How Leaders Delude Themselves About Disruption: A Live Session at Disruption 2020

Editor’s note: A version of this summary was provided by getAbstract.

Ever since Clayton Christensen introduced his theory of disruptive innovation in the 1990s, many organizations have transformed to become capable of dodging disruption — but many others have failed. Scott D. Anthony, a senior partner at growth strategy consultancy Innosight, and Michael Putz, a strategy and business development executive, pinpoint why leaders have lagged in preparing their organizations to forestall disruption and offer practical keys to moving forward.

Leaders miss opportunities to manage disruptive change because of four crucial misconceptions:

1. Leaders allow positive data to lull them into a sense of security. Remember that data reflects past performance and doesn’t show the effects of disruption that’s already happening.
2. They blame their own inaction on shareholders’ desire for short-term results. In reality, you can only maximize short-term returns when you think and act for the long term. Bring shareholders along by sharing your vision, engage them with storytelling, and present a road map with milestones and proof points.
3. Managers tell themselves their people don’t have the necessary skills. Don’t underestimate your workforce.
4. Leaders believe innovation is too risky. Failing to invest in innovation is the riskier strategy. If your innovation fails, you’re losing the money you invested; but missing out on opportunities can place the entire organization in jeopardy. Leaders need to be able to switch back and forth between opposing mindsets: one that supports sustaining innovation and one that enables disruptive innovation.

Many successful companies excel at the development of sustaining innovations, which enables them to serve current customers better. However, disruptive innovation requires a different mindset. Toggling between the two mindsets is difficult due to leaders’ unconscious biases and companies’ implicit values.

Christensen recommended that leaders move disruptive initiatives into separate entities where people can operate based on entrepreneurial values and practices. Nonetheless, senior leaders will have to be able to embrace and internalize both mindsets. To do that, leaders need more than intelligence and intention; they need self-awareness and must be prepared to face the challenges of stepping outside a familiar context.

Many tools and programs exist to help leaders develop the ability to take on new mindsets and shift from one to the other. Join or create a team that is dedicated to self-transformation to hold yourself accountable. Mindfulness can help leaders develop self-awareness, be more present, and foster a malleable mind. Bob Kegan’s immunity-to-change framework can identify the habits and beliefs that hamper your efforts to change and reach your goals. The capabilities that leaders develop for managing disruptive change will serve them well during crises.

During the COVID-19 pandemic, one more managerial misconception has come into view: Many managers have been telling themselves that they must focus on immediate concerns in times of crisis and thus can’t take action on innovation and disruption. But leaders must always lead for the present and for the future simultaneously. Those who have developed self-transformational capacities will be well positioned to seize opportunities during times of discontinuity.

Research shows that during the 2008 global financial crisis, incumbents such as Adobe succeeded in transforming. Many new companies emerged from that crisis, including approximately 100 unicorns — companies with valuations of more than $1 billion. Often, these companies based their growth on aspects of the downturn. Stripe and Square, for example, are two companies that built on people’s loss of trust in traditional financial services providers. Downturns and unsettled times also allow disrupters at the edge of the mainstream to push ahead.

Takeaways from the session:

• Companies often overlook the imperative of responding to disruptive change.
• Leaders need to be able to switch back and forth between opposing mindsets: one that supports sustaining innovation and one that enables disruptive innovation.
• The capabilities that leaders develop for managing disruptive change will serve them well during crises.