As companies increasingly put innovation at the top of their agendas, our firm benefits from direct access to global Deloitte thought leadership to help their clients remain competitive.

One example can be found in "The Innovator's Solution: Creating and Sustaining Successful Growth", by Michael E. Raynor, a Director in Deloitte Research (the firm's thought leadership arm) and Professor Clayton Christensen of Harvard Business School. The globally acclaimed book reveals some surprising truths about innovation, focusing on the phenomenon of 'disruptive innovation'.

Well established companies that owe their accomplishments to (sustaining) innovations are at risk of being trapped by the success of "business as usual". The size and power of an established company may make the development of innovative ideas a very cumbersome and risky process.

Meanwhile, a start-up or carve-out is free to focus on a new idea, develop it successfully and initiate a new business model that cannibalises market share, disrupting the leading position of an incumbent. This has happened many times. Typically, the new product will be simpler, more convenient and cheaper than existing products. It will often target new customers, including those whom established companies saw as unprofitable.

Given such marketplace disruptions, businesses need to tailor their strategies appropriately for a dynamic world and organise themselves to leverage innovation successfully. The theory of disruptive innovation has proven to be a great tool to generate strategic awareness. Deloitte's multidisciplinary approach differentiates itself in its capabilities for supporting the translation of this awareness into executable strategies.

Disruptive Leadership

For an established company, innovation usually occurs in tiny steps as minor improvements of existing products or services.

Meanwhile in a garage somewhere, somebody is busy cooking a new idea into a product or service that could result in a “disruptive innovation”. Typically, the new product will be simpler, more convenient and cheaper than existing products. It will often target new customers, such as those whom established companies have seen as unprofitable.

Take the rise of low-cost airlines. They have prospered through offering basic no-frills service and cheap prices, often using secondary airports. Such carriers as Ryan Air and Virgin were the first to exploit easy Internet ticket booking. They tapped into a budget traveller market that had been largely ignored by existing carriers. And they disrupted the airline industry. Major airlines have been forced to adopt many of the methods of these upstarts.

It turns out that disruptive innovation makes companies a lot richer than everyday innovation. So incumbents would like to do some disrupting themselves. However, this is not so easy to achieve. Managers tend to promote ideas that are “career safe” and for which data already exists. Seeking input from existing customers they are deaf to new potential markets.

Disruptive solution
How, then, can established firms promote highly profitable disruptive innovation? That’s the subject of "The Innovator's Solution”, co-written by business guru Clayton Christensen and Michael Raynor of Deloitte Research.

Many of the book’s ideas contribute to the positioning of our consultant’s innovation practice. This thought leadership is an effective way to open a strategic discussion with CEOs. Consulting’s Koen De Staercke talks for example, about “less for less”, the low-cost airline approach. It challenges the prevailing habit of building ever-fancier, expensive products with features consumers may not necessarily want. Instead, a company can disrupt this pattern by offering a simpler, cheaper product that hopefully becomes a big hit with customers.

While this innovation competency is already strongly developed at Deloitte practices elsewhere, it is relatively new in Belgium. For example, one of our Consulting teams is currently working on an innovation project for Coca-Cola Belgium. It is the first such project in our country. As these ideas take hold, get ready for more disruption.