Innovation driven disruption_Singh_Farid

INNOVATION DRIVEN DISRUPTION
Farid Singh, 15J
17th
September 2015

Innovation Driven Disruption, Singh F. INSEAD
Introduction
The definition of innovation means different things to different people. It can be defined as either
building something completely new, for example innovate to build a new chemical compound, or it
can also be a case where innovation takes advantage of existing innovations and brings them all
together in a unique way.
Either way, in a fast past world like today, innovation in organisations is becoming increasingly
important. Recent history has shown that revenues from traditional core business such as newspaper
advertising or SMS services can drop as fast as 20-30 percent within 2 -3 years. So it is imperative that
organisations carry out some kind of innovation within their own organisational boundaries. In cases
where they don’t, they risk failure or a huge bill for an acquisition. Organisations broadly look at the
following innovation practices
1. Organic innovation development via sub department, innovation labs or visionary top
management
a. Innovate their core business to disrupt their own market, but stay in business
b. Innovate to build complementary business activities
c. Innovate completely out of their area of expertise, usually a case of luck or serial
entrepreneurship
2. Innovation and development as a result of acquisition. Companies will go out and but
innovative companies to fulfil either their own product requirement, or an investment
requirement
For the sake of this study, we try and look at mainly successful attempts at innovation. We look at how
business models affect innovation and how new business models can be used to pivot failed attempts.
We also concentrate at big organisations that try and disrupt their own core businesses. In essence
the stakes are usually high and the learnings from the successes worthy of investigation. What this
study hopes to bring together is a list of good practices and learnings which may help future innovators
in their attempts.
Meteor
Meteor is a large media group based out of Scandinavia. With operations in 29 countries, the most
important countries are still in Scandinavia. With a product portfolio of newspapers, publishing,
multimedia and online services, Meteor is constantly innovating. We look at the innovation activity
from the year 1995. Meteor was a leader in the print classified ad business in Norway. A subscription
based newspaper, the service had been eying the digital market due to customers moving to the digital
medium. Their vision was to go digital, first in Norway and then across the whole of Scandinavian
market. Two thirds of their revenues came from ads, half of these were from classified ads. This puts
the risk associated with not innovating and letting a disrupter acquire market share, in to perspective.
The classified ads business was traditionally cyclical and mainly related to job and real estate sectors.

The main classified ads business, was a business to business to consumer model, which means that
businesses who want to sell houses or recruit people pay the newspaper for advertisements (B2B)
and the newspaper then reaches out to its readers (B2C) to link them to the service providers. The
B2B2C model is unique as it has to be catered for both consumers and businesses.
Early attempt
Meteor realised the need to move into the digital market early on. They owned the local newspaper
and initiated a move in to the online classified market in 1996. The new entity was controlled by a
collection of regional newspapers, but mainly being driven by the newspaper division at Meteor. In
1999 new entrants in the market started with small agile online services in jobs, cars and real estate
classified market. They became the market leaders in the digital classified market and jeopardised the
position that Meteor had built for itself. Meteor used all the marketing power of its media groups, TV
stations, Tabloid business and newspaper to push their first Digital Classified ads service. However,
even with all these measures, the service was not a major success.
A bad defensive game is worse than a bad offensive game
The main reasons for the failure were summarised by Meteor as the newspapers being too defensive
in trying to protect their own position. They were trying to protect revenue streams and did not allow
other Shibsted assets to compete in the business. The new digital venture was controlled by the
advertising department and lacked a fair bit of autonomy, which ultimately lead to it being ineffective
as a new business model.
Rebrand, revive, rejuvenate and dominate
So when the first attempt failed for Meteor, it looked at the problem again. This time however, it
decided on a more aggressive strategy. The business model changed. From being subscription based,
it changed to being a pay per ad service. The price of the ads was kept at a fairly acceptable level and
was not used as a lever to dominate the market. Meteor allowed other assets in the media group to
compete and rebranded the service. This competition for resource allocation, ideas, execution and
customers, from within the group, enabled the newspaper to be more aggressive in their execution.
New organisational strategy was put into place, new management structure was set up and most
importantly, the online classified unit was setup as a completely new entity. In the face of growing
competition, the new entity called WINN, adopted a fairly aggressive stance in the market. It soon
dominated all verticals that Meteor intended getting in to.
Innovate without disrupting the value chain
Instead of moving to a B2C model, and competing with the many brokers, search firms and car
dealerships, the B2B2C model was kept. Rather than competing with the value chain, it complemented
the value chain and did not disrupt the supply. WINN integrated them all, by providing them with an
online platform. There was essentially no disruption to the value chain when the business opened the
digital classified marketplace. The organisation had successfully pivoted the original idea of going
digital and had managed to build a successful B2B2C platform in the Norwegian market.

