Renée Mauborgne explains how companies can reach success outside the usual industry bounds.
In this edition of Author Talks, McKinsey’s Elissa Bandler chats with author and INSEAD professor Renée Mauborgne about her new book, Beyond Disruption: Innovate and Achieve Growth without Displacing Industries, Companies, or Jobs (Harvard Business Review Press, May 2023), cowritten by W. Chan Kim. Mauborgne discusses the concept of nondisruptive growth and how opportunities exist for companies to innovate and create new market solutions without necessarily upending industries or automatically eliminating jobs. An edited version of the conversation follows.
Why did you write this book?
We thought that the entire field of strategy focused only on competing. We focused on the other, missing half: How do you create new industries and markets?
That’s how we came up with our first book, Blue Ocean Strategy. We call existing industries red oceans because they are competitive, and we call new markets and industries blue oceans.
At the same time, in the field of innovation, there is this prevalent and increasingly important idea of disruption. People asked, “Isn’t creation a form of innovation? And if it is, how does blue ocean strategy differ from the field and what we call disruption?”
That question made us dive into our research. We started to see that the answer was no. Blue ocean is not the same as disruption. Disruption occurs when you create a new market in an existing industry, leading to a high level of displacement.
What surprised us is that some of the growing examples in our database experienced no disruption or displacement. That piqued our curiosity. We asked, “What is the other form of innovation? Are these cases simply anomalies—unconnected, unrelated incidences? Or was this the tip of the iceberg?”
The field of innovation focuses on disruption, and the field of strategy focuses on competition. Now, we are learning that there’s something outside of disruption and displacement. What is it? That’s where the research came from for our new book.
What is the key difference between disruptive and nondisruptive ideas?
Disruption occurs when you create a new market within an existing market, leading to a high level of disruptive growth. Blue ocean strategy involves developing a new market across existing industries, creating a measure of disruptive and nondisruptive growth.
Nondisruption is at the opposite end of the innovation spectrum. It occurs when you develop a new market outside the bounds of existing industries, which generates largely nondisruptive growth where there is no displacement.
“Disruption occurs when you create a new market within an existing market, leading to a high level of disruptive growth.”
Can you provide a specific example of a successful, nondisruptive idea?
We began to pursue and build our database on nondisruptive ideas systematically. Things like pet Halloween costumes, men’s cosmeceuticals, and microfinance don’t displace anyone. We saw some disruption with technology, some without technology, and some with existing technology, like how Sesame Street leveraged television to create the preschool entertainment industry.
Some nondisruptive ideas occurred in developing markets, underdeveloped markets, the high-end of markets, and some occurred for lower socioeconomic levels. It was fascinating how prevalent nondisruption was, yet the innovation field wasn’t discussing it.
What should creators keep in mind when evaluating an idea that is potentially disruptive?
When thinking about disruption or nondisruptive creation, the critical question is, how do you know which avenue to pursue?
If you take a step back, disruption occurs when an innovator—whether an established company or a start-up—looks at an existing industry and sees that the industry is either asleep behind the wheel, inefficient, ineffective, or has poor service quality.
Or an industry creates a lot of negative externalities, and an innovator sets out to displace them. The innovator asks, “How can I offer a breakthrough solution to an existing industry problem, dominate the industry, and displace the existing players?” Are you aiming to offer a breakthrough solution to a problem? That’s the path to disruption.
On the other hand, the path to nondisruptive creation can involve identifying and solving a brand-new problem and seizing the opportunity to solve that problem outside of the industry’s bounds. In the book, we outline paths to identify those instances.
“The path to nondisruptive creation can involve identifying and solving a brand-new problem and seizing the opportunity to solve that problem outside of the industry’s bounds.”
What role do regulators or governments have in evaluating the impact of a potentially disruptive business idea?
I may encourage more disruption in an ineffective and inefficient industry if I view things from a government or regulatory perspective.
Companies are thinking about the impact of a potentially disruptive business idea too. Conversely, it’s about creating nondisruptive growth, solving problems, and creating new opportunities. For example, if I’m the government, I see new technologies entering, and there’s an increasing number of people expecting the elimination of hundreds of millions of jobs, including knowledge workers.
The question becomes, “How will society create new jobs to absorb all this released capital?” Doing this nondisruptively is vital; society must create new jobs without displacing anyone. As a government or a company, I will consider levers for growth in new markets to decide which levers suit my situation.
You’ll often find that when an organization disrupts an existing industry, the disrupted companies suffer—people lose jobs, and the community suffers. Additionally, the disruptive organization can experience negative backlash from external stakeholders. To protect people’s livelihoods, communities, governments, societies, and activist groups will say, “Let’s put some constraints and bounds around this disruption.”
With nondisruptive creation, you’re solving a brand-new problem outside industry boundaries or developing a brand-new opportunity. No one’s losing a job. Instead, you’re creating jobs, so there’s no societal pushback.
When 23andMe started, they received standard regulations around the accuracy of what their testing kit does and does not do. These regulations are standard for any medical device. They didn’t get the pushback that disruption gets in society. That’s one of the benefits that comes with nondisruptive creation.
Nondisruptive creation is limited to opportunities based on the type of market you’re in—whether you’re in a developed market like the US, Western Europe, or areas of Asia or, conversely, if you’re in a developing market.
Our research shows that opportunities for nondisruptive creation exist across territories. All developed markets began in developed countries. That’s a market opportunity for nondisruptive creation.
