How to execute digital disruption of business models in disruptive times: Why corporates need to move from innovation safe-spaces to innovation switchboards

Dries Faems: May 14, 2020

In current crisis times, a lot of corporates are forced to engage in digital disruption of their business models. Traditionally, corporates have tried to execute such disruption activities by creating what I call innovation safe-spaces. In this blog, I first explain why these innovation safe-spaces tend to fail in successfully creating scalable business models. Subsequently, I propose the implementation of innovation switchboards as an alternative option to successfully execute the digital disruption of business models.

For a long time, it is emphasized that companies need to fundamentally change their existing business models in order to deal with the emergence of disruptive digital technologies. The current situation provides unique opportunities to engage in digital disruption of business models. After all, for a lot of organizations, moving to digital business models is no longer an interesting option but an essential necessity to survive in these turbulent times.

The need to fundamentally change existing business models brings forward the question: ‘How to effectively execute such digital disruption?’

To spur digital disruption, numerous corporates have launched new initiatives such as corporate incubators, accelerators, innovation labs, and digital innovation hubs. It is important to highlight that most companies have turned these initiatives into what I call innovation safe-spaces or spaces where individuals are geographically and organizationally separated from the core of the organization. The core reasoning behind creating safe-spaces is that, to allow individuals to ‘think different’, it is essential to give them the freedom and space to explore new technologies and tools that radically deviate from the day-to-day activities of the core of the company.

However, these innovation safe-spaces often do not generate tangible outcomes in terms of scalable business models. In other words, these innovation safe-spaces often end up in what is called innovation theater.

Why do innovation safe-spaces often trigger innovation theater?

• By positioning the disruptive activities in a separate place, it becomes more likely that the activities within the innovation safe-space are strategically disconnected from the core capabilities of the organization. In this way, mobilizing the necessary support within the core of the organization to invest in the disruptive business model becomes more difficult.
• Creating an innovation safe-space increases the risk of cultural clashes between the individuals within the safe-space and individuals outside of it. As a result, the innovation safe-space is likely to become the center stage of a political battlefield between insiders and outsiders. In this kind of setting, individuals within the core of the organization are likely to perceive disruptive ideas from the innovation safe-space as potential threats and are likely to fully use their political capital to sabotage efforts, originating from the innovation safe-space.
• Corporates often have impressive human, financial and technological capital, which has the potential to help scaling new disruptive ideas. However, when the disruptive activities are isolated within the innovation safe-space, it will be more difficult to actually access these resources. Instead of fully profiting from the corporate’s resources, the innovation safe-space is likely to get caught in time-consuming and frustrating discussions with HR, procurement, and IT departments, who perceive the innovation safe-space a risk factor instead of an activity that should receive strategic priority.

As an alternative to innovation safe-spaces, I propose the use of what I call innovation switchboards.  In the past, telephone switchboards were used in telephone networks to interconnect circuits of telephones to establish telephone calls between users. In a similar vein, I see innovation switchboards as organizational structures where a wide variety of experiments can be jointly conducted by groups of individuals, coming from different parts of the organization. Such innovation switchboards can still have a separate office and location, but could also operate in a more virtual way.

In contrast to innovation safe-spaces, where the emphasis is on creating organizational separation, the core function of innovation switchboards is to connect different individuals from different parts of the organization to jointly develop disruptive ideas. The core individuals within such innovation switchboards are the switchboard operators. These are the people that are well connected throughout the organization and have the knowledge and social skills to bring together people with complementary skills and ideas. In others words, these innovation switchboard operators are able to bring together all necessary stakeholders to assure that a disruptive business model idea will have the necessary organizational resources, commitment and political capital to nurture and flourish.

In sum, to successfully execute digital disruption of business models, corporates should move to a different organizational approach. Today, disruptive initiatives such accelerators, incubators and innovation labs are often framed as innovation safe-spaces, imposing a clear separation between the disruptive activities and the core of the organization. Instead, I propose the application of an innovation switchboard model, where accelerators, incubators and innovation labs are used as meeting points to spur continuous collaboration between different organizational stakeholders to leverage the existing core capabilities of the organization for disruptive business models. In my opinion, this alternative approach can help corporates in successfully addressing the huge digital disruption challenges they are facing.

This blog is the first outcome of an ongoing research project on innovation theater. In this research project, I analyze practitioner writings (blogs, news articles) and conduct interviews with corporate innovation experts to better understand why innovation theater happens and how it can be avoided. For shaping my ideas for this blog, the insights provided by Bas Wenneker, Alexander Mahr and  Tendayi Viki were especially helpful.