Business model matters
In 2006, Meteor looked at moving this new found digital success to the second most important market
for the group, Sweden. As a group, Meteor had a big media and online presence in the Swedish market.
However, by 2006, various C2C start-ups, where consumers advertised their offerings directly to other
consumers, had entered the market and were dominating the classified ad business in Sweden. These
C2C players were more agile, smarter and had more traction than the B2B or B2C businesses Meteor
were used to.
However, Meteor still held the technology from WINN and had a major media presence in the market.
Meteor evaluated the market and decided to attempt an acquisition. The player they chose to acquire
was a recent start-up but had gained market share and was one of the leading C2C players in Sweden.
However, the acquisition did not work out. In Meteors’ opinion, the asking price for a start-up was
more than they had evaluated it to be. So Meteor, decided to enter the market on its own. Needless
to say, they underestimated the differences between the B2B2C and C2C market. In a couple of years
they failed to get the traction they needed in the C2C market. Meteor realised that the C2C market
was a double whammy. Because consumers were creating the supply and demand, if they felt
alienated, or uncomfortable with either the supply or demand, Meteor would lose traction at double
the rate. Their B2B and B2C experience had underestimated this particular character of the business
model.
Look at acquisitions for what can be, not what is
Following the failure of organics growth attempts, Meteor went back to an acquisition strategy, and
started talks with the same start-up. However, now by the time the deal closed, the acquisition cost
was double of what the original attempt rejected. So in the end, while Meteor did get to learn a lot
over the two years, the acquisition cost them double in financial terms, but importantly it lost the
close to 2 years in the process, a life time in start-up speak.
In the end, the various successes and failures are integral to the innovation process. Fail fast fail a lot,
but keep moving. Meteor managed to innovate their core business, add value, enter markets and
diversify risk, at a time Facebook and Google were just renting their first offices. It was driven by fear,
survival instinct and surprisingly led by customer behaviour.
Eclipse Digital
Eclipse is a big media group in the Nordic countries, with operations in over 10 countries and is based
in Helsinki. Eclipse has various media assets even outside its stronghold of the Nordic regions.
Innovation was more of an internal organic growth process for Eclipse. Led by Innovation partnership
and development, innovation was handled quite differently from companies that were driven by
target driven development. Innovation was not targeted towards a particular need, but was more
organically sown in to the whole group. To effectively and independently do this, a separate
innovation group was set-up, to work towards fostering innovation, by finding synergies between
different company assets and geographies.

Change how things are done now, waterfall, lean or agile
One of the first things that Eclipse looked at were how things were being done in the organisation.
From a traditional waterfall type work development, where development was carried out in a more
sequential method, favouring robustness rather than quick development, the innovation group
started encouraging Agile and fast development, which enabled multiple modules to be developed
simultaneously and then tweaked according to changing requirements. This enabled better
development, quicker idea integration and minimal investment, as there was optimum resource
usage.
Is the organisation ready for change?
Before making any big changes, the innovation group realised that the organisation had to be ready
from within, to foster change and identified four key areas to look at.
a. Skills: The group encouraged staff, in different areas to look at innovation. They made it
easy by suggesting simple frameworks, like the Oster Walder Business model canvas or
the lean start-up methodology. Staff were encouraged to be proactive in looking at major
worldwide changes and look at ideas in a more systematic way.
b. Culture gap: Steps were taken to move both responsibility and power down the chain.
More staff were empowered with tools, framework and culture was changed from the
grassroots level.
c. Organisation: To really make innovation sustainable in the long term, Eclipse decided to
branch off and build an innovation centric organisation which would run accelerators and
labs, working not towards a short term P&L gain, but more long term impact and value
addition. Innovation teams were introduced in most organisation areas.
d. Governance: The biggest hindrance to innovation is governance. When the top
management don’t buy in to the idea, it becomes difficult to create value as investment
is more challenging. To overcome this, Eclipse worked with the CEO and board directors
to create a protected environment for innovation, to ensure there were no surprises later
on and create a common front that initiated from the grass root level of the organisation.
Training is key
With the above changes, the organisation set a target to train 20% of people in lean product
development. Internal accelerator programs, with radical innovation decisions, a quick Yes or No,
going forward metric was slowly introduced. The organisation had to prove that there was advantage
in internal innovation vs. venture funding. To enable this, 7 or 8 internal accelerator programs were
set up. A few of them were focused on certain market sectors, like Education for example, where in
one accelerator program student and teachers in 5 different countries, were bought together to ideate
over the future of education.
Ventures, mix it up
One of the major innovation forums set up by the organisation were ventures and accelerators.
However, to maximise effectiveness, accelerators were setup with a mixed intake of candidates, with
a commercial backer. For example, a telecommunication giant that worked with Eclipse, had a mix of

