From the Inside Out
Nottingham does agree that working at a full arm’s length from an outside design firm can create difficulties. Many firms want to create cool designs that win industry awards, but they have scant ideas on how to turn them into businesses. That’s why it is important to include manufacturing, engineering and sourcing mavens in any design team, and that’s why Nottingham Spirk calls itself a “business innovation firm.” “If you want to scale a new idea, you have to build in a business mindset,” he argues.
Of course, CEOs use many other strategies and they all have their strengths and weaknesses. Some argue that mergers and acquisitions can lead to the absorption of new technology that disrupts, but others say that the burden of integrating two organizations can actually interfere with innovation. Other CEOs are fans of internal innovation labs, crowd sourcing and open innovation with other companies. None of these are perfect.
The Value of Varying Approaches
It may be that a CEO should use a variety of these tools—depending on the nature of the enterprise and scale of the attempted disruption. Matco Tools, for example, does not rely on any outside partner when it works with a supplier to improve a particular finished good that it, in turn, resells to auto technicians. That approach is considered an open innovation model of collaboration.
How does the company decide on which disruptive innovation model to use and when? “The key thing is the complexity of what we’re looking at and the overall impact on the business,”
Gilmore explains. Improving a specific tool might yield only incremental gains. But toolboxes are the major money-makers. “We decided we want to spend more resources on that,” he says.
One of the industries that, perhaps surprisingly, relies on a constant stream of disruption is the toy and game industry. Hasbro, based in Pawtucket, Rhode Island, makes everything from the Monopoly board game to Star Wars paraphernalia.
With $4.4 billion a year in sales, CEO Brian Goldner says that 75 to 80 percent of its products are new each year, meaning there is a constant flow of new items replacing the old. “I am reinventing and reimagining our brands all the time,” says Goldner. His philosophy of disruption is a twist upon Govindarajan’s three-box theory. Hasbro builds teams that manage each brand globally, including household names like Nerf and Play-Doh. They conduct their own research with customers and potential customers. But the company also has its own future-focused innovation groups, including one called the i-Play team, that conduct research on how to take physical toys or games and make them digital or how to adapt them to social media. It’s up to the teams managing each brand to recognize and embrace a disruptive idea.
“I think of the three-box strategy as being more like the Matryoshka Russian dolls that nestle together,” Goldner explains. “You are managing the present and selectively forgetting the past. But you also may find a new truth that changes current beliefs. That is the future. You have to think about all of these at once. They inform each other. I don’t think they are separate processes but rather nestled within each other. The core brand team needs to have a sense of all three boxes at once.”
One of fastest-growing brands within Hasbro, ironically, is Play-Doh, which has existed for 60 years. “We looked at the present, selectively forgot the past and imagined the future,” Goldner says. “You look around the world and people are very focused on helping their children to concentrate on achieving development milestones.”
So Hasbro developed playsets and figurines to sell with the Play-Doh itself, allowing children to do things such as build a village or an imaginary scene. That enhances their creativity and story-telling capabilities, encouraging parents to buy more. In short, the company reimagined how Play-Doh could be used. As a result, Play-Doh sales grew more than 30 percent last year and have doubled in size over the past three years.
In summary, there are many different disruption models and CEOs can decide when to use a particular example. Large companies have the benefit of bigger budgets, more specialized expertise and global scale. But smaller companies can use less formal methods of disruption and can act faster than their larger peers. It seems every CEO needs a toolbox of disruption strategies that everyone in the company understands and embraces. These strategies must be accompanied by the right mindsets and culture, as well as the compensation systems that support the most
collaborative and inventive behaviors. The effort is necessary to maintain a competitive edge. Any CEO who is not thinking about disrupting his or her business is exposed to the possibility
that someone else will.
Sidebar: Solving the Disruption Dilemma
Sidebar: HALO: Disrupting at a Disruptor