Innovative Solutions

Synopsis

Why do so many great companies fail? "Disruption." What is Disruption? Inspired by the work of author Clayton Christensen, we'll explain disruptive technology and "The Innovator's Dilemma," how to use innovative solutions to avoid disruption, how to customize our Innovative Solutions presentation template with the top innovative tools to get you started, and if you read until the end, we'll explain how a company like Zara, the world's most successful clothing retailer, could use these tools to adapt to governments that want to end fast fashion.

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What makes something "disruptive"?[/title]

Two words explain why so many great companies get beaten by newcomers even though they're managed efficiently, focused on productivity, and generate solid revenues: disruptive technology. Fun fact - Clayton Christenson originally coined the buzzword "disruptive tech" as "that which helps newcomers overtake an incumbent's market share."

There are two types of technology: sustaining technology and disruptive technology. Before the personal computer, there was the "mini-computer" - a huge unit that was "mini" compared to an original computer. The creators of these computers would, year after year, develop faster mini computers to hold more memory because managers and developers had profit incentives to focus on sustaining technology.

What happened? They were overtaken by upstarts who created the "personal" computer, a product consumers wanted, eventually turning Apple and Microsoft into the world's first $3 trillion dollar market cap companies. So how do you avoid being overtaken— or overtake— your competitors with disruptive technology? We'll review some of the top innovative solutions you can use, like the SCAMPER Ideation Map, Concept Screening, Innovation Ambition Matrix, Discovery-Driven Planning, Organizational Continuum, and much more available to download as part of our Innovative Solutions presentation template.

Tool highlights

First up is the SCAMPER Ideation map. To develop a disruptive concept, it first must be envisioned. The brainstorming tool SCAMPER helps with this. This sticky-note style visualization simulates how a physical brainstorm in the office might feel. Answer the questions under each bucket to form your ideas, and drag the stickynotes to rearrange them across categories as you ideate. (Slide 6)

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Innovation ambition matrix

Once there's a vision for what to create, that's when an Innovation Ambition Matrix comes in. This matrix tracks investments from "core" to "transformational" technologies in order to determine the right resource allocation for each. "Core" is the sustaining revenue stream technologies, while adjacent technologies build off core technologies and test the water of new markets. Transformational technologies are completely future-focused. The Y axis covers if the technology is based in existing or new markets, and the X axis covers whether existing products or new products will be used to win the market. On the right, a pie chart is used to highlight how much resources to allocate to each and the projected or actual ROI. (Slide 11)

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70-20-10 rule

How do you know how much to invest in each category? Use the 70-20-10 rule. A safe allocation dedicates 70% of resources to core technologies, 20% to adjacent, and 10% to transformational innovation to test the waters. Think about Meta and their $10 billion allocation to VR and the metaverse through metaverse labs. With $71 billion in expenses in 2021, that accounts for about a 14% allocation. (Slide 12)

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Discovery driven planning

R&D and marketing teams like to prove ideas based on user data, but you can't "prove" a market that's currently untapped. The thing with disruptive technology is no one knows if its going to work. Even Mark Zuckerberg doesn't know if the metaverse will actually happen

"Discovery" driven planning is a tool used to carefully tread that water without burning out. This table organizes the elements of any growth plans across the key strategies to employ, the assumptions they'll operate on, the horizon, ( either near, mid, or long-term) to manage current and future growth opportunities, the level of confidence in the plan, and how critical the assumptions are to the goal. Add these up to get an overall score, with a score over 15 top priority to move forward. Then, change and modify the plan as you go based on trial and error. It's not that you can't come up with the right idea without discovery-driven planning. Rather, the goal is to not run out of resources before you do. (Slide 16)

Questions and answers

Why might a traditional hierarchy work best for a startup in terms of streamlining resources and workflows?

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A traditional hierarchy might work best for a startup in terms of streamlining resources and workflows because it provides a clear structure and chain of command. This can help in defining roles and responsibilities, ensuring that tasks are completed efficiently. It can also help in decision-making, as the hierarchy provides a clear path for decisions to be escalated and approved. Furthermore, a traditional hierarchy can help in resource allocation, as it can clearly define who is responsible for what resources. This can help in avoiding confusion and ensuring that resources are used efficiently.

How can a larger company manage the clash between disruptive and sustaining teams?