Technology professionals, advertising innovators and external innovators on one of the programs. The
mix of candidates in the program had interesting business model insights. The technology
professionals used technology as the lever in their business model, the advertisers used advertising as
a business model element whereas external innovators had a completely different outlook, and
usually came up with the most creative business models. Without a bias or inclination, they were the
most out of the box thinkers.
The accelerator programs varied in size from 100-300 candidates, with 3 months curriculum, training,
8 weeks of experimentation and validation. They normally targeted specific problem areas whenever
possible.
Decide the innovation cause and extraction process
One of the major insights Eclipse worked with, was to not base all innovation KPI on revenue, but
innovation was driven to create value and then extract revenue over a longer run. Business
development was balanced against innovation. Assets that could give an unfair competitive advantage
were leveraged and used.
Grow ventures
Once ventures were picked to proceed to more formal entities, they were provided with strategic
investment, the ideas were protected and risk was hedged by avoiding EBIT centres. Rather than
taking an innovative idea and assigning a profit or loss value to it, the ventures were designed to be
used by multiple products and services, thereby avoiding the go-no go approach and giving time for
ventures to be slowly assimilated in to different assets. Domain experts were introduced and
stakeholders managed. Ideas were often pivoted multiple times. This enabled disruption and
innovation across multiple aspects of the venture. This also enabled a more modular creation, which
could then be moved to different geographies and areas within Eclipse.
Did we say training?
A lot of what Eclipse did with respect to innovation, was driven from within. Their target of training
20% of their workforce, did raise eyebrows. ‘What if you train them and they leave?’ was a question
asked multiple times. ‘What if we don’t train them and they stayed?’ came the reply.
Woking Bros.
Woking Bros. is a traditional global publishing company, which is now transformed and innovated itself
to a major information technology services company. They provide business advisory and regulatory
advisory services to legal, medical, law, financial and tax companies to name a few. Traditionally, this
information would be published in books and publications, or delivered via a subscription model which
generated over 80% of the company’s revenue.

One of the company’s’ main business is to provide regulations and compliance statements, both
generic and specific to certain parameters to various lawyers, medical firms, pharma companies,
auditors and anyone who needs such in depth service.
All starts with the customer
Innovation and the process of disrupting their core business for a 150 year old company started with
customers. While Woking Bros. was a major player in the market, they could not ignore the evolving
customer needs. And while for them, not innovating would not lead to customers leaving them, but it
would seriously compromise the effectiveness of their customers. Evolving digital laws, customer
habits and a real need to make their business dynamic, lead to them moving to digital platforms.
Prepare for innovation
One of the first things that Woking Bros. did to bring about change was to set the stage, to disrupt
without affecting their business to begin with. Capital investment for innovation was provided,
business needs were redefined and identified and a decision to grown both organically and by
acquisitions was taken
In addition, decisions were taken on important innovation elements like product change, market entry
and use of digital technology to make sure over-use of technology did not hold customer adoption
back. Further traditional elements like direct mail marketing were included in the process, keeping in
line with the way clients operated.
Further identification of the customers was carried out as well. Who was buying the service, and what
did they need? How fast did they need it? This meant looking at their customers’ customers.
That business model again
Throughout our look at innovation, the importance of understanding the business model had been
key. From a subscription based print model, Woking Bros. moved to a freemium model. This was
supported with the fact that the user had become savvier and that there were additional sources
available, which could provide a free level of content. As content was freely available, and searchable,
it was very important to be a part of that revolution, rather than be the ones fighting it. The company
also realised that their main sources of revenue would not be generic services, but in-depth and
propriety information and content.
The business model became an onion layer revenue model, with a more targeted multi-layer pricing
structure. Defining this new business model was the most important factor of success..
Freedom of information, fight or flight?
Another interesting phenomenon started happening, which this new business model and digital
competency was being built. The core business realised that the freedom of information flow meant
independent lawyers and doctors and professionals could not communicate easily, and therefore

