Featuring Scott D. Anthony, a senior partner at Innosight, and Michael Putz, a strategy and business development executive, coauthors of the forthcoming Sloan Management Review article “How Leaders Delude Themselves About Disruption.”

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We’ve known for decades what causes disruption. How disruptors enter the market, and how incumbents typically bungle their responses. So why are companies still so vulnerable to disruptive threats?

It isn’t about not having the right playbook. The problem is that leaders downplay disruptive threats or overestimate the difficulty to respond. This means that dealing with disruption is not just an innovation challenge; it’s a leadership challenge.

Yet leaders can successfully navigate disruption with the individual and organizational capability to confront powerful deceptions and respond to threats.

Scott Anthony and Michael Putz will explore the capabilities needed to counteract delusions about disruption and how leaders can avoid self-sabotage. They’ll discuss:

  • Early warning signs and signals of disruptive change
  • The four most common delusions about disruption
  • Ways that leaders and organizations can transform to turn disruption into opportunity
  • Provide real-world examples of companies managing the delusions of disruption

Watch the webinar on-demand

 

 

Q&A with the Presenters

 

How can you sell the future to your leaders when they’re so bent on having concrete numbers to take any gamble?

One key is to try to estimate what we call a “growth gap.” Start with an aspiration 5-10 years in the future. Then look at the present reality. Most of the time there is a shortfall between what a firm wants to deliver to investors and its current plan. That makes the problem more concrete and creates a clear imperative to pursue less certain disruptive growth options.

 

Which incumbents are executing bold programs to fundamentally transform their business models today?

Innosight’s Transformation 20 report is available here. It features companies from a range of industries, such as tech (e.g., Alibaba), financial services (e.g., DBS), and energy (e.g., Ørsted). The diversity of the companies in the research shows that success is indeed possible in many different contexts.

 

Have you been tracking leaders in nonprofits that are dealing with disruption well?

We have not extensively studied the nonprofit sector, but the Settlement Music School in the Philadelphia area is an impressive case example. Its CEO Helen Eaton has executed a dual transformation strategy. She has transformed existing branches from places where classes are taught primarily to children to community hubs and found innovative ways to have music education appear in the community.

 

How often do you see leaders who believe they’re addressing disruption but, in fact, are making incremental changes… way too little too slowly?

This is a very common problem, that fits into the “the data says we are safe” and “innovation is too risky” lies. Because people don’t perceive a problem, they don’t adequately invest in the solution, and to mitigate the risk they do basic things. We call some of these things “innoganda,” others call it “innovation theater.”

 

Would (are) compensation models rewarding innovation driving innovation initiatives. If so, what KPIs would be legit?

We are often asked this question. People have experimented with many different approaches, and there isn’t an obvious best answer. But we think actually what you provide as a reward is less of an issue than what happens if things don’t work out. The fear of failure is a huge inhibitor of innovation inside just about every established organization.

 

Do you have any advice for a strategy team that invariably butts up against strong biases and opinions from a CEO that is very skeptical on what is possible?

What we said on the Webinar was two things. First, find success stories that speak to the CEO. There are indeed a number of cases and showing how people like the CEO succeeded can be powerful. Second, get the CEO to experience “tomorrow today.” We told the example about how the CEO of the Singtel Group in Asia held Board meetings in places like Silicon Valley, Shenzen and Tel Aviv to let the Directors see what was going on with their own eyes.

 

How are firms able to systematize disruption? How should we think and go about the idea of allocating resources to disruption?

Innosight has written several books on the topic, most notably Dual Transformation, The Innovator’s Guide to Growth, and Building a Growth Factory. The basic answer is to be structured and systematic about it, making sure you have a robust innovation strategy, a strong process to develop and shape ideas, portfolio management and related systems to get the right resources to the right places, and a culture that enables the work getting done in the right way. It is not easy, but the answer has been reasonably and clearly documented.

