To round out their discussion of innovation, the authors of Seeing What’s Next tackle the concept of overseas expansion. They use the theoretical model of the “wheel of disruption” to address the cyclical nature of innovation and how it occurs. They also illuminate factors that encourage the “wheel,” creating a “big picture” tool for innovators to understand this process and plan their attack.
The “wheel of disruption” is a cyclical system, which progresses through the following steps:
- Firms establish disruptive footholds
- Growth occurs
- Growth stalls
- Internal disruptive ideas are squashed
- Managers leave/entrepreneurs coalesce
- New businesses form
Silicon Valley is a particularly strong example of the “wheel” in action in the United States. Historically, start-ups in this area experience exponential growth, hit a wall in innovation, lose critical talent in the process, and the talent creates new start-up opportunities elsewhere. The cycle continuously repeats.
In looking at Silicon Valley (and other similar examples), we can identify 6 factors that encourage this process:
- Strong market for talent – increases flexibility, mobility, and risk-taking.
- High-capital markets – sufficient financial resources enable firms to grow and target disruptions.
- Unconstrained product markets – enables motivation and ability.
- Strong supporting infrastructure – enable training, education, market research, verification and accreditation services to improve innovation.
- Vibrant industry dynamics – strong interactions and competition to spur new business.
- Strong research and development – protects intellectual property, while encouraging research to allow technology to be applied to new markets.
Developing countries often lack many of these features, but innovating there is not impossible. By “leaping downwards,” established companies can target nonconsumers in developing countries through the formation of local disruptive firms. They can do so by harnessing their established resources, processes and values, and applying them to these new markets. This type of innovation not only improves the microeconomic climate in developing countries (which leads to a healthier macroeconomic system), but also brings valuable services to populations previously ignored. These populations are often more flexible and accepting of change, since they do not have preconceived notions of quality or processes. The social impact of this type of innovation is strong, and helps bridge the gaps found within the globalization process.
While many entrepreneurs in the developed world may never encounter the opportunity to develop innovations overseas, it is important to remember that these markets exist. In fact, more and more innovators are turning to initiatives overseas when expanding their reach, affording them more innovative opportunities, while improving the lives of individuals in developing countries. By harnessing talent, resources, and research, ventures (large or small) can successfully innovate within relatively unconstrained product markets overseas, thereby improving their product’s reach, while positively contributing to the wave of globalization that is our future.
Source: Christensen, C.M., Anthony, S.D., & Roth, E.A. (2004). Seeing What’s Next: Using the Theories of Innovation to Predict Industry Change. Boston, MA: Harvard Business School Publishing Company