Whether it’s microfinance or finance companies like Wecyclers or M-Pesa, there are numerous nondisruptive opportunities in a developing market. If I’m an established company and want to explore either area, I can look to them to think about nondisruptive opportunities regardless of the market.
How is nondisruptive creation different from new-to-the-world innovations?
New-to-the-world products and services can also be disruptive. For example, when the new-to-the-world airplane came on the scene, it displaced ocean liners that carried passengers back and forth. It was new to the world but disruptive.
A nondisruptive innovation is more than just new to the world—it can be new to the area.
Think about the sanitary-pad market for women. Initially, it was a high-end, nondisruptive innovation created in developed markets.
Before that, women would use rags, corn husks, or other nonmarket solutions for sanitary pads. Now, we know that this market is worth $1 billion today.
Interestingly, certain rural parts of India still don’t have access to sanitary pads. Even discussing women’s sanitary needs in India was considered taboo, and women wouldn’t enter a store to purchase them. To solve this problem, an Indian entrepreneur created pad machines that allow women to create simple pads and sell them to other women, which was nondisruptive to India.
If that same pad machine is for sale in the West, it’s likely to be disruptive.
Nondisruptive creation has four advantages at the company level. One of them is that it avoids direct confrontation with established players; with disruptions, you aim for the existing industry and, hopefully, knock it down.
Note that established players aren’t going to sit there and do nothing. They’re going to fight.
Consider a nondisruptive industry outside the bounds of existing industries where there are no players to push back. Take the Square reader, for example. There’s a large credit card industry that is mainly geared toward the payment industry for medium and large companies.
Square enables a babysitter or an ice cream vendor, who couldn’t historically accept a credit card payment, to take credit. Square saw the need and benefits of creating a credit card reader for these “smaller” consumers.
Since Square hasn’t displaced any sales from the existing medium and large companies, nobody came out to punch it. That’s key.
You could also look at GoPro. They created a nondisruptive industry outside of the existing camera industry. Did all camera companies try to attack GoPro? No. The companies didn’t feel threatened, and what GoPro offered was outside the industry’s bounds. That’s a real power and organizational advantage to nondisruptive creation.
Are disruptive inventions inevitable?
Whenever an industry provides an opportunity for solutions, the industry will impose negative externalities on the world: for example, the industry is inefficient, ineffective, and it imposes pain points on customers, which entices disruptors to enter.
This disruption thrills customers, and, in turn, the disruptive company makes a lot of money.
In this process, there’s a loss at a societal level to affected companies, and there are demands on the new market from the existing market. That’s where you have social-displacement costs that hurt communities, societies, and people.
Disruption will occur, leading to a more efficient and effective use of resources than the current industry.
Are nondisruptive paths better for affected stakeholders?
No. There are both disruptive and non-disruptive opportunities in diverse industries. CEOs don’t want to constrain their companies to only look at the disruption and take on the existing player.
These are factors that a CEO must consider: first, the existing player will fight me because I’m “taking the bologna off their bread.” Secondly, there will be backlash, often from society, regulators, and social-interest groups. Thirdly, complex emotional and political challenges arise when disruption affects an established company.
Take a company like Kodak, for example. How could they let digital photography come in and put them out of business? It’s a different perspective from Kodak; disruption can displace their employees, R&D, and those they work with.
Companies often try to find compromising solutions, and if there are disruption opportunities, they will pursue them, but they must consider the cost and benefits.
At the same time, there’s the nondisruptive approach. As a CEO, I want to consider both sides and what makes the most sense for the company. Why ignore any opportunities? Especially when people and the government are looking for businesses that are a force of good and that achieve economic and social success while not displacing others.
Are there opportunities to create new markets for accessibility or to build on existing ones?
Opportunities for nondisruptive creation exist across all spheres of life. One could be the nondisruptive opportunity that we kick off the book with, which is the deaf experiencing music.
We sometimes take hearing for granted. People who are born deaf might never hear music or the sounds of life. To fix this, Mick Ebeling and Daniel Belquer created a wearable technology called Music: Not Impossible. In their work, they understood that we don’t hear with our ears. Instead, it’s a vibration that enters our body. We hear with our brain.
A person can fall and hit their head and lose their hearing without injuring their ears. They asked themselves, is there a part of our bodies that we can allow sound to enter through so that we don’t feel it through our ears—which is not effective for the deaf?
The answer was skin. They researched the area of skin and created vibrotactile vests with various vibrators that have different intensities that mimic music.
“Opportunities for nondisruptive creation exist across all spheres of life.”
Ebeling and Belquer solved that problem. The opportunity for entrepreneurs interested in that space is to take problems in the accessibility space and apply this type of thinking. What can we create when we start thinking this way?
What are the key takeaways of the book?
There are several key takeaways. The first is that innovation doesn’t have to be disruptive, even though that’s what we talk about in today’s world of innovation. There’s an alternative, an overlooked path we call nondisruptive creation, which promotes economic growth and prosperity.
The second takeaway is that innovation doesn’t have to be a zero-sum game. Nondisruptive creation is a positive-sum approach to innovation and growth, where business and society can thrive together.
“Innovation doesn’t have to be a zero-sum game. Nondisruptive creation is a positive-sum approach to innovation and growth, where business and society can thrive together.”
This article first appeared on insiderintelligence.com
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