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A larger company can manage the clash between disruptive and sustaining teams by creating a spin-off team with separate goals. This provides the autonomy both teams need to survive. Commingling a disruptive team into a sustaining team typically won't work because the two competing goals will clash and one will overshadow the other. Therefore, it's much better to create a separate team for disruptive innovation.

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Organization continuum

A big part of the innovator's dilemma is the decision on how to structure a company to address innovation, which should be based on the organization's unique resources, processes, and values, or RPV. These three elements determine how and what decisions the company makes. As Christenson says, early-stage startups depend on their initial resources, like founders. Meanwhile, an established company relies more on process and values, since they hire and replace thousands of people every year.

Questions and answers

How does Zara's waste management framework align with sustainable fashion initiatives?

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Zara's waste management framework aligns with sustainable fashion initiatives in several ways. Firstly, Zara has a repair and reuse program where customers can drop off used garments in store. This initiative not only reduces waste but also promotes the reuse of clothing. Secondly, Zara is planning to use 50% recycled material in all its new products after 2022. This will significantly reduce the demand for new raw materials, thereby reducing environmental impact. Lastly, Zara is considering the use of AI for calculating more accurate product volumes for delivery, which could potentially reduce waste from overproduction.

What are common challenges Zara might face in applying this waste management framework and how can they be overcome?

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Some challenges Zara might face include: adapting its business model to accommodate higher costs associated with using recycled materials, expanding its repair and reuse program, and implementing AI for more accurate product volume calculations. These challenges can be overcome by allocating more budget to these initiatives, modifying its e-commerce platform to offer resale directly, and charging more for products made with a higher percentage of recycled materials to maintain profit margins.

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This Organizational Continuum chart helps plot team hierarchy to help manage innovation. Since innovation is not a one size fits all solution, every company's RPV structure is different. As a larger company, commingling a disruptive team into a sustaining team typically won't work because the two competing goals will clash and one will overshadow the other. In that case, it's much better to create a spin-off team with separate goals to provide the autonomy both need to survive. For a startup, a traditional hierarchy might work best to streamline resources and workflows. (Slide 23)

Questions and answers

What are the challenges Zara might face in creating a great resale experience and how can they overcome them?

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Zara might face several challenges in creating a great resale experience. Firstly, convincing customers to buy less and pay more could be a significant hurdle, as fast fashion consumers typically prioritize low cost and convenience. Secondly, Zara would need to ensure the quality and condition of resold items to maintain their brand reputation. Lastly, logistical challenges such as managing inventory and facilitating transactions could also pose difficulties. To overcome these challenges, Zara could invest in quality control measures, develop an efficient resale system, and educate consumers about the benefits of sustainable fashion.

How can companies convince customers to buy less and pay more?

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Companies can convince customers to buy less and pay more by focusing on enhancing the user experience and providing high-quality products. This can be achieved by investing in product development to ensure superior quality, offering excellent customer service, and creating a unique and enjoyable shopping experience. Additionally, companies can also emphasize the value and benefits of their products, and how they justify the higher price. It's also important to communicate the company's values and how they align with those of the customers, such as sustainability efforts, ethical sourcing, etc.

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Case study: Zara

So how could a company like Zara use these tools to innovate given the EU's new rules that force fast fashion retailers to change their business model by 2030? Given this horizon, and the criticality of the EU as a market for Zara, it will need to update its organization, product, and delivery practices.

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First, Zara will need to brainstorm how to eliminate or reverse its waste problem. It already has a repair and reuse program to drop off used garments in store, so it can dedicate more budget to grow this initiative, and maybe even modify its e-commerce storefront to offer resale directly. For delivery, it could adopt AI to calculate more accurate product volumes. For product, now that it will aim for 50% recycled material in all its new products after 2022, it may need to adapt and modify its business model to charge more for a higher margin.

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The key here is that Christensen says the innovator's dilemma is not actually a technological challenge, but a transition point where technology satisfies enough that it becomes a marketing challenge. Think about why fast fashion overtook high-end retailers to begin with: consumers wanted convenience, reliability, and low cost. Once product performance is good enough, the user experience dominates. If Zara can create a great resale experience, it could stave off the competition and regulators — so long as it can convince customers to buy less and pay more. *It will be a tough needle to thread.*

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Conclusion

Remember, you can download our Innovative Solutions template for these tools and more slides on Industry Attractiveness, Context Map Canvas, R&D Allocation, Market Adoption Curve, Project Margin Projection, Demand and Performance, plus many more to save time and hours of work.