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Ivan Bofarull, chief innovation officer at Esade, and Thomas Kneale, innovation consultant and former US Navy commander, talk about how companies should navigate disruptive innovations after Covid-19.
Q&A recap answered by our speakers:
What are the main mistakes that "moonshot" organisations can make?
"Moonshot organisations can fail in two ways: they can fail trying to be too ‘moonshotty’ or by treating innovation just as business-as-usual. If you fail on the high side, you risk disconnecting from the organisation’s core. If you fail on the low side, then you risk bureaucratic processes slowing you down – and you may not commit to the idea financially because it may not initially yield the expected metrics."
How can businesses better navigate disruptive innovations?
"You need to be ambitious when navigating disruptive innovations. However, at the same time, you must connect to your sponsors through a compelling narrative that they can understand and also show progress and results in a structured way."
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Which industries are most likely to be disrupted because of Covid-19?
"Businesses that are currently doing very well enable mobile presence, such as telepresence, telemedicine and online learning. We will see in a few months from now how the usability of these products improves drastically: in a post Covid-19 world we may not want to go back to the standard way of doing business. Incumbent companies in industries where users are forced to adopt new behaviours – such as online learning, video technologies, telemedicine and streaming – will have a hard time unless they get to grips with the new behaviour that users are adopting."
What is the main difficulty that established companies must overcome if they want to adapt to disruptive innovations?
"We often think about infrastructure and business models, but sometimes cultural inertia can be the most difficult aspect to overcome. Even if you can put the processes in place to shift a company to a new way of doing business, it is very difficult to convince those who have been doing the same thing for a long time. This is true even if you can turn around the infrastructure very quickly.”
If there is a new habit that I can take to my company next Monday to navigate and overcome disruptive innovations, what would it be?
"The quickest and easiest thing to do on Monday is to be explicit about your model of the world – or your business – and be clear about what you know and what you don’t know. Many people just try things to see what works, but you won’t be able to make positive progress unless you are aware of your assumptions, test your hypotheses and update the model."
Ivan Bofarull: We are covering the topic of disruptive innovations along with my friend, Thomas Kneale, an innovation consultant and former US Navy commander for 24 years. Thomas, welcome! It's a pleasure to have you here with us.
Ivan Bofarull: I would like to start by sharing three basic ideas. Idea number one is that disruptive innovations won’t mitigate after Covid-19, and it's quite the opposite. Disruptive innovations will accelerate both in frequency and magnitude.
The second idea is that this is going to happen because this crisis is forcing us as individuals and companies to change some of our key behaviours and accelerate the way we adopt new disruptive behaviours.
The third idea is that you should create the habit of thinking big to anticipate truly disruptive scenarios. At the same time, you should think in a very systematic and agile manner to make things happen in short increments along the way. You don't see disruptive innovations coming. And the reason why you don’t see them coming is because new players are actually not competing with you. What they are doing is changing the nature of your industry.
After Covid-19, disruptive innovations will accelerate both in frequency and magnitude
This idea of blind spots was first conceptualised by Clayton Christensen in his iconic book: The innovator's statement. He was saying that because you are doing the right thing is actually the reason why disruption will come. And the reason for that is because the biggest transformation that we have experienced in the digital age is that thinking big is easier and cheaper these days.
Starting up a new business is much cheaper. Upfront Ventures, a VC from los Angeles, found that starting up a tech business today is 1000 times cheaper than 20 years ago. After starting up, while you are scaling up, the digital advantage in the digital age, is the possibility you have to reach an unlimited upside. And this is a concept that was introduced in 2011 by Marc Andreessen, a legendary venture capitalist from Silicon Valley, in a very iconic piece titled "Software is eating the world".
So, the question here is: what can we expect after Covid-19? Disruptive innovations will not mitigate at all. We’re going to look at these from two perspectives. One perspective is from the demand side. From the demand side, customers will start adopting new disruptive behaviours. And the thing is that they are forced to do this by the supply side.
Companies will also be forced to adopt new behaviours. One of the big reasons why established companies fail to transform is because disruptive innovations are actually architected. All innovations and companies feel lazy to adopt architectural innovations. And in a radical crisis like this one, companies will not have more options. Now, how can you take action based on this?
One of the big reasons why established companies fail to transform is because disruptive innovations are architected
Our suggestion here is that as an executive or a company the biggest risk down the road is not thinking big enough. What we suggest is a new powerful mental model, namely "moonshot thinking." This basically means thinking of improving by 10x in contrast to just improving by 3 or 5, 10 percent. How can we launch and implement moonshots in a systematic and reliable way?
Thomas Kneale: This is a very interesting question, especially in the context of disruption. Disruption leads to disorientation. So we want to put some kind of structure in place so we have something to hold on to.
You mentioned I come from the military and I'll use a military frame of reference for this one. There's a way of thinking about this that comes from a guy called John Boyd who shares my background as a pilot. He came up with this concept of the OODA loop. It stands for observe, orient, decide and act. It makes sense, right? You need to observe what your opponent is doing. You need to orient yourself to understand what it means to you. You need to decide how to respond – and then act. And this sounds obvious, of course.
The biggest transformation that we have experienced in the digital age is that thinking big is easier and cheaper these days
We'll start with observe. One of the things that's interesting about Covid-19 is that it became apparent to most of the world at roughly the same time. Now you could quibble with that and you could say the information was out there for a while, but I think it exploded into the collective consciousness simultaneously around the world and we all observed it together.
So that sets up an interesting dynamic when we think of it in a competitive context, because it means that most companies start on an equal footing, at least within a given industry. So, what's really important is how quickly and how correctly we react to this disruption to be successful in the new environment?
The second step of that little loop is orient. And I think this is where it starts to really get interesting. I think that conceiving of the orientation step as developing or changing a model is very important because models are predictive and testable. When we put a model into place, it guides our future action, but it also predicts the results of those actions so that we can test it with our models. And then continue to make adjustments. Orienting is the process of destroying your old mental models and creating new ones in a disruptive environment. This is very important.
One of the things that coronavirus teaches us is that our mental models are almost always wrong
The next step in the loop is decide. He has written a hypothesis in parentheses X to decide. When you decide about what you're going to do, you're making a hypothesis about how the world will behave according to your model. And when you act, you're testing the hypothesis.
So, now we've gone through the loop once. But this is where it's important to remember that it's a loop. As soon as you act, you're back at the beginning of the loop and you have the opportunity to observe the results of your action and see if they match what your model says should occur. And if not, you update that model. And as you go through the loop, your model gets closer and closer to reality.
But one of the things that coronavirus teaches us is that our mental models are almost always wrong. To converge on the model, we have to be explicit about what the model is. We generate hypotheses and form that model. Then we test them. We update our model based on the result. This is the way that lean and agile helps us, it gives us a structure.
We should continue to quickly go through that loop. I want to point out that whereas these steps are useful, if we live in an organisation that has a culture that always operates this way – because disruption can come from anywhere at any time – then we'll always be ready to do this. It will help us, especially in times of disruption.
Ivan Bofarull: Thank you so much for sharing your wisdom with us. Thank you very much for joining us.
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