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LEADERSHIP

4/03/2013 @ 7:22AM

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Disrupt or Be Disrupted
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How Great Companies Out-Execute AND Out-Innovate Their

Competitors
My colleague Randy Ottinger has a keen eye for business and an
interesting perspective on what hes seen as the best practices of successful
companies. Here he offers his most recent observations of how
organizations are succeeding while keeping pace with the increasing speed
of todays world.
Business disruption has become a hot topic and its not just a passing
trend, its the new normal. Whereas a decade ago business disruption was
the rare exception, it is now a reality that companies face on a regular basis.
The major cause of disruption is the rapid advancement of technology and
globalization, which allows new business models to be introduced at an everincreasing rate and with rapidly declining costs. The truth is, at this very
moment your company is most likely either disrupting other companies or
being disrupted.
One key to surviving in a world of disruption, where the external
environment is changing at lightning speed, is to change the game
internally. This requires accelerating your speed-of-execution as well as
your agility to seize new opportunities. When a company can do both, it goes
from just surviving to thriving. The capability to out-execute and disrupt is
quickly becoming a critical competitive advantage for the 21st century
company.
Although this may seem obvious it is by no means an easy task. The barriers
to accelerating operational execution while at the same time innovating at a
faster and faster rate to disrupt competitors are daunting. Most companies
fail at one or the other. The primary reason for failure is that disruptive
innovation requires a different set of skills than management execution.
The Innovation-to-Execution Cycle

Innovation by its very nature is the domain of entrepreneurs. Entrepreneurs

thrive in an unstructured environment. They shun management structure
because it impedes creativity and slows them down. Instead, they are most
successful in a highly networked world where a free-flow of information
provides the ability to invent, learn, and adjust at a very rapid rate.
Entrepreneurial networks are most often seen in early-stage companies with
innovative founders. As these companies grow, however, they hit a certain
point where they require structure to scale.
Scaling is less about innovation and more about management structure,
systems, and processes. Great managers realize that growth and scaling
require accountability, reliability, and predictability, which cannot be
achieved through an unstructured innovation network. As a result, great
managers build highly structured management hierarchies.
The diagram here shows the natural progression of a company moving from
being high on the ability to innovate with a networked structure (top left
quadrant) to high on the ability to execute with a hierarchical structure
(bottom right quadrant). During this progression the management structure
and systems typically overwhelm the entrepreneurial culture, slowing down
innovation until it dies off.
The impact of the disappearance of innovation is often
imperceptible to leaders since it can be years before it
has any effect on financial performance. In other
words: Innovation leads to growth that continues for a
period of time. Then markets become penetrated,
competitors jump in, and revenues slow down. It is
only at this point that many companies realize they
are at risk due to a lack of continued innovation. And,
by that time, the innovation engine that led to the
companys initial success has often been killed by
increasingly adept management. With the death of
innovation, a company becomes highly susceptible to disruption.
So how does a company execute on todays opportunities while constantly
innovating to avoid or even lead disruption?
Dual Operations: A Disruptors Competitive Advantage
The key is to create a dual-operating structure that combines the best of both
worlds. This is described by my colleague, Dr. John Kotter, in a recent article
published in the Harvard Business Review. In short, a dual-operating
structure allows the management hierarchy to execute on the opportunities
of today without being burdened by the free-flowing nature of an innovation
network. At the same time, an employee innovation network provides an

engine for new innovation that is not limited by the structure of the
management hierarchy. In the Kotter model, the same employees live in
both worlds within the same organization. (The top right quadrant of the
diagram above).
Ultimately, great companies execute and disrupt at the same time. Often
they disrupt themselves. In a previous blog, I discussed how Apple disrupted
itself, which led to accelerated growth and stock price performance. Truly
great companies like Apple, Google, Amazon, and Starbucks constantly find
new ways to become relevant to us and remain an essential part of our lives.
When analyzed closely, you can see that they are simultaneously executing
and innovating.
As a leader, a key to your organizations long-term success is its ability to
balance the management discipline to achieve short-term financial results
with the agility to quickly seize new windows of opportunity. If there is not
enough management in the organization, crucial breakdowns occur in the
day-to-day operations. If there is not enough innovation, changes do not
occur quickly enough, your people can lose their passion, your products can
become outdated and worse, your business can become irrelevant. Great
leaders maintain the balance between achieving results today and innovating
to seize new opportunities in the future.
So if you want to avoid disruption or even lead disruption then you need
to greatly accelerate the way you operate internally to keep pace with a
rapidly changing world.
Randy Ottinger is an Executive Vice President at Kotter
International, a firm that helps leaders accelerate strategy
implementation in their organizations. John Kotter is the chief
innovation officer at Kotter International, and is the Konosuke
Matsushita Professor of Leadership, Emeritus, at Harvard Business
School.
***
For more about how organizations can develop the agility
required to succeed in todays rapidly changing world, read Dr.
Kotters recent article, Accelerate! available from the
Harvard Business Review.
Follow John Kotter:
On Twitter: @KotterIntl
On Facebook: http://www.facebook.com/KotterInternational
On LinkedIn: http://www.linkedin.com/in/johnkotter

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