Thursday, May 8, 2014

Nokia: Three Metrics of Disruptive Innovation


by David Letterman, Nokia

‘Disruptive innovation’ has been a favorite discussion topic for years. I am sure every industry, every company and every innovation team, has had rounds and rounds of discussion about what disruptive innovation means for them.

Rather than attempting another end all, be all definition for innovation, let’s focus on the passion it evokes and the permissions it enables. Disruptive innovation, as an internal charter, allows expansion beyond previous boundaries; it gives permission to go after new markets, new customers and new business models.  If left unencumbered, it can guide the company to proactively find and validate big problems for which external partners, new products and new markets can be created.  Disruptive innovation can be a source of otherwise unattainable revenue growth and market share.

Innovation is about converting ideas into something of value, making something better AND hopefully something that our customers are willing to pay for. For the purpose of putting the framework into two buckets, let’s distinguish between incremental and disruptive innovation.

Most innovation in established companies is developed by corporate innovation engines, whose job is to continually improve their products and services.  This continuous innovation delivers incremental advances in technology, process and business model.  Specialized R&D teams can add value to these innovation engines by solving problems differently or having a specific charter to go after larger levels of improvement.  Although the risks are higher, breakthrough innovation occurs when these teams achieve significantly better functionality or cost savings.  This combination of corporate and specialized incremental innovation is absolutely necessary for companies to keep up with or get ahead of the competition – and which most successful companies are very good at.

Disruptive innovation, on the other hand, is much more difficult for the corporate machinery. Here, new product categories are created, new markets are addressed and new value chains are established.

There is no known baseline to refer to.

Disruption implies that someone is losing – being disrupted. So clearly you won’t find a product roadmap for it in the company catalog. And it’s not even necessarily solving the problems of the current customer base. This is an area where, with the right passion, permissions and charter, a specialized innovation team can take a lead role and create significant growth for the company.

Here is my take on three characteristics of teams chartered to do disruptive innovation -

  • A strong outside-in perspective is crucial, for not only identifying the problem and validating the opportunity, but also for finding and creating a solution, and perhaps even taking it to market. Collaboration is everything when it comes to disruption.
  • Risk quotient - Arguably, all innovation contains some element of risk.  But, in this case of proactively seeking disruption, we must allow for an even higher degree of risk. For most innovation teams, ‘Fail fast’, ‘Fail often’ and ‘Fail safe’ are the mantras.  But in case of disruptive innovation when we are seeking new markets, perhaps based on new technologies, our probability for success is untested. And to the incumbents, this new  solution is unacceptable, often something they have never considered or simply cannot deliver.  If you are solving a really important problem it justifies embracing the risk, revalidating the opportunity and digging deeper to create a solution.  Redefine risk in the context of meaningful disruption – ‘Fail proud’ and keep on solving.  Remember SpaceX?
  • How disruptive is disruptive - For a new entrant to eventually become disruptive it needs to be significantly better in functionality, performance and efficiency - or much cheaper - than the alternatives.  Although the benefits may initially only be noticed by early adopters, for the solution to disrupt a category it must be made available to, and eventually accepted by, the masses.

A simple example that addresses these three characteristics – is how the Personal Navigation Device market was disrupted by the smartphone.

In the early and mid 2000s, Garmin and TomTom had a lock on the personal navigation market. When Nokia and the other phone manufacturers began delivering GPS via phones, they were coming to the market via a totally new channel, embedding the functionality in a device that the consumer would carry with them at all times.


The incumbents may have acted unfazed.  But in reality, they couldn’t respond to the threat.  The functionality may have been inferior to what they were selling but the cost was perceived as free.  It was totally unacceptable and the business model was “uncopiable.” What started as a feature in just select high-end phones would soon be adopted as a standard functionality in every smartphone, and expected by end users by default. In just two years, there were five times as many people carrying GPS enabled phones in their pockets as there were PNDs being sold.

