An Enterprise cannot disrupt
One of the main reasons I joined Everbridge back in October 2015 was for the opportunity to learn from building a dedicated innovation lab as a strategic effort.
Coming into it, there were bits and pieces I had done over the years at various times/jobs and there was a lot of theory on how one would build a lean innovation lab within an enterprise to help accelerate innovation without negatively impacting the core enterprise model. This opportunity allowed me to put it all together and convert theory into practical experience.
Let me add to the title of this post – An Enterprises cannot disrupt because of the way its’ structured; and for the same reasons, it also cannot disrupt itself.
Enterprises already have a well defined model when it comes to how they make money:
value proposition, profit formula, key resources and processes that are needed to deliver to their model.
Startups on the other hand, do not known how money will be made, what really is the value proposition, what the profit formula looks like; they must find product-market-fit before they run out of money.
Running a startup with a model that’s suited for enterprises will hinder disruption; running an enterprise with a model that’s suited for startups, will result in chaos.
Usually the revenue/growth for enterprises comes from focusing on “evolutionary” innovation: innovations that are sustaining – whereas startups get their revenue/growth from focusing on “revolutionary” innovation: innovations that are disruptive.
The chart below takes various opportunities and attempts to size the revenue size and also categorize the type of innovation – before you disagree with a “but wait, there are startups that have more revenue that large enterprises”, its important to note that every (successful) startup, does eventually become an enterprise and with that, it’s focus will also likely change.
Since enterprises tend to focus on sustaining innovations, they leave the door wide open for startups to come in after new-growth markets that enterprises are not focused on or come in with a low-end disruption taking away existing customers who are okay with a lower feature product/service that comes with a lower price tag because startups will accept the (much) lower margins.
As the low-end moves out, enterprises go up the chain, focusing even more on their higher-valued accounts (charging higher prices to their most demanding customers) because that’s traditionally where they’ve found the money. As startups continue their low-end disruption moving upwards, always taking away the new lower-end as they get more feature rich; enterprises continue up the chain as well – only to one day find out there isn’t anything left at the top and to take from and the bottom has cleared away. (Disruptive Innovation: Clayton Christensen)
By making innovation a strategic effort and building a startup within the enterprise that goes after revolutionary innovations; it can diffuse and transition revolutionary innovations to evolutionary innovations – in other words, it can disrupt by not disrupting and stopping others from disrupting itself.