Large companies have a problem. Even when they are aware of early disruption in their target markets they can’t help but to continue improving existing products and carry on extracting higher profits. Organizational structures and processes of these big players are geared purely for optimizing the status quo.
In the meantime the more nimble startups keep on experimenting and innovating in tiny segments of the market that are not relevant to the big players. They can do so due to the flexibility (or lack) of process and organizational structures. They also don’t have the burden of satisfying all customers all the time.
For the bigger firms allocating management focus and resources to try out disruptive innovations does not make economic sense. But does that mean large players should totally forget about disruption? Probably not. One possible approach would be to become early investors in potential disruptors with perhaps plans for more involved future partnerships or even a merger/acquisition.
In such a scenario the larger firm should ensure that the smaller firm (startup) can operate independently with it’s innovation game and failure is not frowned upon. It’s also imperative that the smaller firm (or business unit) have a small but vocal customer base to ensure a solid feedback loop.
The big players should look at such investments/acquisitions as playgrounds to test hypotheses, fuel innovation and come up with products that would disrupt the current market.
Now the challenge for the large firms would be in identifying potential disruptors early on and thereafter making sure they do not stall the innovation of the startup.
On the other hand the key for the startup would be to make sure that the larger firm’s intentions are good and has no ulterior motive of killing the disruption!