Speaker 1: Hello, T-Talks. My name is Kyhan Krippendorf. I am the bestselling author of Outthink the Competition, How a New Generation of Strategists Seize Opportunities Others Ignore, and more recently, Driving Innovation from Within, A Guide for Internal Entrepreneurs.

Speaker 2: So the first question is, what do you think about disruptive innovation? So I like to think of disruptive innovation as a concept. I think to understand it, we have to appreciate it's not real. You can't touch it. You can't feel it. You can't manipulate it. It doesn't exist, but it is a concept, which for me means it's a language tool that helps us solve problems. It is a version of an overall strategic concept that has been around for millennia. Sun Tzu called this concept taking hold 2,500 years ago. He's the Chinese general that wrote The Art of War, and he used this term taking hold, which was you step in and your enemy lets you take them hold, meaning there's no loss, meaning there's no bloodshed, there's no death. Gandhi, Mahatma Gandhi, he had a phrase that I love, which is, first they ignore you, then they laugh at you, then they fight you, and then you win. And what he's describing here is that you, in a sense, get to take your enemy whole because you do something that they first ignore and laugh at. His enemy was Imperial Britain, and he knew that if he adopted a strategy they were familiar with, picked up the guns, that they would immediately fight, but instead he picked a strategy that they didn't know how to react to. You could also call it blue ocean. We're going to talk about blue ocean a little bit later. I think that's a permutation of it. Disruptive innovation achieves the same thing, which is having your competitor not react to your attack. Disruptive innovation says you do that by pursuing a customer that your competitor doesn't view as important or valuable, and you provide a technology or a product that your competitor views as inferior. So they essentially ignore and laugh at you, and they let you take that customer. Then you've got your beachhead, you've got your first part of the market, and you will then learn and develop a better product, a better technology, and take higher value customers. So disruptive innovation is part of a concept that's been around for millennia. We've just called it different things over the years. I personally like to call this the fourth option, which is a metaphor that just says there is a point at which others stop thinking. They start repeating themselves. They'll say, well, the way that you solve this problem is A, B, C, or I've been in this business for 20 years, and the key success factors are 1, 2, 3. Now, they may be right, but it also means they've stopped thinking. To disrupt, to create a blue ocean, to make them ignore and laugh at you, to take hold, what you need to do is recognize that moment and come up with a fourth option, an option beyond the ones that people think of or expect. Next question. Is marketing innovation based on a demand by the market, or do these types of innovations create the demand? I think it's a very fascinating question. I think that they appear to create demand, but you have to think about what we mean by demand. Think of it this way. Technology has been interacting with humans for 7,000 BC. We started using technology when we started learning how to farm. That's when technology started becoming more sophisticated with a scratch plow. Now, technology evolves more quickly than humans. The average generation for a human is 20 or 30 years. The generation for technology is now getting very short. You can even have technology that evolves every year or every month. Version 1, version 2, version 3. With artificial intelligence now, we now have technology that is immediately adapting. It is evolving more quickly. What that means is that humans evolve more slowly than technology, although I will say that as we are able to start editing our genes, humans may start evolving more quickly as well, which is an interesting thing to think about. But let's hold for right now that humans don't change as quickly as technology. Then what happens? Technology makes something possible that wasn't possible before, or that wasn't possible as effectively as before. Then the technology appears to create demand. It appears to create demand because one of two things happen. Either it replaces an existing technology and then more people use the new technology than before, or it creates demand because there was a demand that people had that there was no technology for, so they didn't even know that they had the need. They didn't even know they had the demand. It unlocks latent demand. I'll give you an example of the first one. When HP produced the first electric calculator, a marketing firm that they hired told them that they should shelve the project, not try to sell it, because there was already an existing technology in place that had a radically lower price point. Think about that. What was the technology that people used before there was an electric calculator? It was primarily the slide rule. They said, why would anyone want an electric calculator which costs many times the price of this wooden slide rule that allows them to calculate things? Luckily, HP didn't listen to the marketing experts. Instead, they produced a thousand of them just to see if the market would accept them. Before long, they were selling a thousand a day. They appeared to create demand, but what they really did was they replaced an existing technology with a new technology, which had other people who had the demand, but maybe they didn't know how to use a slide rule or the slide was too clunky, to start using that technology. The second way is to actually create a new solution to a need that people have