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February 04, 2019

Is disruptive innovation a waste of effort?

Everyone these days feels the tug of disruption. Blockchain will revolutionize banking. Autonomous vehicles will upend transportation. Pick any industry, and you’ll find a disruptive threat somewhere on the horizon.

What should your company do about it? The answer, quite possibly, is: nothing.

There is a rich body of research among business scholars studying the natural patterns of innovation. Scholars draw a distinction between exploitative innovations, which build upon the existing capabilities and expertise of a firm, and exploratory innovations, which create new-to-the-world knowledge or technologies.

New research from Sue Cohen at the University of Pittsburgh draws an eyebrow-raising conclusion: the added cost and risk of exploratory innovation may not be necessary. In other words, investing directly in disruptive inventions could be a waste of your firm’s resources. You might be able to get there by exploiting adjacencies and choosing the right partners.

And yet, financial firms cannot ignore blockchain. Nor can auto insurance avoid electric vehicles or autonomous driving. Nor can physical-product companies sidestep the rise of IoT. And so on.

That means all of us face a dilemma. Either waste resources on speculative inventions, or do nothing and wait for obsolescence (or worse).

What should your firm do? 

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