Disruptive innovations tend to flourish in new organizations

When an incumbent organization is structured for delivering sustaining innovations to a known customer base, an effective means of pursuing and leveraging strategic innovations is to create a new organization within the value network that is focused on the disruptive innovations that open up that new market.

By embedding independent organizations within an entirely different value network, where they were dependent upon the appropriate set of customers for survival, those managers harnessed the powerful forces of resource dependence.[1]

It will be difficult (and maybe impossible) to simultaneously manage two entirely different business models within a single company.

It seems to be very difficult to manage the peaceful, unambiguous coexistence of two cost structures, and two models for how to make money, within a single company.[2] … establishing independent organizations to pursue disruptive technology seems to be a necessary condition for success.

By retaining sufficient control over the new organization, the incumbent may create a vehicle to reinvent themselves at a later date, if needed.

#organizations #leadership

See also:

  1. The Innovator’s Dilemma – Christensen (1997), ch. 5, 108. The author recounts an example: “manufacturers that had accounted for all of Quantum’s revenue. They determined to leave Quantum and start a new firm to commercialize their idea. Rather than let them leave unencumbered, however, Quantum’s executives financed and retained 80 percent ownership of this spinoff venture, called Plus Development Corporation, and set the company up in different facilities.” Ibid., 104. ↩︎

  2. Ibid., 110–113. ↩︎