Values that focus an organization priorities on high margin products cannot simultaneously focus priorities on low margin products. This is why focused organizations perform so much better than unfocused ones. Their processes and values are aligned with the set of tasks necessary to perform in the higher margin market. Choices are:
- Acquire an organization whose processes and values are more closely aligned with the new task.
- Hard to assign a $ value to processes and values.
- Hard to integrate the new company into the larger company without vaporizing those processes and values.
- Generally better to let them live alone and give resources.
- Try to change the processes and values at the current organization.
- Separate an independent organization – within the company. A “Spin Out” company
- When the company’s current processes and value would stifle the unit working on the disruptive technology.
- Can be because cost structure is different than the mainstream organization
- Can’t be expected to compete for resources within the main organization. The smaller company will generally lose, or change focus in main organization causing inefficiencies.
Processes are very hard to change. 2 reasons:
- Organizational boundaries are generally drawn to facilitate current processes: Can impede creation of new processes.
- In some cases, managers just don’t want to throw them out: They created them and they like them.
So it’s important to see and accept the disruption in advance.
The reasons why innovation seems so difficult for established firms is because they employ highly capable people. Then set them to work within values and processes that are not compatible to creative innovation. They are about maximizing profit with existing products and resources. However the speed of change is much faster now than ever before.