Embracing disruptive innovation is essential for monopolies to stay relevant and avoid the fate of becoming obsolete.
Embracing disruptive innovation is essential for monopolies to stay relevant and avoid the fate of becoming obsolete. In this article, we explore the power of disruptive innovation through case studies of Intercorp, Alphabet, and Qantas. We delve into the strategies employed by these companies, including fostering an innovative culture, leveraging cutting-edge technology, and forming strategic partnerships.
Additionally, we examine the rising force of Web3 and its potential to challenge the status quo of centralised companies, presenting both risks and opportunities.
Understanding Disruptive Innovation
Picture a company like Google, presiding over multiple industries with a sizeable market share and an interconnected ecosystem – that's what we call a monopoly. But maintaining a monopoly isn't a static process; it requires constant self-disruption to avoid becoming a historical footnote, much like Nokia. The key to continuous disruption lies in the concept of disruptive innovation. In order to achieve disruptive innovation, I always like to reference Peter Thiel’s horizontal or vertical framework:
To achieve disruptive innovation, vertical progress is needed, so in essence doing something new. Startups, agile and lean, are prime drivers of vertical progress, while large corporations, despite their deep pockets, may struggle to foster innovation. But, it can be done.
For this article, I’ll focus on how corporations can execute disruptive innovation. Let’s take a look at some unusual case studies.
Imagine a company that touches every facet of your life. That's Intercorp for the people of Peru. With humble beginnings as a supermarket chain in 1982, Intercorp has grown to dominate in more than ten sectors including retail, education, banking, insurance, real estate, healthcare, and telecommunications. The breadth of Intercorp's influence is such that a Peruvian could be born at an Intercorp clinic, schooled at an Innova institution, work for an Intercorp company, and retire with assets acquired through Intercorp's services. All these milestones are testament to the company's unwavering commitment to its mission: to create a better future for all Peruvians.
Founded in 2015 as a restructuring of Google, Alphabet reigns as a tech monopoly. With a family of entities ranging from Google to YouTube, Android, Chrome, X, and Verily, Alphabet's vast portfolio serves as a testament to its influence and innovation. This industry giant's success pivots around three elements: disruptive innovation, a relentless focus on user experience, and an unrivalled access to data.
At the heart of Alphabet's innovation is X, popularly known as the moonshot factory. This R&D facility embodies Alphabet's commitment to tackling the world's grandest challenges. X operates autonomously, employing a lean startup approach and setting definitive "kill metrics" for each project to effectively phase out non-performers. And amidst this, Alphabet's mission - to organise the world's information and make it universally accessible and useful - remains the guiding force.
Qantas soars above its competitors as Australia's largest airline, but it's their data-driven innovation that sets them apart. This innovation takes shape in the Qantas Frequent Flyer programme, a customer and partner loyalty scheme that catapults Qantas beyond the realm of standard airline operations. With a membership reaching around 12 million, this program doesn't merely generate substantial revenue, but it also breaks the mould of traditional loyalty programs. Members can earn points through a spectrum of partners, from hospitality to car rentals, which can then be transferred to partners like Amex, Capital One, and Citi. This savvy approach has seen Qantas reap the benefits of a precious commodity in today's digital age - consumer data.
How Corporates Achieve Disruptive Innovation
The key to innovation lies in an organisation's ability to question its mission, purpose, and changing consumer preferences. Encouraging a culture of creative thinking and challenging the status quo allows a business to evolve its product line in ways that sync with its mission. This approach forms a thriving, scalable ecosystem, where every element enhances the whole.
Driving innovation can be inspired through numerous approaches both inside and outside the company confines. Let's look at a few avenues:
- Cultivating an Innovative Atmosphere: Inspire a workspace that emphasises creative thoughts and shuns the fear of failure.
- Committing to R&D and Harnessing Cutting-edge Tech: Enhance current offerings or business verticals based on the incorporation of advanced technologies such as AI, blockchain, AR, and the like. L’Oreal's AR makeup try-on is a fitting illustration.
- Launching Venture Studios: Build disruptive ideas from the ground up through R&D, and then spin them off into independent entities. Alphabet's X offers a classic example.
- Fostering Start-up Partnerships: Large corporations can join forces with startups that are nurturing valuable ideas that align with their growth trajectory, paving the way for potential joint ventures. Unilever's partnership programme is an example of this.
- Incubating via Internal or External Accelerator Programmes: These initiatives allow corporations to collaborate and secure a stake in businesses in their target industries, fuelling mutual growth. Aviva’s alliance with Founders Factory in an external programme exemplifies this.
- Investing in or Acquiring Start-ups: partial or full ownership of start-ups building products that add value to a corporate business. An example includes L’Oreal venture fund Bold.
- Seeking External Proficiency: Corporations often rope in strategy and innovation consultants to offer counsel and delivery on new business prospects. Intercorp's collaboration with IDEO to launch the Innova schools is a case in point.
These methods merely scratch the surface, as there is no cookie cutter approach to innovation.
Web3, a Threat to Monopolies?
Monopolies offer certain advantages like better quality, efficiency, and a conducive environment for innovation. However, they also harbour risks with increased centralisation and control, posing potential consumer hazards as evidenced by Meta's ongoing data breaches.
Nevertheless, a rising force is set to challenge this - the philosophy of Web3. Web3 strives to redistribute power, advocating for a more decentralised society, steering away from the concept of monopolies controlling multiple markets.
This evolution of technology and networks is poised to challenge large monopolies, as we see consumers' behaviours changing and their demand for greater control increasing. Yet, within this threat lies an opportunity. Monopolies can harness Web3 technologies to empower their most crucial asset - their customers. This could take shape through various means, such as data ownership or incentivizing engagement. An example of such adaptation is Meta's new project, a decentralised social networking platform known as "P92", designed to provide users with data ownership and control. It's a brave new initiative, but its success is still up for debate.
Conclusion & Key Learnings
In conclusion, successful disruptive innovation requires understanding purpose, a consumer-first approach, continuous self-disruption, and thinking beyond conventional boundaries. Embracing the potential of Web3 opens doors for businesses to navigate change, unleash their potential, and shape a brighter future for themselves and their customers.
The key learnings from this article include:
- Web3 poses a threat and opportunity for monopolies to empower their audience
- Focus and execution are key in building an ecosystem, not just ideas
- Understanding a business’s purpose is crucial for developing products and entering further industries
- New ventures have to be consumer first, following the lean start-up methodology
- Businesses have to continuously disrupt themselves to stay ahead through a variety of approaches
- Data is one of the most valuable commodities a business can have
- Work with start-ups or external experts
- Think outside the box
This article was inspired through experience and the book "Non-Bullshit Innovation" by David Rowan