ParisTech Review

The 1980s progressed and the legendary California management guru, Garry Hamel, lobbed stones on the surface of the linear model for innovation that would send ripples outward and demand new patterns neither incremental nor linear. Creativity and a departure from past models were the order of the day. Thirty years later, his revolutionary ideas have become received wisdom. Boardrooms are filled with converts who believe innovation, along gradual lines, modest and resting on the shoulders of that which went before, is no longer sufficient. As markets, particularly in technology, mature with increasing rapidity, disruptive innovation has become the breath of life. Setting in motion a process of liberation form past constraints in both thought and action is the goal but remains as difficult as ever to accomplish.

The secret of disruptive innovation is shrouded in mystery and those capable of harnessing its power remain rare indeed. An almost fanatical belief in a particular vision must operate at the expense of all other concerns allowing strategists to discard every comfortable rule of past success.

Incremental innovation evolves within a known framework according to the rules of “systematic design”. Within this context an object, service, or process is modified to enhance performance and the recent history of the automotive sector is bursting with examples such as ABS or the Auto Stop Start function, (a clever way to save fuel by stopping and restarting the engine when a car is idling). Both are brilliant incremental innovations that were able to evolve in a stable conceptual space employing techniques, materials, and architectural considerations that were already well understood. Progress occurs, but proceeds according to one or two clearly defined parameters such as horsepower or energy efficiency.

Disruptive innovation is of the type that occurs when a manufacturer of traditional automobiles makes the paradigm shifting decision to move into the production of electrically powered vehicles or when public works projects favor hemp based building materials over traditional concrete. In both cases, we can observe decision makers stepping into the unknown without the benefit of a safety net. If we think of “systematic design” as a sort of safe harbor, then these two examples represent clearly how far it is possible to sail from the safety of shore. Professor Armand Hatchuel, coordinator for the Chair of Design Theory and methods for innovation at Mines ParisTech, has risen to become the pedagogical point of reference for corporations and is an authority in this constantly evolving domain. “Leaders must be prepared to practice innovative design by harnessing the power of rupture in the identity of a studied object as it trickles down. The plunge into unknown seas gives rise to perplexity whether for the client, marketing, or engineering. Nevertheless, this moment of rupture is what creates future value.” The metamorphosis extends beyond defined borders and gives rise to the transformation of an entire ecosystem including the intellectual foundations which have governed the strategy of economic actors up to that point. Even language must be adjusted as is demonstrated by the poverty of the seemingly innocuous expression “electric vehicle” to explain what lies under the hood of this advanced technology, what Professor Hatchuel has defined as an entirely new form of electro-mobility and which represents a social and technological revolution.

To create a rupture with the past, research must not be tied to the physical object but must be flexible enough to allow for a complete reorientation of the way it is perceived. Aerospace groups must look beyond the creation of the perfect fighter jet, whether in the form of a Rafale or F-18, and focus their energies on the creation of unmanned drones. Initial developments in the domain of nuclear submarines offer a textbook example as their missile systems encountered a major stumbling block in providing accurate coordinates for their location in relation to the target. A solution was found by measuring radio signals from a satellite whose position was already known. Following subsequent refinements, the truly disruptive event, and the one with the most profound consequences, arrived in the form of the extension of the technology into civilian life with the launch of on-board GPS by automobile manufacturers. The Linux operating system is another example of disruptive innovation to which can be added Renault’s low-cost car, the Logan, or the recent adoption of cloud computing which would shift to distant servers the bulk of IT applications currently tethered to the traditional client-server model of system architecture.

Some companies have made a routine of rupture and push up against known limits daily. Tefal invented non-stick cookware and innovation at Groupe SEB was responsible for such landmark appliances as the electric odorless deep fryer and it is unquestionably creative innovation that has allowed SEB to continue operating, and thriving, on French soil. For creating real rupture, James Dyson, inventor of the bagless vacuum and founder of the company bearing his name is a legendary figure and entered his market when competition was at its most intense in the latter half of the 80s. Each manufacturer was engaged in a constant battle to introduce yet another performance boost to its product whereas only Dyson dared shatter the previous business model on which the industry relied by depriving himself through his invention of any future revenue from bag sales. Industry heavyweights such as Hoover and Rowenta turned a deaf ear to the solicitations of researchers pursuing similar developments allowing the outsider to become the new point of reference for an entire industry, able to force others to follow his rhythm and eventually constraining his competitors to introduce similar products at the top-end of their product ranges. The moral to others who aspire to be a global reference: while size is important, innovation is more so.