that they don't know they have. Now, as we get better at, this is an example, as we get better at sequencing DNA and we can do that earlier in life, we can now take DNA from a fetus and get insights into whether the fetus that will become a child, whether they have some genetic issue. This creates a big ethical dilemma for us and one that we've never had to face before. What do you do if you find out that your fetus has a genetic deformity? The easy answer is, well, we are just going to educate ourselves and become aware of it and be prepared for it, for this child that's going to come into our lives. But of course, people are saying, well, will people abort the fetus? Will people try to change the DNA of the fetus? It raises all these ethical issues and the reason it raises these ethical issues is because this is something that we were never able to do before. We didn't even think about it. We didn't think about it because it wasn't possible. So you could say that this creates a new demand. It is a need that we've had for thousands of years, but we never realized we had it because we never even consider it to be possible. So I think in those ways, innovation creates demand, but we need to understand the mechanics by which it creates demand. Next, what is the importance of the concept of design thinking? So design thinking has the same root as agile, lean, and scrum. The common root between all of these concepts comes from a fighter pilot named John Boyd. He was known as the 92nd Boyd because his whole life he had a running bet that if he got into the air with you within 90 seconds, he'd have you locked in his sights. You can look him up and read about him. He was just a phenomenal fighter pilot and a trainer of fighter pilots. He could train fighter pilots to win in situations where you wouldn't expect them to win. So when he retired, the military asked him to lay out his theory and it's a fairly complex framework that he developed, but we can simplify it by saying there are four steps. He calls them OODA, Observe, Orient, Decide, Act. O-O-D-A. What he says is a fighter pilot, when they're in the air, they observe the environment. They then orient themselves to what's happening. They make a decision and then they take action on that decision. Then they continue and they observe the results of the action and they orient, decide, and act. The way to win is to go through that cycle, observe, orient, decide, and act faster than your competition, than your enemy. He calls it getting inside your competitor's OODA loop. This introduces an alternative fundamental metaphor for how we think about conflict. Whereas before the metaphor was say that of a chess game or a Go game where you have a beginning, a middle, and end. In the beginning you develop a plan and then you execute the plan and then you adjust if the plan's not working, but you're planning ahead. This says you can't create a plan, you need to take action. Observe, orient, decide, act, and then observe what's happening. This is very much what design thinking is also. Design thinking is both that and also a human-centered approach. Let's leave aside this human-centered approach for now, but design thinking basically says you need to put something in front of people and see how they react, learn from that, and then build from that. You cannot run a financial projection based off of how someone will react to a product if no one's ever reacted to the product. The data isn't out there, there's no report, there's no history to pull, to research, to pull together. You need to actually create the data. This is particularly important because as the pace of change accelerates we increasingly need to move to this design approach, this OODA approach. Established companies typically adopt what I like to call a prove, plan, execute a model. You prove that this idea is going to work, this new product is going to have a market, you make a plan, and then after you give me a bulletproof plan I will fund you and you can execute. There are two issues with that. The first is since the world is moving so quickly, your opportunity cost is very high if you take the time to build a plan or take too long to build a plan. So you could spend nine months building the perfect plan and then the opportunity's gone because someone's moved more quickly than you. The second thing is that if you're doing something really innovative there is no data to build the plan. So instead what you want to do is take an act, learn, build approach. Take action, learn from the action, build from that action. So I think design thinking is very important. I think we should appreciate the fundamental message of design thinking which is take action and learn from it, don't build a plan, and then execute. In a disruptive ecosystem is it hard to survive for the brand? Is it hard for a brand to survive? I think it is hard for anything to survive in a disruptive ecosystem. If the disruptive ecosystem is changing quickly then the life cycle of any configuration of that system and anything that survives on a particular configuration of the system, the lifespan of that becomes shorter. That said, I think that brands become more important in a disruptive ecosystem but we have to appreciate that the owner of the brand is starting to change. So brands for me are basically a symbol of trust. You think of Volvo and you immediately think of safety. They've created a brand that says you can trust anything that has the Volvo name on it as being safe. BMW has a different brand. BMW's brand for me is the ultimate driving machine, that you're going to get the thrill from driving the car. Now you probably get a thrill from driving either car. They're probably both safe but you have the trust of one promise for each of those brands. When you buy