Marketing Week just named 100 of the most disruptive brands in 2016. Wonolo and Winnin, two of our Coca-Cola Founders portfolio companies, were included. This is awesome for them but it also validates what we’re trying to do through our platform—create disruptive innovation.
Disruptive innovation is very difficult for big, established companies. In this post, I’ll go deep into how big companies think about innovation and just how hard it is for them to be disruptive.
What is disruptive innovation anyway?
Clayton Christensen originally coined the phrase “disruptive innovation” and defined it as:
“… a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors.”
Christensen’s definition is clear, but starting in about 2012, when Kodak filed for bankruptcy, the term “disruptive innovation” began being used much more broadly inside the cubicles and corridors of most big companies. Disruptive Innovation became a buzzword that was linked to the ability to use new digital technologies and business models to disrupt entire industries. And, over the past decade, startups have come to symbolize this kind of innovation. Every big company felt the need be able “to do what startups do.”
It might not seem like it, but it’s very difficult for big, established companies to do what startups do. But before we get into that, let’s step back and understand how most big companies think about innovation.
Most big companies are good at “incremental” innovation.
The goal of incremental innovation is to signal to the market that the company is keeping up with trends—it’s fresh, relevant, and cool. This is critical to stay competitive no matter what category the company competes in.
And most big, established companies are good at it. Think about it. Incremental innovation is relatively easy to plan, resource, and measure. Incremental innovation is a new feature or a new flavor. This kind of innovation doesn’t disrupt anything—in fact it’s fun and exciting. Incremental innovation makes everyone feel good. It doesn’t rock the boat, it enables it to sail better, cheaper, faster. Who doesn’t like this kind of innovation?
But to be disruptive, you have to break things.
Disruptive innovation doesn’t just make something to sell to people. It introduces the world to a new category of products or services. It replaces our current point of view with a new point of view.
Airbnb, Uber, Slack, Square, Jet are disruptive.
This kind of innovation is very difficult to plan, resource and measure. This kind of uncertainty and risk that this kind of innovation takes makes it hard—if not impossible—to create inside of big companies.
At Coca-Cola, we knew we needed to create a new model.
For most big companies, even though they may say they want disruptive innovation, they don’t. It’s just too disruptive.
When we began to focus on “disruptive innovation,” we knew we would need to create a new operating model—one that could work independently from the internal processes and systems that drive our core business.
In 2014, we launched a platform called “Coca-Cola Founders.” The platform connects our local business units’ biggest challenges with repeat founders to co-create scalable startups. In less than two years, we’ve used this platform to create 12 startups in 10 countries generating a 3x return on our investment.
The model is working. It’s still early, but imagine if we can leverage this model to actually create entire new categories—at the scale of Coca-Cola.