Disruptive innovation: It's now the fast that eat the slow
By Gary Coleman - September 30, 2013
Disruptive innovation is a subject we hear a lot about these days. But never have I heard its impact on the large versus the small quite so sharply represented as during a panel I recently moderated made up of business executives.
Let me set the stage. All of the panelists had experienced the perspective of the large, multinational enterprise. One panelist is currently serving as COO of a large bank with 40,000 employees. One had worked for large companies but now was the CEO of his own successful tech start-up. Another panelist was the former CEO and president of a multinational pharmaceutical company and is now a partner in a small private equity firm. Similarly, the last panelist had worked in large tech companies but is now a partner with a smaller enterprise.
All of these executives were remarkably blunt about the state of large companies today. Large companies, with their complex structures, focus more on process, they said, often slowing down their reaction to market trends. In contrast, smaller companies focus on speed. Commented one panelist: “A lot of the problems that big companies have is that they see the trend coming—but the engine is so big they’re not able to change the way they execute.”
Two factors are also contributing: a culture of innovation—or lack thereof—and legacy costs. Newer, smaller entrants seem to enjoy a culture of innovation that produces new approaches and new models enabled by digital technology. And, by taking advantage of the cloud, these newer entrants can avoid the drag caused by huge legacy structures and costs. (And it’s not only business—governments, too, are struggling with legacy costs: On a panel I moderated at a recent World Economic Forum event, Former Prime Minister Tony Blair had plenty to say about it.)
This brave new world was summed up by the panelist from the tech start-up: “We love the saying, ‘It’s not the big that eat the small, it’s the fast that eat the slow.’ “ It’s not the college drop-out in his garage anymore, he pointed out, but rather the executive on your team who’s “peeling out” and setting up their own shop. That executive sees the opportunities disruptive innovation presents—and decides to jettison the structural impediments of a big organization.
But all hope is not lost for the large company. Several panelists pointed to new models now emerging. One was taking part in these—a lean venture capital firm closely associated with a large company. Other companies are now encouraging the head of a unit to own part of the business—actually loaning them money. And some were exploring ways to break their business into “performance units” with more autonomy.
In reality, there seems to be little fear that the large multinational is on the brink of extinction due to disruptive innovation. But like any species that’s in danger of being eaten—it may need to adapt and take a different shape in order to survive.
Gary Coleman is Managing Director, Global Industries, of Deloitte
Touche Tohmatsu Limited. He is a member of Deloitte’s Global Markets Committee and is the lead partner in Deloitte’s strategic relationship with the World Economic Forum. Follow him on Twitter @gcoleman_gary.