PDF Summary:Beyond Disruption, by W. Chan Kim and Renée Mauborgne

In Beyond Disruption, W. Chan Kim and Renée Mauborgne introduce a powerful new approach: nondisruptive creation. By developing new markets that operate outside existing industries, companies can unlock limitless growth opportunities without disrupting established players.

The authors explain how nondisruptive creation sidesteps conflicts with incumbents and triggers less resistance from stakeholders. They outline the process for uncovering nondisruptive opportunities by questioning industry assumptions and leveraging internal resources creatively. Kim and Mauborgne demonstrate why embracing nondisruptive creation is crucial for achieving responsible, sustainable growth.

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• Implement incremental improvements to your current services or products that address common customer pain points. Gather feedback from your customers about what could make their experience better and introduce small enhancements. For instance, if you run a car wash, you might add a mobile payment option or a loyalty program that rewards frequent customers, thereby improving the customer experience and potentially increasing repeat business.

Supporting New Developments That Leave Existing Business Unchanged Is Simpler

The authors discuss how nondisruptive creation can be advantageous for established companies by making it easier to secure buy-in from stakeholders within the company for innovation and growth initiatives. Unlike disruptive creations, which often involve cannibalizing or threatening a company's current business, nondisruptive innovations don't endanger existing revenues or job security, thereby reducing internal resistance and fostering a more supportive environment for experimentation and growth.

Kim and Mauborgne use the example of 3M's sticky notes to illustrate this point. When 3M researcher Art Fry discovered an application for a "non-adhesive adhesive" that had been sitting unused in the company's labs, he faced minimal internal resistance in developing and commercializing the product, as it was clear that the new invention would create a fresh market without displacing 3M's current products or ventures. Similarly, Pfizer's development and launch of Viagra for erectile dysfunction, a problem that had previously been unaddressed by the pharmaceutical industry, was met with strong internal support, as it promised to unlock untapped demand without cannibalizing existing drug sales.

Disruptive Creation Triggers Resistance From Stakeholders Tied To the Existing Model

Kim and Mauborgne delve into the challenges faced by established companies when pursuing disruptive innovations, highlighting the resistance that often arises from internal stakeholders whose interests are rooted in the current business structure.

They use the case of Encyclopaedia Britannica (EB) to illustrate how internal resistance can hinder a company's capacity to react successfully to threats of disruption. EB, a leading publisher of hardbound encyclopedias, was initially proactive in venturing into the digital realm by creating CD-ROM and online versions of its product. However, its efforts were ultimately hampered by resistance from its powerful salesforce, whose livelihoods were tied to selling the print version. Management's reluctance to confront this internal conflict and disrupt its main operations ultimately contributed to EB's decline in the face of digital disruption. The authors emphasize that disruptive innovation, though essential for industry renewal, often poses significant organizational challenges due to the resistance it can provoke from stakeholders who perceive it as a threat to their existing interests.

Other Perspectives

• The assumption that resistance is always negative overlooks the possibility that stakeholder concerns might be valid and that their resistance could highlight potential flaws or oversights in the disruptive innovation.
• The idea that established companies face challenges may overlook the strategic decisions made by companies to focus on incremental innovation or other areas of business where they have a competitive advantage.
• Stakeholders tied to the existing model might also be motivated by a genuine belief that the current system is superior, rather than just personal interest.
• Some companies may intentionally choose not to react aggressively to disruptive threats if they have a diversified portfolio and can absorb the impact without significant overall harm to their business.
• The digital versions of EB's products might not have been sufficiently innovative or user-friendly, which could have led to a lack of consumer interest and support, rather than internal resistance being the main barrier to success.
• It's possible that the salesforce's resistance was a reflection of broader market trends or customer preferences at the time, which may have still favored print encyclopedias over digital versions.
• The company's management might have failed to communicate the strategic importance of the digital transition effectively to the salesforce, leading to a lack of buy-in from the sales team.
• The decline may have been inevitable due to the disruptive nature of the internet on print media, and management's actions might have only marginally affected the outcome.
• Not all industries require disruption for renewal; some may benefit more from stability and predictability, which can foster a different kind of growth and development.
• Some organizations may have a culture that embraces change and innovation, which can mitigate the perceived challenges of disruptive innovation.
• Some stakeholders may have a vested interest in innovation and change, especially if they stand to benefit from new market opportunities or have a stake in the success of the disruptive technology.

Non-Disruptive Creations, Unlike Disruptive Ones, Sidestep Stakeholder Backlash

The authors point out how generating non-disruptive innovation can help companies avoid backlash and resistance from external stakeholders, including government agencies, regulators, social interest groups, and industry associations. Since nondisruptive innovation creates fresh markets beyond current industry limits, it doesn't trigger the same level of concern over job losses, business closures, or regulatory challenges that often arise with disruptive innovations.

