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Managing Disruptive Challenges Through Innovation

The business of innovation

With an historic transition underway to an information-based economy, organizations are increasingly investing in innovation. While disruptions across industries have happened for a long time, the recent capability to quickly leverage technology that launches disruptive movements brings a significant increase of such occurrences. At every opportunity, start-ups who experience disruptions can now develop and release expedient pioneering solutions. Strategists at legacy businesses face the challenge to keep up with industry transformation by developing new solutions at a break neck pace and adopting new business models.

Strategies of large organizations who meet this challenge:

  1. Expanding R&D capability: Typically involves an increase in research facilities by adding new equipment and skills or by building a new department within the R&D organization. This approach faces the challenge of innovating without bringing fresh talent into R&D.
  2. Buying innovation: Legacy companies have begun to purchase innovative companies with products that outmatch their own. While acquisition is a good way to fill an innovative deficit, acquisition is fraught with the challenge to maintain the innovative spirit of the acquired company and to avoid burdening the acquired company with non-value added processes.
  3. Establishing independent innovation centers: Companies increasingly create small independent groups that offer a culture of innovation since they are unsaddled by the practices of the larger corporation.

(I will offer some examples of such centers later in this post.)

Providing an environment for team building in an independent innovation center is an important factor in improving chances for success. For example, DotLoop is a company who operated solely out of Cincinnati. When they transferred a segment of operations to Silicon Valley, founder, Austin Allison stated, "The culture in Cincinnati just isn't ideal for an entrepreneur". While he clarified the intent of his statements, his comment reflects several other companies who are building a presence in the Silicon Valley.

Examples of companies building innovation centers:

  1. GE (General Electric): As a conglomerate, GE has R&D facilities tied to individual business units. The increasing use of software to change business models and the ability to develop a common set of patterns can bring huge improvements to large businesses. The commonality of solution components has GE investing in a software and analytics center at San Ramon, California. GE is faced with integrating the needs of a diverse organization to develop innovative solutions and the San Ramon facility is somewhat disconnected from the heart of Silicon Valley. Time will tell if GE will be successful in this initiative.
  2. Wal-Mart: The retail industry is facing unprecedented challenges from companies like Amazon and EBay. Customers want to purchase a wide variety of goods from home or their mobile device. To counter this challenge with innovative solutions, Wal-Mart launched a team known as Wal-Mart Labs in the Silicon Valley. To augment their strengths, Wal-Mart acquired a string of early stage startups. The challenge that Wal-Mart faces is to combine these acquisitions to develop cohesive solutions that can fundamentally change commerce.
  3. NTT (Nippon Telephone and Telegraph): While we are familiar with large US based companies, few of us know about conglomerates in Japan outside the automotive industry. After Samsung and Apple, NTT has the highest revenue in the world among technology companies and is made up of diverse divisions. With the acquisition of Dimension Data and OpSource, NTT has accumulated a strong portfolio of cloud solutions. In order to bring together innovative solutions, NTT announced last April the formation of NTT Innovation Institute Inc. based in San Mateo. Though still in start-up mode, the support from their corporate arm will make this institute worth watching.

Apple experienced a string of losses in the 90's that were staunched by Steve Jobs who returned to lead Apple back to a dominant position in the tech sector with innovative products. Innovation is increasingly viewed as a major component of a business strategy used to adjust to rapid change. The manner in which companies meet the challenge of rapid change depends on their cultures but incorporating strategies like those mentioned above will define companies who succeed and companies who fail.

This post was first published on Robustcloud.com. Republished with permission.

More Stories By Larry Carvalho

Larry Carvalho runs Robust Cloud LLC, an advisory services company helping various ecosystem players develop a strategy to take advantage of cloud computing. As the 2010-12 Instructor of Cloud Expo's popular Cloud Computing Bootcamp, he has already led the bootcamp in New York, Silicon Valley, and Prague, receiving strong positive feedback from attendees about the value gained at these events. Carvalho has facilitated all-day sessions at customer locations to set a clear roadmap and gain consensus among attendees on strategy and product direction. He has participated in multiple discussion panels focused on cloud computing trends at information technology events, and he has delivered all-day cloud computing training to customers in conjunction with CloudCamps. To date, his role has taken him to clients in three continents.

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