The Innovator’s Other Dilemma — Mike Smith
Innovation is essential for staying competitive, even as it presents challenges. Clayton Christensen’s “The Innovator’s Dilemma” explains why market leaders struggle with disruptive technologies. Established companies often fail to adopt disruptive technologies not due to a lack of innovation, but because inherent structures and decision-making processes prioritize immediate profitability, established customer needs, and the protection of existing franchise positions. This leads to new entrants successfully exploiting smaller markets that, when the disruption shifts the technology frontier, become larger ones. Beyond these concerns, there is another important challenge: aligning different organizational roles to support long-term innovation. This “Innovator’s Other Dilemma” involves coordinating engineering, business development (BD), and leadership efforts to create lasting value.
A major challenge is the difference in time horizons among various functions. Engineers see technological progress as a series of steps that often require long-term investments. In contrast, BD teams focus on annual targets and (relatively) short-term goals, needing immediate metrics to judge investment attractiveness. To address this, companies should adopt a time-based approach to investment allocation that supports a multi-horizon business strategy:
1. Horizon 1 Funds: For sustaining current products, supporting active proposals, and positioning in the market.
2. Horizon 2 Funds: For bidding activities and modernizing products thus balancing short-term needs with long-term goals.
3. Horizon 3 Funds: For shaping markets and developing transformational technologies that plant seeds for future-oriented projects.
This approach ensures that both immediate and future needs are met.
The competition for resources between engineering and BD is very much business driven. It forces a deliberate balance between business imperatives — meeting customer needs today and shaping the needs of the future. Both consume discretionary funds for research and development (R&D), marketing, and proposals. Traditional models often favor current revenue-generating products, leading to a focus on product maintenance over innovation. A more strategic model involves distributing resources based on the timing of returns and respective importance. This ensures that funds support current operations and future growth objectives.
While customer input is crucial, it can be tricky to manage. Companies often struggle to prioritize different stakeholder voices and product requirements. To navigate this, businesses should engage customers early in the innovation process to iteratively validate ideas and align developments with market demand. However, it’s important to balance this with the understanding that initial customer responses might not lead to immediate sales. In addition, that feedback will be a moving target as environmental stimuli change.
Internal cultural resistance can also hinder innovation. Reluctance to fund R&D until there is explicit demand can leave companies unprepared for market moves. Addressing this requires a culture shift to reward calculated risks and view failures as learning opportunities. Encouraging collaboration between engineering and BD teams can create a shared understanding and commitment to innovation. What is more, a joint discovery process can help break down the seemingly natural barriers between the two functions. By valuing experimentation and iterative development, organizations can reduce the fear of failure and enhance innovation capabilities.
The key to overcoming the Innovator’s Other Dilemma is fostering collaboration across functions. Establishing forums where engineering and BD leaders discuss technology investments can lead to better decision-making. These forums should focus on evaluating investments based not only on customer funding, but also on their willingness to fund in the future (especially where there may be co-development opportunities). This approach helps to ensure that innovation efforts are timely, market-driven and feasible. Creating a common language and shared metrics enables organizations to align innovation strategies with market demands. This collaborative approach not only bridges gaps between functions but also shows senior leadership that integrated efforts can offer significant advantages.
To achieve long-term success, organizations should plan for both short- and long-term goals by wisely allocating resources, focusing on customer needs, and encouraging teamwork across departments. This strategy will also pave the way for sustained innovation that yields near-term financial success without “mortgaging the future.”
About Mike Smith: a tested senior executive and U.S. Navy veteran with over 20 years of achieving organizational excellence in the Aerospace and Defense (A&D) industry, Mike is renowned for driving over $14 billion in new value creation. A mission-driven growth leader, he specializes in expanding A&D companies into new markets, optimizing margins, and fostering shared access to defense technology. Mike is dedicated to fostering collaborative success and propelling collective growth through purpose-driven leadership and ground-breaking strategic thinking.
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