The Innovation Show

You know how irritating it can be to get stuck behind that person who clearly cannot execute a 3-point turn!?! While that minor inconvenience may cost you valuable minutes and slightly elevate your blood pressure, it can’t be as bad as the world’s most embarrassing (and costly) 3-point turn, one that brought the world to a standstill.

On the morning of 23rd March, 2021, Ever Given, one of the largest container ships in the world ended up wedged across the Suez Canal with its bow and stern stuck in the canal banks, blocking all traffic until it could be freed. One of the world’s oldest running shipping journals, Lloyd’s List estimated each hour of the blockage cost $400 million. Each day would disrupt an additional $9 billion worth of goods, not to mention the plethora of knock-on effects including delays of vital medical and food supplies as well as those drop-shipped products we bought on Amazon. In addition, crucial materials such as semiconductors impacted manufacturing, which delayed production, which influenced stock prices and market valuations.

There is an important analogy here for organizational flexibility in turbulent times, a lesson that has its roots in disruptive innovation theory.

The Suez Canal runs through Egypt and connects the Mediterranean Sea to the Red Sea. The canal is part of the Silk Road that connects Europe with Asia. Modern container ships like the Ever Given are so massive that global ports and canals have struggled to accommodate them for years. This was a disaster waiting to happen, as is often our folly in business and in life, we wait until there is a crisis before we take action. It was only after the incident that the Egyptian government announced that they will be widening the narrower parts of the canal. Bear in mind that each lost day cost the state-owned Suez Canal Authority a staggering $15 million per day in lost transit fees.

While the obvious connection to organizational disruption is that companies wait until they experience a crisis before they act (if they act at all). Examples include Blackberry’s late response to the iPhone or Kodak’s poor reaction to a digital world even after the 1970’s silver crisis sent a warning shot, but that is not the point of this Thursday Thought.

The Suez Canal obstruction provides a metaphor for how old platforms (the canal in this metaphor) must adapt to new products, services, business models and mental models. We cannot “cram” new tools into old systems. Moreover, the old system is so entrenched in its ways, that even updating the system is not enough, we often need to replace the old system entirely. Doing so involves creative destruction, the decline of the old to make way for the new. This is not something legacy organizations and those who benefit from the status quo do very well, they fight the new and protect the old. Oftentimes, they do this without even knowing this is what they are doing. One of the common ways organizations do this is through “cramming”.

Cramming is a term we discuss on The Innovation Show with Michael B. Horn, who co-authored, “Disrupting Class,  How Disruptive Innovation Will Change the Way the World Learns” with Curtis Johnson and the late Clayton Christensen. Cramming is a term Christensen proposed in his theory of disruptive innovation. It is akin to stuffing a square peg into a round hole. Those readers who have worked in change initiatives will have experienced some variations of cramming when they attempt to introduce a disruptive concept.

When a legacy organization tries to morph a burgeoning product or service with disruptive potential into existing processes, what comes out the other end is rarely disruptive. Rather than embracing an innovative product’s inherently disruptive qualities, an incumbent tries to “cram” the product to fit not only its existing processes and values but most likely its existing business models and mental models. The more successful and established the existing firm’s products and services are, the more difficult it is to break away from cramming.

I empathize with the changemaker who brings the disruptive innovation, as they go from department to department, organizing meeting after meeting seeking organizational buy-in. Ralph Waldo Emerson said,“To be yourself in a world that is constantly trying to make you something else is the greatest accomplishment.”, the same goes for your original disruptive concept. As you bring it to marketing they offer their input, slightly altering the concept to fit their existing marketing models. Next comes sales, who reject some aspects of the product for fear that it will cannibalize existing sales (and the bonus systems that come with those sales). Uh oh, finance is next, the CFO places an impossible timeline on the profitability of the disruption and in doing so places a noose around the embryonic possibility. If it is not profitable in 18 months, they’ll kill it.

In a desperate bid to get sign-off, you agree to adapt to everyone’s suggestion and in doing so, you sign the disruption’s death warrant. Disruptive concepts always take longer than expected in legacy organizations, because of the unfortunate games of Machiavellian games of snakes and ladders.

So what are we left with? The disruptive spirit is drained from the potential disruptive innovation. Because the incumbent sees the potential disruptive innovation as a liability, they neuter its disruptive force and your great idea is but a shadow of its future self. As is all too often the case, the changemaker is disappointed, as is the incumbent organization. If she doesn’t leave to find support to build her product elsewhere sometimes organizations will embrace her idea and nourish it away from the stranglehold of the past until it is ready to challenge the existing organization. There is nothing new here, the great Buckminster Fuller recognized this phenomenon decades ago: