Simon Wild

12 June 2014 — I wrote an article last month about how we need the next disruptive innovation in the property industry to drive us forward, and I referenced a book that I love, The Innovator’s Dilemma, but a recent article from the Harvard Business Review blog caught be eye, it was called “In Defence of Routine Innovation”. Uh oh! Is my ego tainting my view of what is needed? Everyone loves an iconoclast, but do we need them?

“Disruptive innovation – generally defined as innovation that fundamentally transforms the way value gets created and distributed in an industry – has the promise to catapult start-ups into multi-billion-dollar enterprises and topple seemingly untouchable giants, all at the same time.”

Oh yeah, give me some of that – topple untouchable giants, multi-million dollar enterprises, love it, where do I sign up?

“Yet all the excitement about disruptive innovation has blinded us to one simple but irrefutable economic fact: the vast majority of profit from innovation does not come from the initial disruption; it comes from the stream of routine, or sustaining, innovations that accumulate for years (sometimes decades) afterward. An innovation strategy has to include both.”

Damn, routine? That doesn’t sound so interesting.

The article gives an example of “every innovation pundit’s favourite company to criticise today: Microsoft.

“The company has its origins as a disruptor. But for much of its history, Microsoft has been an incredible sustainer. Is Microsoft’s growth slowing? Absolutely… but how many companies in corporate history have earned $325 billion over three decades?

“Then there’s Apple. The iPhone has got to be the single most successful consumer electronics product in history.”

But the article states there was no big disruption.

“The iPhone did not change the value proposition of the business; it did not create a new market or enter an existing market with a low-end alternative (a classic disruption strategy). The idea behind the App Store – allowing and making it easy to install third-party software on a device – has been around since the beginning of the computer industry. The iPhone has been extraordinarily successful, but it’s hard to argue that it was disruptive.”

Oh no, I used the iPhone as an example of being a disruptive technology and it wasn’t. I hate being wrong.

“My intention is not to diminish or dismiss disruption. But there is far more to the innovation game than disruption. If you disrupt and can’t sustain, you don’t win”.

Okay, now we are getting to the crux of it. If you disrupt and can’t sustain then you don’t win. Now the winning in the sustainability game is a societal level winning, not an individual or business winning.

So if the win is to disrupt and then sustain innovation then certainly the Green Building Council of Australia is winning. They have sustained routine innovation in the property industry over the last 10 years. But the question remains – would they have sustained this if they had stayed focused on that top 25 per cent, the disruptors of the market?

“Once a company is established, innovation strategy means understanding how to leverage distinctive existing strengths to generate value and capture value,” the article states. “It means understanding how your repertoire of R&D skills, intellectual property, operating capabilities, relationships, distribution channels, and brand can protect and extend the value from innovation.”

It seems to me that the GBCA have nailed this. They are leveraging their relationships, distribution channels and brand to generate and capture value – remembering that in the regard of a sustainable future the value being generated is the continued improvement on the sustainability performance of the industry.

“It certainly does not mean allowing your existing resources to drag you into oblivion as the competitive landscape changes. But neither does it mean blindly observing the often-repeated mantra: “You should eat your own lunch before someone else does.”

Sometimes, your own lunch is pretty good and the right strategy may be to protect and extend it as long as possible.” So maybe I was wrong with the iPhone analogy, maybe we need sustained and disruptive innovation, maybe the GBCA are looking at how they can provide both! Maybe the sustained routine innovation of the GBCA is the better option for the industry? Maybe I was wrong!

I will leave you with the final comment in the HBR article:

“A company that is a great sustaining innovator has no reason to be ashamed.”

Simon Wild is chief executive of Cundall.