The authors argue that although nondisruptive innovations still need to comply with standard regulations, they are less likely to face the kind of intense scrutiny and pushback that disruptions often encounter. Take the case of Sesame Street, Music: Not Impossible, or the Square Reader, all of which were able to flourish without provoking any significant negative reactions from outside stakeholders. The authors contend that by creating new markets without disrupting existing ones, nondisruptive creation offers a more harmonious approach to growing and innovating in a way that aligns with the interests of a broader range of stakeholders.

Innovative Developments Spark Conflict, With Lobbying Efforts to Restrict and Constrain Growth

The authors discuss the challenges that disruptive creation can present for companies due to the backlash it often triggers from outside stakeholders. Because disruption involves unseating incumbents and potentially circumventing established norms and laws, it frequently attracts negative reactions from those who are threatened by its impact.

To illustrate this point, they provide the example of Tada, a South Korean ride-hailing company that was ultimately shut down due to government intervention. Tada creatively utilized a legal loophole to provide an alternative to traditional taxis, which sparked strong opposition from drivers and their unions, resulting in protests, lawsuits, and eventually legislative action to ban Tada's service. Similarly, Smile Direct Club, a company trying to revolutionize the orthodontics industry with its telehealth-based clear aligner service, faced a barrage of legal challenges from established orthodontists, highlighting how disruptive creations can quickly become entangled in legal and regulatory conflicts.

Practical Tips

• Enhance your adaptability by role-playing scenarios where your business faces opposition from established entities. Imagine you're launching a product that disrupts a traditional market, and role-play with a partner who acts as the opposition. This exercise can help you develop negotiation skills and contingency plans.

Other Perspectives

• The negative reactions from outside stakeholders can sometimes be a catalyst for necessary regulatory reform and modernization, which can benefit the economy and society as a whole.
• Not all innovative developments lead to conflict; many are embraced by the public and authorities for their positive contributions.
• Backlash may be short-lived if the public or market quickly adopts the new technology or service, outweighing the influence of incumbents.
• By exploiting a loophole, companies may inadvertently contribute to a public perception of operating in a legal grey area, which can affect consumer trust and brand reputation.
• The entanglement in legal and regulatory conflicts can sometimes be a sign of a healthy democratic process where different interests are represented and negotiated, rather than a negative aspect of disruption.

Process, Enablers, and Foundations for Nondisruptive Creation

Finding Non-Disruptive Opportunities by Exploring Emerging Problems

Kim and Mauborgne emphasize that the foundation for bringing about nondisruptive innovations lies in the ability to identify and explore fresh issues or chances that reside outside the confines of current industries. They highlight two main avenues for uncovering such nondisruptive opportunities: addressing existing but unexamined challenges that people have accepted as part of life, and solving new challenges that arise from evolving trends in areas like the economy, society, environment, technology, or demographics.

In dealing with current but unexplored issues, companies like Grameen Bank, Kickstarter, and Music: Not Impossible unlocked new markets by offering market solutions for problems that had long been accepted as inevitable or intractable. For example, Grameen Bank addressed the issue of no access to credit for the very poor in Bangladesh, Kickstarter tackled the issue of funding creative projects for artists, and Music: Not Impossible devised a way for profoundly deaf people to experience music. In addressing new issues or challenges that were surfacing, companies like the Tongwei Group, Winia Mando (with their Dimchae kimchi refrigerator), and the cybersecurity industry seized opportunities arising from new trends and challenges. Tongwei created a fishery-integrated photovoltaic industry to address China's increasing demand for eco-friendly energy, Winia Mando developed a specialized refrigerator to tackle the kimchi storage needs of urbanized Koreans, and the cybersecurity industry emerged in response to the growing threat of cyberattacks fueled by widespread internet access and digitalization.

Assess Market Potential for Attainable Nondisruptive Opportunity

Kim and Mauborgne underscore the importance of carefully assessing the commercial viability of an identified nondisruptive opportunity to ensure its feasibility and relevance. They encourage companies to look past their own perceptions and interests to think about the broader appeal and influence of the chance they are pursuing. A key question to ask is, "Who else would care?"

To determine the market potential, companies should identify the specific groups of people or organizations who are likely to benefit from the solution to the problem or the realization of the opportunity. This involves understanding the target audience's number and their willingness to pay for the proposed offering. For example, Jack Dorsey and Jim McKelvey, in creating Square Reader, went beyond seeing the problem of taking card payments as a personal one and recognized the vast market potential by determining the huge number of small merchants, microbusinesses, and self-employed individuals seeking such a solution. Similarly, in founding Grameen Bank, Mohammad Yunus observed the financial struggles of poor rural people in Bangladesh, and he also assessed and confirmed the immense scale of the market for microloans across the country.

