Disruptive (or radical) innovation - as opposed to incremental innovation - refers to a type of innovation that creates new markets and value networks, eventually disrupting existing markets and potentially displacing established players and competition.
The key characteristics of disruptive innovation include
Simpler and more affordable solutions: disruptive innovations are often simpler, more accessible, and more affordable than existing solutions. This is typically made possible by digital technologies and through simplification of the features and functionalities provided.
New market segments and niches: disruptive innovations tend to target new and more focused market segments, which are not well served by the existing products and services.Over time, disruptive innovations gradually capture more customers beyond the initial niche and gain market shares from established players.
New business and revenue models: disruptive innovations are typically supported by new business and revenue models, for example by replacing a one-shot acquisition price with recurring fees and subscription schemes, or by replacing variable commission-based price with fixed price schemes.
For established companies, disruptive innovation is vital for several reasons:
Sustainable growth and market expansion: Embracing disruptive innovation allows established companies to stay relevant, serve new customer needs and expand their customer base. (e.g., new generation of clients) in order to continue to grow.
Competitive advantage and defense against disruption: by being proactive in exploring and adopting disruptive innovations, established companies can maintain a competitive edge. This helps them to stay ahead of newcomers and potential disruptors and protect their market position. By introducing disruptive innovations themselves, established companies can prevent new entrants from gaining a foothold and disrupting their markets.
Innovation culture and talents’ engagement: embracing disruptive innovation fosters a culture of innovation within the company. This can lead to a stronger employee engagement and ability to attract talents.
However, disruptive innovation can be challenging for established companies and is very hard to deliver from inside the company. For several reasons:
Focus on running current business often prevents fresh perspectives and new ideas: It’s (almost) impossible to have the same teams running the current business and disrupting themselves with innovative ideas.
Lack of the skills, resources and mindset required for disruptive innovations: disruptive innovation typically materialize through quick and iterative cycles, which allows to rapidly build, test and scale new solutions. This building approach requires specific competencies and mindsets (including creativity, entrepreneurship, business design and prototyping, risk-taking) which are often rare or absent in established organizations.
Organization and tech-landscape inertia: political frictions, resistance to change, and poorly evolutive IT systems often represent a major obstacle to disruptive innovation. On the opposite, disruptive innovation requires quick decision-making, high willingness to modify the traditional ways of working, rapid integration of new techs and IT solutions.
Risk aversion and reputational concerns: established organizations often shy away from radical changes due to the potential threat to their brands and reputation. A clearly separated, independent and “secured” environment is often required to build and test disruptive innovations.
Venture Building effectively enhances and complements existing structures and setups.
In the age of rapid technological evolution, innovation has become a top-tier priority on every executive's agenda.
A multitude of strategies have emerged in corporate spheres to tap into this wave of innovation:
While each of these avenues holds merit and serves distinct strategic goals, they fall short in catalyzing disruptive innovations that retain value over time.This is where the Venture Studio approach emerges as a game changer.
Unpacking the Venture Building Model
Venture Studios, also termed Startup Studios, operate as independent entities tied to their parent corporations, built to systematically ideate, develop, and bring ventures to fruition. This structure offers several advantages:
1. Execution & theory
Traditional methods like open innovation and incubators excel at ideation but can falter in scaling ventures.
Venture Studios provide an insulated environment, devoid of the day-to-day distractions of the parent corporation. This ensures that emergent ventures aren't stifled by resource allocations biased towards established revenue streams.
2. Talent Acquisition & Retention
Where traditional innovative strategies tend to foster innovation and agility across the whole organisation, required skill set and mindset for nurturing a fledgling venture highly differs from managing established corporate operations.
Venture Studios attract entrepreneurial minds, offering them dynamic projects, fostering a sense of ownership, and ensuring optimal talent application to navigate ventures to profitability.
3. Prioritizing Venture Needs Over Corporate Constraints
Conventional innovation avenues, rooted in core business, often grapple with organizational politics, resistance, and infrastructural limitations.
In contrast, Venture Studios prioritize the needs of the ventures, streamlining decision-making processes, and facilitating adaptive and agile operational practices.
4. Safeguarding Corporate Reputation:
Disruptive innovations often challenge the status quo and may even be at odds with the core business.
Venture Studios act as a shield, allowing disruptive initiatives to operate independently and securely.
The venture building model is proven and more successful than traditional approaches.
We invite you to read the upcoming article that introduces a fresh perspective. As the corporate world faces the challenge of leveraging entrepreneurial energy, the emergence of hybrid start-ups presents a compelling solution (startup leveraging assets from a corporate). Through the fusion of internal strength and external dynamism, this article reveals a transformative path taken by leading companies to strengthen their market position and drive the digital revolution.
Let's delve into one striking example that highlight the transformative potential of disruptive innovation driven by hybrid startups
Revolutionizing Aerospace with Airbus's Hybrid Startup: UP42
Take the case of Airbus, a prominent player in the European aerospace industry. Airbus was already accumulating substantial volumes of high-quality data from satellites. With the democratization of digital platforms, barriers were lowered, granting access to external organizations, as well as enabling Airbus to synergize this data with industry information and partner-generated data. In response, Airbus conceived its hybrid startup, UP42, a platform spanning the industry. The objective was to tap into the latent value concealed within their existing assets. This ingenious move not only generated a fresh revenue stream for Airbus but also for its platform collaborators. Today, UP42 stands as a global provider, extending geospatial data, analytic tools, and applications to a diverse clientele.
Fusion Partners can help you set up the venture building and operate it.
Whether you need help with implementation, operations or both, our solution is ready to drive significant change in your organization's trajectory.
Building the foundations for transformation
Our approach focuses on creating an innovation studio tailored to your organization's specific needs and aspirations.
This journey begins by defining clear objectives, identifying pain points to be solved and categorizing the types of startups likely to respond effectively to these problems.
Our expertise extends to creating investment structures that align with your company's objectives, ensuring a harmonious allocation of resources. Building a committed team is essential. Together, we design decision-making processes that combine agility with a thorough validation mechanism, increasing breakthrough potential. Each step includes clear milestones and deliverables, serving as benchmarks along the innovation journey.
Operating the studio to realize potential
Ready to rewire your projects? Let's talk and explore how we can collaborate.
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