Following this logic, when RATP, which runs the Paris metro and bus system, undertakes to remake its image much will rest on identifying its core competence as extending beyond simply moving commuters from A to B but in identifying improvements that can be made in the region’s foot traffic which is extremely diverse and encompasses seniors and the mobility impaired; pregnant women and stroller pushing mothers; and of course baggage laden tourists to the French capital. Considerations for the interests of all will play a role in the creation of a comprehensive program of research that accounts for advances in cognitive science and physiology and uses these tools to better understand the modalities of foot traffic and how to create a rupture with any previous deficiencies in service.

Simply identifying the point of rupture and developing its potential can be the greatest challenge, as Apple’s adventure in the mobile telephone market so clearly illustrates. The origins of the iPhone can in fact be traced to Steve Jobs’ decision to develop a tablet computer and it was during the developmental stages of what would eventually become the iPad that he first encountered the multi-touch display. The prototype failed to meet his exacting standards and was sent back to specialists in ergonomics. The finished product was returned with the now famous “scrolling” function and it was at this point that Jobs realized the potentially revolutionary nature of the new device when applied to mobile telephones. The entire concept hinged on the new user interface and its ability to free handsets from the limitations imposed by their screens. “Scrolling” was the key that unlocked the future of telephony and Apple moved to the vanguard of the nascent market for smart phones despite having almost no previous experience in the sector. Rupture gave birth to market where none had existed before.

For Benoît Sarazin, founder of Farwind Consulting and graduate of Telecom ParisTech, “practicing disruptive innovation acts to create a market in which you are the reference, the sole actor for whom all strategic options are available.” Rupture exerts a profound influence on the three pillars of a successful business model: the creation of value (what can I offer and to whom?); development of an architecture for distribution of value between clients and suppliers; and finally, the sound financials required for investment and the generation of profit (locating a revenue stream). Being ahead of the pack in these fundamental areas is the key to creating a decisive competitive advantage.

Running parallel to the intellectual challenge of rupture is the need to surmount corresponding managerial unknowns. How do we compose teams capable of disruptive innovation? How should they be organized to harness their potential for imagination and creativity? How do we arrive at our destination when we have yet to imagine how it may appear? How do we reorient our sensibilities and shift our priorities to problem finding rather than problem solving? In response to these questions and others, the Chair of Design Theory and methods for innovation at Mines ParisTech has developed a unified theory for design reasoning known as the C-K Theory (Concept-Knowledge). This theory provides a model for understanding the process of creative rupture. Taking a multi-disciplinary approach it aims to illuminate and expand our understanding of the creative process and is centered on leading research in management theory, further enhanced by contributions from the main currents of philosophy, logic, and psychology. Bringing it all together allows us to create a sound basis for engineering that harnesses and organizes disruptive innovation into a defined model. The resulting KCP method has since been adopted by some of the world’s leading industrial giants.

This “theory for design reasoning” demonstrates that to thrive in the 21st century, engineers must no longer be content with limiting their role to the narrow confines of optimization and modeling. The future of the discipline depends on developing a third capacity for generating innovative concepts. This would align with an entirely new perspective on how to define the engineer’s role in a world where, more and more, the lines between design and engineering have become blurred. The ideas offering the greatest capacity for exponential growth will often be the most disruptive. An idea that appears “foolish” may sometimes represent the most sensible way forward. The A380 might never have seen the light of day if Airbus had relied on a simple extrapolation of previous models of development and had not understood that for an aircraft of such scale the ordinary rules no longer applied and could in fact be counter-productive to success.

Development of a unified theory for design has been arduous as it entails seeing beyond the paradox of trying to organize innovation as something that cannot be organized. In this topsy-turvy world we are more interested in the state of the non-art and the logic of the un-known. The pedagogical foundations of disruptive innovation repose on the elucidation of the C-K theory. Within this framework, the creative thinking of the individual or collective can be simultaneously liberated and channeled and will flow along two paths. On one side, in the “C” or Concept space, metaphor and analogy are employed to overcome mental roadblocks that stand in the way of a redefinition of an object and its role. On the other side lies the “K”, or Knowledge space, where as in all scientific endeavor, we labor to push the frontiers of understanding ever outward. When combined, the two spaces produce a fresh perspective and method where rupture can burst forth and its power can be harnessed. The C-K Theory was developed by Armand Hatchuel and Benoit Weil who, along with numerous colleagues, who were able to demonstrate the rare creative power that could be unleashed when the two paths are juxtaposed in time and space. Their work appeared in the recently published “Strategic Management of Innovation and Design” whose pages carefully illustrate the path toward a new paradigm based on theories of structured design and innovation which issue forth from a defining moment of rupture.