Practical Tips

• Volunteer for organizations or causes that align with your values to meet others who are similarly invested. This hands-on approach allows you to directly contribute while building relationships with those who care about the same issues. If animal welfare is important to you, volunteering at a local shelter can connect you with fellow animal lovers and advocates.
• Volunteer your solution or opportunity with a local organization to see its impact firsthand. If you've created a new educational game, offer to run a play session at a nearby school or community center. This will allow you to observe which age groups or types of learners get the most benefit from your game, providing real-world insights into your target groups.
• Use social media polls to gauge price sensitivity by asking followers to choose between different price points for a hypothetical new product or service. This can provide a quick and informal way to understand what your audience might be willing to pay. For example, if you're thinking of launching a handmade jewelry line, post images of a few pieces with varying price tags and see which ones get the most votes.
• Volunteer with a local non-profit that provides financial literacy or microfinance services to gain firsthand experience. Offer your time to help with administrative tasks, client workshops, or fundraising events. This will give you a closer look at how microfinance operates on the ground and the difference it can make in individuals' lives.

Uncover Nondisruptive Opportunities by Questioning and Reassessing Existing Assumptions

Opportunities that don't involve disruption often remain hidden because established sectors can't see past their conventional assumptions and mindset. The authors stress that you should actively question and reshape these assumptions to uncover and release those hidden opportunities. By uncovering the assumptions that have obscured opportunities and challenging them, you open up new possibilities for growth and innovation.

To systematically dissect and challenge existing assumptions, the authors introduce a structure that examines beliefs and their effects. This involves examining the fundamental components of a current sector's business framework—such as its evaluation of risks versus returns, intended clientele, and range of operations—and identifying the underlying assumptions that shape these elements. The next step is to probe deeper and draw out the implications of these assumptions, revealing how they have blinded the field to the nondisruptive possibilities. Finally, by consciously challenging and reframing these assumptions, companies can find means to access the opportunity and create a new market.

Assumption-Implication Analysis Uncovers Industry Assumptions' Business Implications to Unlock Opportunities

Kim and Mauborgne illustrate the application of assumption-implication analysis through the examples of Prodigy Finance and the governing body of cricket in India, the BCCI. For Prodigy Finance, the authors show how the traditional banking industry's assumptions about risk-return assessment, target customers, and business scope led them to overlook the opportunity of financing international students seeking advanced degrees abroad.

By challenging these assumptions, Prodigy Finance devised a new model based on assessing students' future earning potential and established a global infrastructure for loan enforcement, establishing a fresh segment for loans for international education that conventional banks had deemed too risky. Similarly, BCCI, the governing body of cricket in India, challenged its existing assumptions about risk-return, target customers, and business scope to create the hugely successful Indian Premier League (IPL). By adopting the faster-paced Twenty20 format, attracting players from other countries, and creating a more entertainment-focused experience, BCCI expanded the appeal of cricket beyond hardcore fans and tapped into a massive new market, achieving remarkable growth and revenue generation.

Other Perspectives

• Targeting a broader customer base or expanding the business scope may not align with the core competencies or strategic objectives of certain banks.
• Prodigy Finance's model may inadvertently favor students from certain prestigious institutions or high-paying fields, potentially reinforcing existing educational and economic disparities.
• The success of such a model is highly dependent on the accuracy of predicting students' future earnings, which is inherently uncertain and could result in financial instability for both the lender and the borrower if projections are inaccurate.
• The IPL's reliance on attracting international players could be seen as a continuation of existing practices in sports leagues rather than a novel challenge to assumptions.
• The focus on a shorter format and international players could overshadow the importance of nurturing local talent and investing in grassroots cricket development.
• The entertainment-focused approach may have led to a homogenization of cricket culture, with unique regional nuances being overshadowed by a more generic, globally appealing product.
• While BCCI achieved remarkable growth and revenue generation, it's important to consider the sustainability of such growth. Rapid expansion can sometimes lead to challenges in maintaining the quality of the game and the experience for players and fans.

Securing Opportunity: Creativity, Inside Assets, and an Open-Minded Approach

Kim and Mauborgne identify three crucial enablers that play a significant role in helping organizations realize nondisruptive opportunities: creative thinking, internal resources and abilities, and a "could" rather than a "should" mindset. They highlight that a company's capacity to effectively utilize these enablers is essential for navigating the challenges and complexities of creating and capturing a new market.

