The Idea in Brief
You’re facing a major disruption in your market—a breakthrough technology that could reshape your entire business. Should you treat the innovation as a threat, aggressively marshaling resources to protect your existing markets? Or should you treat it as an opportunity, cautiously experimenting with new business models that take advantage of the breakthrough?
The answer is—surprisingly—both. Framing a disruptive technology as either threat or opportunity is natural—but dangerous. Why? Each position has pros and cons.
Framing an innovation as only a threat pumps up the adrenaline needed to generate energy, funding, and other resources. But managers who feel too threatened may overreact, desperately defending existing business models and resisting attempts to integrate the innovation.
Framing the innovation as only an opportunity fosters creative thinking and openness to new business models. But it doesn’t convey urgency. Overfocused on existing businesses, managers may allocate insufficient resources for experimentation with the innovation. Starved, the experiment fails.
The solution? Frame the innovation differently at different stages of its evolution. When you first identify the breakthrough, frame it as a threat, to ensure funding and other resources. Later, as you explore new markets and business models, frame it as an opportunity to inspire creativity and experimentation.
The Idea in Practice
Beyond Framing
Recognizing the importance of framing is only the first step. You also have to make structural and process changes so your company can flexibly shift between frames as circumstances evolve. These guidelines can help:
- Separate the new venture from the core business. Free-standing ventures need autonomy to allocate resources to innovation and achieve higher market penetration.
- Fund in stages. Control the flow of investment in the new venture.
Example:
When a new chip-technology application threatened to disrupt Teradyne’s core business (manufacture of semiconductor test equipment), the CEO established a separate unit to develop the new technology. He committed additional money only after unit leaders found and developed new markets for the technology.
- Cultivate outside perspectives. Staff the new unit’s leadership ranks with people who have experience outside the core organization. They’ll stay focused on the opportunity promised by the new venture—rather than the threat to the core business.
- Appoint an integrator. Integrators manage the tensions between the parent and the new venture, have high credibility in both organizations, maintain an active sense of threat in the parent, and protect the new organization.
- Modularize integration. Don’t strive too early for synergy between the parent and new business—let the technology improve first. Then—as you identify increasing opportunities to leverage resources between both businesses—retain the work processes unique to each entity. For example, the New York Times Company has used its on-line sales force in conjunction with its print sales force to assemble ad bundles for leading customers like Bloomingdale’s.
- Consider acquisitions. Acquiring an already successful company in the new market environment can stave off defensiveness in the parent organization. For example, Knight Ridder and the Tribune Company bought on-line recruitment sites Careerbuilder and Headhunter.net.
We all confront unexpected changes throughout our lives, and our responses are often determined by how we perceive those changes. If we see a change as a threat, we tend to react defensively, taking immediate, aggressive action to protect ourselves. If, however, we see the change as an opportunity, we tend to be more deliberate and reasoned in our response. We may postpone action, continuing in our established routines as we wait to see how the situation plays out.