Silicon Valley Open Innovation Challenge

There are many other characteristics you might consider to be the most important measurements for disruptive innovation.  For me, these three are as good as any.  It comes down to the simple questions of “Why does it matter?”  “What problem does this empower us to solve that was otherwise unmet?” and “How can we provide significantly positive impact for the company and for the people to whom the innovation will serve?”

Nokia’s Technology Exploration and Disruption (TED) team is chartered to look at exactly these questions. In its search for the next disruption, it has launched the – Silicon Valley Open Innovation Challenge.

This competition is an open call to Silicon Valley innovators to collaboratively discover and solve big problems with us, and to do so in ways that are significantly better, faster or cheaper than we could have done alone. We see Telco Cloud and colossal data analytics as the two major transformational areas for the wireless industry, opening up possibilities for disruption – and those are the focus themes for the Open Innovation Challenge. We’re willing to take the risk because we know the rewards of innovation are worth it.

Click here to submit your ideas and be part of something truly disruptive. Apply now!
Last date is 19th May 2014.

http://nsn.com/OpenInnovationChallenge

David Letterman works in the Networks business of Nokia within its Innovation Center in the heart of Silicon Valley. Looking after Ecosystem Development Strategy for the Technology Exploration and Disruption global team, David is exploring how to create exponential value by pushing the boundaries of internal innovation. An important initiative is Nokia’s Silicon Valley Open Innovation Challenge, calling on the concentrated problem-solving intellect of the Valley, to solve two of the biggest transformations for Telco: Colossal data analytics and Telco Cloud. Prior to his current position, David worked for a top tier Product Design and Innovation Consultancy, and held various business development and marketing management roles during a previous 10-year tenure with Nokia.


Nokia invests in technologies important in a world where billions of devices are connected. We are focused on three businesses: network infrastructure software, hardware and services, which we offer through Networks; location intelligence, which we provide through HERE; and advanced technology development and licensing, which we pursue through Technologies. Each of these businesses is a leader in its respective field. Through Networks, Nokia is the world’s specialist in mobile broadband. From the first ever call on GSM, to the first call on LTE, we operate at the forefront of each generation of mobile technology. Our global experts invent the new capabilities our customers need in their networks. We provide the world’s most efficient mobile networks, the intelligence to maximize the value of those networks, and the services to make it all work seamlessly. 
http://www.nsn.com
http://company.nokia.com

1 comments:

David,

You do understand the irony of having someone from Nokia, the leading firm in an industry that was thoroughly, fully, and utterly Disrupted, explaining how to develop and nurture Disruptive Innovation?

Going onward then, you were doing great until you said "For a new entrant to eventually become disruptive it needs to be significantly better in functionality, performance and efficiency - or much cheaper - than the alternatives", which happens not to be the case.

Incumbents have always had the upper hand when it comes to improving the performance of their product. Kodak had functional digital imaging long before Canon and the Swiss had prototyped quartz watch movements before Seiko. The key to Disruptive Innovation is not to be 'better' at meeting existing performance metrics but better at meeting DIFFERENT performance metrics, e.g. ones to which a currently unserved or underserved market would be greatly attracted.

One more minor clarification would be that Disruptive Innovation is seldom if ever based on a single change in business model or architecture, but is far more often a new combination of existing technologies into an architecture which serves new purposes. The difference may seem subtle, but were it not for the availability of Google Maps and the ubiquity of apps-based pocket PCs running under standardized operating systems (Android and iOS), the dedicated GPS devices made by Garmin and Magellan might still dominate the market for GPS (likely much smaller than today's market of course) to this day.

While these concerns may appear trivial on their face, they can, if not taken into account by the team that adjudicates and estimates the value and applicability of the ideas submitted to your contest, sub-optimize (if not entirely subvert) the entire intention of the project.

Thanks for providing food for thought and Good Luck on the competition,
Rick Mueller
Manager - Disruptive Innovation Group at LinkedIn
https://www.linkedin.com/groups?home=&gid=1837479

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