The emergence of new functions will require the traditional approach to adapt to the new reality. The contribution of marketing for instance will have to evolve. The conventional notion of a “prototype” must be discarded. As understood by systematic theories of design, the prototype exists as the first in a series of developments leading ultimately to a finished product. In the new logic of rupture however the final product may never exist at all as in the image of the “concept car” model employed by automobile manufacturers. Creating the notion of an innovation function or “I” represents a new exercise in style for the design process. Corporations must expand beyond the limitations of the R&D process to the next level of “RID”: research, innovation, and development. Exploring the triangle this new model represents, the “I” can be understood as not just a function but an entirely new approach toward research and development. In “I” mode, management privileges the exploration of new spaces and adjusts its system of rewards to encourage new forms of creation. Exploration proceeds simultaneously along multiple paths and enjoys a degree of freedom unimaginable during a traditional developmental phase as there exists no fixed objective and the outcome is entirely unknown. In “I” mode, even a temporary roadblock can create value, as long as the lessons learned in the run up to the impasse are retained and employed in the creation of new paths for exploration. Managers will have to undergo a revolution of their own as they adapt to the new terrain. Whereas “D” mode proceeds according to “objectives”, “I” mode follows the logic of “value” and dispenses with the constraint of fixed milestones. This sharp departure from previous practice was powerfully explained in 2006 by the academic team of the Chair at Mines ParisTech in “Les processus d’innovation : Conception innovante et croissance des enterprises” (The Process of Innovation: Innovative Design and Growth in Enterprise). In this volume they have clearly illustrated the impact the passage from R&D to RID will have on management who now face a transformation as universal in scale as with Taylorism and Fayolism in the past.

One of the sharpest divisions between the incremental model for innovation and the more disruptive one is that while the former often requires massive investment the latter most certainly does not, and can be positively frugal. The extraordinary success of the iPod unfolded against the backdrop of a global collapse in the price of technology shares but because almost all manufacturing had been outsourced Apple was able to concentrate solely on the creation of value through disruptive innovation, which in this case appeared in the form of the celebrated scroll wheel.

Rupture creates ideal conditions for a reversal of previous habits when it occurs under favorable conditions. To be prepared, explains Benoît Sarazin, one must be sensitive to the whisper of “faint signals” that are easy to overlook due to their paradoxical nature. The creators of Skype were successful because they made the leap of understanding that allowed them to recognize that consumers were ready for a system for making and receiving telephone calls that would exist, independent of the network over which they were being carried. When Jonathan Wyatt, the New Zealand runner, exchanged his shoes used on the track for a sturdier version suited to trail running (a variant on running that uses mountain trails) he broke the unwritten rule against any top level athlete switching disciplines midstream in their career. Through the simple act of changing his shoes, Wyatt created a quiet revolution in “extreme sports for the masses”, or super-endurance.

Shifts in society modify client priorities and disruptive innovation satisfies latent desires that were poorly expressed previous to the arrival of change. With that said, clients are often poorly equipped to appreciate the possibilities of truly disruptive innovations and can play the role of false friend in demanding incremental improvements that are extremely costly while remaining completely nonplussed toward a truly revolutionary advance. These very same clients will nevertheless be the first to voice their displeasure when an enterprise fails to identify a trend early enough creating a double bind for producers as we can observe in the market for hard drives. Manufacturers of 14” drives missed out when the market shifted to favor the 8” form factor and the same process occurred when a further revision was made to 5.25”, and again when the transition to 3.5” occurred …

From the moment it was published in1997 “The Innovator’s Dilemma” by Clayton Christensen of the Harvard Business School has excited an animated discussion over the role of the client in the allocation of resources at the heart of enterprise. In the face of risk, management must make a stark decision on which of two paths they are going to take. Leading in one direction is the path of disruptive innovation with all its unknowns. In the other, a path under which progress must be measured against competitors and driven by a constant need to innovate and raise levels of quality to stay in front once a truly disruptive innovation becomes accepted and banal. Errors in judgment are costly meaning that whatever choice is made it should be taken with care.