.

It may seem odd for an innovation writer to place so much emphasis on non-technological issues. Most of my writing is on disruption, however, and the conclusion forming in my mind over recent years is that social organisation is the key to understanding what actually disrupts markets and businesses.

Looked at this way, the central issue is not whether we are, or are not, innovating profoundly through technology. Whether the creation of a global communications network linking individuals at unprecedented scale is as profound an innovation as the creation of an electricity network, is a vacuous comparison.

The electricity network allowed people to satisfy a need for light and radically altered their time budgets, permitted easy shift work, urban travel, social behaviour, and pastimes. The global communications network is doing something similar - changing the way people function, how they think and relate, what they want from life, and crucially how they organise. The social interaction and organisation of people is being disruptedĀ and is being drawn more centrally into the economy in multiple ways. That is what raises the most profound challenges.

Because change is complex, and because changing organisations are even more complex, it is necessary to explain transformation as simple as possible. And for me, the starting point is this. Most enterprises are based on a financial interest model or a productivity model. We are now looking at an economy dominated by a human interest model of business. That's the primary challenge that leaders have to meet.

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