between themselves share information and expertise. Ideas were being exchanged, associations were
being set-up and an ecosystem was building up, which could undermine Woking Bros’ own services.
But rather than try and stop this ecosystem, Woking Bros. made itself the focal point of the
information exchange. It actively got involved in associations, forums and platforms, thereby
becoming the perceived force, getting feedback and adapting its core businesses response to changing
markets.
Ventura First
Billed as one of the most innovative holiday and Travel Company in Europe, Ventura First has been
innovating modestly, in its market for some time. A big player in the travel and tourism industry, the
company is slightly different as it deals with a sector that is often seasonal, but also price sensitive and
has smaller per transaction profit margins, but many more transactions.
Due to the challenges above, innovation still has a long way to go, and is usually very risk averse.
Incremental innovation
Unlike other companies, Ventura First is forced to innovate incrementally, and as an industry cautious
with change, on many cases, the innovation has had to be simple, effective and discrete. Further this
innovation has had to be limited to parts of the business, and in many cases limited to geographical
regions as well.
What this inadvertently allows for is a very tight risk averse, customer focus development cycle. It also
means that Ventura First, does not have an innovation department, or group, but innovation is driven
more out of operational need and is handled by individual managers.
Not everything works, everywhere
One of the peculiarities of the innovation process is that it is not carried out, or even implemented on
a global scale for Ventura First. Individual managers decide the level, scope and implementation of
ideas and this can be mainly attributed to culture or the variety of it across the various operational
units. This is also down to the fact that implantation of new ideas is a nightmare process due to the
very critical operational environment and complex IT landscape in the organisation.
If you can’t be global, be very good locally
And this is true for innovation. To overcome the restriction of limited opportunities to innovate
globally, Ventura First setup a process by which innovation and disruption was carried out locally, very
effectively and efficiently. Local processes were built from the ground up, and therefore transferring
them was comparatively easier. Cross functional teams worked on the new idea implementation,
keeping global technical resource requirement to a minimal, and this meant there were no major IT
changes in the organisation suddenly.

Small organisational groups, worked locally without big meetings, or brainstorming sessions.
Managers would often take up an idea and as long as it was backed by customer insights, these ideas
would be taken up and worked on.
Once there, make it happen first
Incremental innovation, localised efforts and a very lean method of operation mean that Ventura First
ramp up successes extremely quickly. Due to the very competitive nature of their industry, most
disruption, whether it is digital or process oriented is replicated by individual managers, tailored to
their requirements and released. They make sure in the case of Ventura First, growth and
differentiation are the drivers.
Hush is the word
Being a very competitive industry, that is also very price sensitive, Ventura First has to be very careful
with the way its customers looks at the new ideas it rolls out. If customers find out beforehand that
there are new ideas, routes or travel products and services being worked on, they can choose to wait
to bring their custom to the company, thereby reducing cash flow.
Ventura First makes sure that their advertising and marketing department are the ones that
communicate innovation only when it is ready to be delivered to the customers. When there is nothing
to innovate or disrupt, no advertising effort is made. In addition, Marketing staff are paired with
outside creatives to fully deliver the message of innovation to their customers.
Conclusion
During my research I found every organisation has a different way of disrupting their core business.
If we had to pick a word it would be ‘choice’. Organisations choose to innovate. They have choices,
and these choices are usually driven during every step of the process. A process loosely defined as
a. Choosing to innovate- Why are we innovating? Is it out of necessity now, or a necessity of
the future? Does it need to add value now, or do we want to extract value over time?
b. Choosing the small wins- Driving small changes, with no or low cost of implementation,
mainly revolving around culture and organisational expectations.
c. Choosing to look at the business model- This is what most innovative companies pivot their
disruption around. Through our interviews, it is clear, the business model choice, evaluation
and implementation is very critical.
d. Choose to pivot- Most innovation actually starts off different to what it ends up as. And this
is what makes it so successful, and easy to replicate. Ideas, requirements and expectations,
all need to be pivoted.
e. Choose a scale, any scale- It is also surprising, that innovation works even on a very small
scale. It is like a perpetual energy device, once you start doing the small stuff, the big stuff
happens on its own.

Some succeed and some fail, and this begs the question: Should innovation be an input or an output
in an organisation? Should an organisation concern itself with the deliverable or the input? One of
the inferences from the study is that majority of organisations that disrupt themselves, thrive on
innovation that is fed in to the organisation either via an innovative process, visionary person or
disruptive thinking. It is also seen that in cases, the outcome of this kind of thinking, is usually
greater than the sum of the inputs.

Innovation driven disruption_Singh_Farid

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