Resourcefulness, the first enabler, involves creatively leveraging the wide range of knowledge, expertise, assets, and abilities available worldwide, even without directly owning them. Internal assets and abilities, the second enabler, encompass the tangible and intangible resources that a company possesses and can utilize to realize the opportunity. Finally, a "could" mindset promotes an approach to problem-solving that prioritizes exploration and experimentation over rigid adherence to conventional wisdom or best practices.

Kim and Mauborgne emphasize that while all three enablers are essential, their relative importance can vary depending on the specific context and nature of the opportunities being pursued without disruption.

Resourcefulness: Leveraging External Knowledge and Skills for Affordable, High-Quality Nondisruptive Solutions

Kim and Mauborgne emphasize the importance of resourcefulness, which they define as the ability to leverage external knowledge, expertise, assets, and abilities to realize nondisruptive possibilities that are both cost-effective and highly valuable. It involves looking beyond the confines of one's own organization and creatively drawing from the abundance of resources available globally.

The authors highlight several key aspects of being resourceful:

• Information Search and Knowledge Acquisition: Companies can leverage online resources, databases, and other publicly available information to gain valuable insights and expertise on various topics relevant to implementing their nondisruptive innovations. For example, Daniel Belquer, a sound engineer at Not Impossible, used online resources to research scientific studies on vibration and auditory function—expertise outside his specific skillset—to inform the development of Music: Not Impossible.

• Cross-Industry Inspiration and Analogous Problem-Solving: Nondisruptive creators often draw inspiration from other industries, domains, or historical precedents to find creative solutions for their challenges. Examples include Kickstarter's inspiration from the historical crowdfunding of Alexander Pope's translation of the Iliad, Sesame Street's adoption of advertising techniques to engage children, and the video game sector's use of traditional sports models for e-sports leagues and events.

• Strategic Partnerships and Collaborations: Resourcefulness also involves forming partnerships with individuals or organizations possessing complementary expertise, technologies, or resources. Prodigy Finance, for example, partnered with universities to access their data on graduates' career outcomes to refine their risk assessment model, and Square used Apple's iPhone technology for its Square Reader without needing to develop its own hardware.

• Uncovering and Leveraging Existing Social Capital: Resourceful companies tap into existing social norms, trust, and community bonds to bring their nondisruptive innovations to life. Grameen Bank, for example, leveraged the strong social fabric of rural villages in Bangladesh to ensure loan repayment and accountability, while Compte-Nickel collaborated with tobacconists and media outlets, trusted institutions in French communities, to provide their portable banking service to the unbanked.

The authors argue that by embracing resourcefulness, companies can overcome resource constraints, speed up their efforts to innovate, and create high-impact solutions that are significantly more affordable. They emphasize that resourcefulness isn't simply about using existing resources but about finding creative ways to access and leverage the abundance of knowledge, talent, and capabilities that exist outside a company's immediate boundaries.

Practical Tips

• Utilize open-source data analysis tools to conduct your own mini-research projects on topics that intrigue you. For instance, if you're interested in consumer behavior, you might use Google Trends to analyze search patterns or tap into datasets available through government websites or institutions like the World Bank. With basic tutorials available online, you can learn to interpret this data to understand broader trends that could inform your personal or professional decisions.
• Engage in "Industry Immersion Days" to gain fresh perspectives. Once a month, choose an industry or field vastly different from your own and spend the day learning about it. This could involve visiting businesses, attending a lecture, or participating in an industry-related community event. Afterward, reflect on what you've learned and identify one or two concepts that could be translated into your own work or personal projects. For instance, after attending a workshop on urban gardening, you might apply the principles of sustainable growth to your own financial or career planning.
• Identify your strengths and weaknesses to seek out complementary partners. Start by making a list of your skills and resources, then note where you're lacking. For example, if you're great at product development but struggle with marketing, look for a partner who excels in that area. This could be as simple as reaching out to a marketing-savvy friend or joining online communities where you can find potential collaborators.
• You can leverage local online community groups to test your innovative ideas by sharing them and asking for feedback. Start by joining Facebook groups, Nextdoor communities, or local subreddit forums that align with your innovation's target audience. Share your idea in a post, framing it as a community-driven project, and ask for honest feedback and suggestions. This approach utilizes the trust and camaraderie within these groups to gain valuable insights and potentially find early adopters.
• Implement a 'frugal innovation challenge' within your company or with a group of entrepreneurial friends where you compete to create the most cost-effective solution to a common problem. Set a clear problem statement and a tight budget, and use only the resources readily available to you. This could be anything from designing a low-cost marketing campaign using free tools to creating a prototype of a product using recycled materials. The challenge will foster a culture of resourcefulness and highlight the potential for high-impact solutions that don't require significant investment.