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Disruptive innovation: It's now the fast that eat the slow

By Gary Coleman - September 30, 2013

Blog image fastDisruptive 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.


Dttl_garycoleman_56x56Gary 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.

Comments

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We are once again staring at the dual action points of following a process oriented or result oriented approach regarding innovations. Large organisations essentially follow a process oriented approach as it is time tested and probability of success is much higher in this case. But I do admit that many processes in large organisation end up actually diverting or staggering decisions. Smaller organisations many a times do not have proper structures to process ideas and strategies, which appears to be providing a speed advantage. However, chances of success are then reduced considerably with costs attached. To sum up, I think that the means to achieve the end are also important and cannot be compromised for speed.

Multinationals will always have to find ways to innovate disruptively, in order to sustain growth, or even survive. But they cannot lose their strength to innovate in a more "dull" way; do what you are currently do better. Often overlooked by proponents of radical innovation, the capability to do incremental improvements can be vital to big firms survival. The balance between incremental and radical innovation has been, and will continue to be in the future, a difficult one to manage!
An interesting challenge for smaller companies or startups that are moving fast may be that there are many others racing for these pool of resources. According to the organizational ecology theory (Michael T. Hannan, John H. Freeman), the organizations that survive this race need some degree of reliability and accountability, and therefore have to resist change and start moving slower. Again, an interesting balance to explore!

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