This document discusses innovation in the age of disruption and black swan events. It argues that while foresight and scenario planning are important for guiding long-term strategy, organizations must also be agile and able to change pathways in response to new events. The definition of innovation is broadened to include value creation through new products, services, and business models, not just R&D and technology. Examples are provided of companies that exemplify different types of innovation, from startups to large firms pursuing incremental and disruptive innovation.

1. December 2011
industry insights
Innovating Innovation:
Innovation in the age of
disruption and Black swans
23

2. December 2011
industry insights
In an era where change occurs in the blink of an eye, between using the foresight information to resulting in a positive impact to the economy,
investments into foresight and scenarios planning drive long term strategy yet be sensitive to the business, public service delivery system, social
are important to guide organizations develop emergence and impact of disruptive innovations well-being or the environment”.
strategies for future investments. However equally and black swans at the same time. Organizations
important are how these strategies are translated need to be dexterous enough to deviate from With so many de nitions oating around, it is
into action and the willingness of the organization the charted course and redirect resources to understandable that there is much confusion
to change pathways with the emergence of new more valuable projects. Secondly, organizations on what is innovation exactly. e OECD has
events or circumstances. should explore more e ective strategies towards also de ned innovation in four areas - product
creating innovations; this may range from strategic innovation, process innovation (a markedly
In late July 2011, oodwaters drowned a third of collaborations with external parties or tapping improved production or delivery method),
ailand causing billions of dollars in damage, on channels for open innovation. Organizations marketing innovation (involves a new marketing
pu ing 14,000 factories underwater and nearly would doubly bene t from such activities from a method involving signi cant changes in product
700,000 people temporarily out of work. Toyota, nancial and risk management perspective. On design or packaging, product placement, promotion
Honda and Western Digital are only a few of the the upside, organizations need to explore how the or pricing) and organizational innovation (involves
giants that had to suspend their operations in disruptive situations may be used to their own introducing a new organizational method in the
ailand. How would any foresight or scenarios advantage. In short we need to look at how we de ne rm’s business practices, workplace organization
planning session have predicted this disaster? If innovation and more importantly, how we approach or external relations). According to Figure B,
this were your predicament, how agile is your innovation. Malaysian companies are already practicing these
organization in exploring new strategies and how various types of innovation; however the majority
well would you be able to implement them? focused much more on incremental innovation with
a sma ering few that practiced radical innovation.
In the 2010 Malaysian Innovation Climate Survey
Report, which collated views from employees in In the era of disruptive innovation and black swans,
organizations, many Malaysians viewed innovation organizations need to broaden the de nition of
Clayton Christensen in his book e Innovator’s as strongly related to creativity, R&D and technology, innovation and not limit themselves to R&D, patents
Dilemma made famous the concept of disruptive and least associated it with risk and processes as and technology, but to focus more on value creation.
innovation, where the introduction of a new shown in Figure A. In fact many current incentives We believe that innovation should be de ned as “the
24 technology or business model disrupts the and innovation initiatives are strongly tied to R&D, introduction of new products, services, processes,
traditional market practices. is is the space where science and technology and less on processes, technologies, business models or management
CDs replaced the 3-inch oppy disk drives but are services and business models. practices that have created signi cant value
now on the endangered list themselves due to the
emergence of mega-thumb drives/ ash drives. Figure

3. A Elements