 

How can we acculturate new employees and existing employees to a more team-oriented approach, as well as a less siloed one? 

Many employees are trained early to be very territorial as well as parochial with respect to their product/unit/division. Yet innovation often requires combining ideas from different silos and sharing the gains with other units. The key is to create a collaborative culture where executives walk the talk; employees will eagerly align with it.

 

What types of approaches to creating a shared vision of future markets work well with incumbent leadership teams?

Lead from the Future, the forthcoming book by Innosight co-founder and senior partner Mark Johnson and partner Josh Suskewicz, provides a clear answer to this question. The basic idea is to have a senior team go through a collective experience that starts with imagining the future environment at least five years in the future, then determines a vision of the future organization, and then walks back to the present to determine milestones that will bridge the gap between the present reality and the future aspiration.

 

Do organizations still set-up an innovation function and appointment of chief innovation officers to management the innovation process? Or are they actually starting off with projects using separate teams to build new capability?

Sophisticated companies have multiple innovation functions. That is, they have a dedicated group to pursue new growth businesses, what we call Transformation B in Dual Transformation. But they also have an innovation function to help to build the organization’s overall innovation capacity. The fundamental question is to first determine your strategy, and then make sure that your innovation approach fits it appropriately.

 

How do you balance the internal culture to develop disruptive innovation versus allowing the start-up community to handle the disruptive innovation?

Certainly, there are many examples of technology firms acquiring venture-backed startups. That can be an expensive game, particularly in competitive markets, but it is always good for established companies to be searching for startups to partner with or potentially acquire. That can be harder in sectors that garner less attention from venture capital and therefore have fewer disruptive alternatives. Our view is that there is little downside, and significant upside, to developing the capacity to build disruptive growth engines.

 

Disruptions do happen not only to the organizations but also to leaders — do you see that in your research? If so, what do you recommend leaders to transform themselves in this ever-changing world of disruption?

This is a great question. We offer the idea of mindfulness in our Sloan Management Review article, but that’s clearly on the tip of an emerging area of research that intersects the strategy/innovation fields and the human/psychodynamic fields. We hope to write more about in the future. So, “watch this space!”

 

Do you have some good examples of interventions that work well to ‘surface assumptions’ with leaders of incumbent organizations? What about asking management to list its implicit assumptions?

Yes, Ray Dalio’s Bridgewater Capital is famous for empowering employees at all levels to challenge decisions and demand clear explanations for the logic behind how they are made, which creates an incentive for people to explore their own unconscious assumptions and biases before their colleagues do. That kind of foundational approach is important because it is hard for people to do by themselves and not wise for them to share unless it is in the right environment.

 

This makes me think that we often need to change company cultures style of internal discussions to be less “zero-sum debates” with winners and losers, to more positive-sum-oriented where most people benefit.

This is an interesting question. Many companies actually thrive on fostering internal competition, at least in the core business. Zero-sum debates in the disruptive business are not so much a bad idea that needs to be stamped out, but a misunderstanding of what needs to happen. For example, disruptive teams aren’t competing with each other against fixed goals, they are being measured around things like rapid learning around well-constructed experiments. Innovative powerhouses like Disney’s Pixar and Netflix are famous for direct, candid conversations, where there are winners and losers, but of ideas more than people.

 

How do you help leadership and your customers think about the implications of a “post-disruptive” world? For example, AI and robotics are likely to change work and jobs fundamentally and not just “we’ll do things more efficiently”?

When we use the word disruptive, we use it in the classic Christensen way of someone trading off pure performance in the name of simplicity and convenience, wrapped typically in a business model that allows them to prosper at lower prices points. A large change, therefore, need not lead to Christensen-style disruption with an entrant taking down an incumbent. Technology is always changing the basis of work, whether it is deployed in a sustaining or disruptive fashion. There will be people who use AI and robotics to do what they historically did better; there will be people who use AI and robotics to indeed disrupt the status quo. It all comes down to the choices that leaders make.