a car you could go and look under the hood and investigate every nut and bolt and test and look at all the stats and come to your own conclusion about which is safer and which is more fun to drive. But we don't have the mental energy for that so we trust brands. Brands are trust and trust becomes more important in a disruptive ecosystem because people don't know what's going to happen next. They're worried about how things are going to change and so they will look for something that they can trust. But the owner of the brand is shifting, I think. Where it used to be that people trusted companies, primarily they trusted the company that owned the brand. I trust the company Volvo. I trust the company BMW. Increasingly we're starting to see people trusting not the owner but rather the system. Uber, for example, I don't think that people, at least I and people I know, don't use an Uber because they trust the company. They trust the system that the company's built. The platform of drivers, the feedback system, the way they track, the way they tell you when someone's going to arrive. If someone can build another system that's like that, I think people would switch very quickly. In today's day and age, loyalty really is just, I haven't found anything better yet. When new systems evolve, people will trust those. Blockchain is another example of trusting the system. Blockchain is a way to create trust without having to trust one person. Let's just simplify it that way. You could go to a bank and traditionally you would go to a bank and use them to move around your money because you trusted them, their morals and their values and their history. But now increasingly more people will trust blockchain, not because there is anyone there that has morals or values, but because the system is trustworthy. So what I'm saying is brands do have trouble surviving because everything will have a shorter life cycle and disruptive ecosystem, but they do become more important because trust becomes more important. However, we have to appreciate that brands are not only associated with the owner of the brand now, but now with the system and the system is something that people can't own. Is blue ocean strategy the same concept as being disruptive? As I alluded to before, I think they are both permutations of an overall concept. There are different ways to create this dynamic of your competitor not reacting. I think that there are 36 different ways and two of those ways we can call disruptive innovation and blue ocean. They're just two ways to achieve the same end. Disruptive innovation, as I said, is target a customer that your competitors don't value with a product that they view as inferior so they let you take them. They don't respond to your taking them. Blue ocean says go find a customer that your competitor is not even thinking about so they won't react. If disruptive innovation allows you to take a piece of the beach that your competitors don't care about, blue ocean allows you to just find a different beach. The guy who developed the Big Bertha, for example, which was a golf driver that gave you such an advantage that even novice golfers could hit that first shot perfectly. It gave you such an advantage that the PGA said this is illegal. We're not allowed to use this on PGA sponsored tours. Now the creator could have been upset by that but he said no but that's not a problem for me because I'm not selling this to golfers. Too much competition for those golfers. I'm selling it to the millions of people that want to start playing golf but they are too nervous to pick up that first club. That's blue ocean. Adding a new piece to the game. These are two different ways to achieve the same end and there are 34 other different ways to achieve that end. Is organizational culture a barrier to generating disruptive business models? It is a factor. It can be a barrier or it can be an accelerator. I've been studying how disruptive business models can emerge from within existing companies and if you're looking to create a disruptive innovation from within an established company you're challenged a little different than that of an entrepreneur where an entrepreneur can design any business model around their their product idea. You are designing a business model inside an existing business model and that can create conflicts and evoke certain drivers that will drive your innovation back. There are four sets of drivers. There's talent, leadership, organizational structures and culture. So culture is an important factor. What I find is however that culture is neither good or bad. It sort of depends on what culture you have. If you have a culture that encourages innovative thinking for example. A culture that encourages proactivity and autonomy. That encourages the willingness to take risk. That encourages market awareness. Those four factors, those four cultural norms, they will accelerate the ability to introduce disruptive business models. So what you want to do is you want to understand culture and you want to try to find a culture inside your organization that has this right mix of these four things and you want to build your disruptive idea inside that culture. The creator of Sony PlayStation for example. He looked to build the PlayStation in the the main part of the business but then he realized that it had the wrong culture. Instead he took that idea and he built it in Sony Entertainment which had a different subculture and it was the right kind of culture to allow that new disruptive business that Sony eventually introduced and eventually owned 70% of the market of console video gaming. They did that because he found a culture that supported disruptive thinking. Wow these questions are great. They really made me think. Thank you for letting me participate.