Systems Thinking and Disruptive Innovation

MIS 5001

Source: Christensen, C., Anthony, S., and Roth, E. “Seeing What’s Next: Using the Theories of Innovation to Predict Industry Change.” Harvard Business School Press, 2006, p.4.

Sustaining

Move along a known path such as improve an existing

product.

Low-end

Existing products are “too good” and relatively

expensive

New-market

Change the product to get new people by changing its nature or by making it more

convenient

DISRUPTIVE INNOVATION THEORY

TYPES

Systems

Stakeholders Model

Types and means

Measures

Innovative Systems

SYSTEMS INNOVATION APPROACH

Is Hulu still relevant?

How did the story evolve?

REFLECTION

Who is a Stakeholder?

1. Does the stakeholder have a fundamental impact on your organization’s performance? (Required response: yes.)

2. Can you clearly identify what you want from the stakeholder? (Required response: yes.)

3. Is the relationship dynamic — that is, do you want it to grow? (Required response: yes.)

4. Can you exist without or easily replace the stakeholder? (Required response: no.)

5. Has the stakeholder already been identified through another relationship? (Required response: no.)

https://hbr.org/2014/03/five-questions-to-identify-key-stakeholders

Graham Kenny

RICH PICTURES

OR

CONTEXT

Customers The subject of T Homeowners

Actors Those who do T Members of the home

Transformation process Input > output Hand painting

Weltanschauung Worldview assumed in the T

Hand painting will improve the appearance

Owners The power to stop T Homeowners

Environmental constraints Fixed but relevant outside elements that can influence T

Weather

Adapted from: Checkland, Peter, and John Poulter. Learning for action: a short definitive account of soft systems methodology and its use for practitioner, teachers, and students. Vol. 26. Chichester: Wiley, 2006.

huluSunday, May 17, 2015 5:00 PM

Hulu

HULU - OVERALL

A Hulu owned and operated system for consumers to view professionally produced content, that is easy to find and enjoy, and which serves the needs of advertisers and content owners, and increases the revenue and long term viability of Hulu.

Customers The subject of T Consumers, Advertisers, Content owners

Actors Those who do T Hulu staff

Transformation process Input > output Acquire and serve content

Weltanschauung Worldview assumed in the T Content is good, consumers want to view it on the internet, …

Owners The power to stop T Content owners, Internet providers, Hulu board

Environmental constraints Fixed but relevant outside elements that can influence T

Technical skills of employees, Bandwidth, device capability, digital availability

ACTIVITY

What is Hulu’s problem today?

What is the solution?

Diagram the solution

What kind of system is it?

ACTIVITY - CONTEXT TABLE

Customers The subject of T

Actors Those who do T

Transformation process Input > output

Weltanschauung Worldview assumed in the T

Owners The power to stop T

Environmental constraints Fixed but relevant outside elements that can influence T

ACTIVITY – RICH PICTURE OF THE PROBLEM

ACTIVITY – DRAW/DIAGRAM THE SYSTEM

ACTIVITY – WHAT KIND OF SYSTEM? – CIRCLE ONE

SELECT THE RELEVANT MEASURES

Efficacy

• does it work?

Efficiency

• Is there sufficient value given the required resources?

Effectiveness

• Does it achieve long term goals? (i.e., R)

Ethicality

• Is this system morally correct?

Elegance

• Is the system aesthetically pleasing?

STILL MEASURES ARE ONLY ONE PIECE OF THE PUZZLE…

Innovation

Measures

Types

Means

UNDERSTANDING SIGNALS OF CHANGE

Barriers to innovation are

changing

i.e., Government regulation

Nonmarket Contexts

When new markets are

being created

i.e., Facebook, iPad

Non-consumers

When companies are filling down-

market need

i.e., Netbooks, Kindle Fire

Overshot Customers

When companies are filling up-market need

i.e., new data analytics

software to handle “big

data”

Undershot Customers

MEANS AND TYPES TO GENERATE SYSTEMS

Undershot Customers

Overshot Customers

Non-consumers

Nonmarket Contexts

Low cost

New capability

Ease of use

New place

New time

Change in legislation

Sustaining

Move along a known path such as improve an existing

product.

Low-end

Existing products are “too good” and relatively

expensive

New-market

Change the product to get new people by changing its nature or by making it more

convenient

TYPESMEANS

Engine

Spoke and hub

Interface

Interact

Sequence

Perspectives

Map

DISRUPTIVE INNOVATION THEORY RUBRIC

WHAT IS THE NEW TECHNOLOGY INNOVATION?

(you must be able to specify this, otherwise

Christensen is likely not applicable)

▪ A single new feature or a bundle of new features

▪ A new attribute/representation/bundling that

simplifies previously complex features

▪ A new kind of product/service

▪ A mix of other innovations

WHAT WILL THIS NEW INNOVATION COST?

▪ It will be much lower cost than what you spend

to get the capabilities now >> ‘low end’

▪ It will cost quite a bit more or it will be a new

cost that cannot be compared >> ‘new market’

HOW EASY TO USE IS THIS NEW INNOVATION?

▪ Much easier to use >> ‘low end’ or ‘new market’

▪ It will do something entirely new which will

require a learning curve >> ‘new market’

HOW DOES THE ABOVE COMPARE TO EXISTING

SIMILAR PRODUCTS/SERVICES?

▪ Significantly better >> ‘new market’ or ‘low-end’

▪ Slightly or somewhat better >> ‘sustaining’

WHO IS USING THE EXISTING PRODUCTS / SERVICES?

▪ (describe the customers, their demographics,

size of market, etc.) >> ‘sustaining’ or ‘low-end’

▪ (nobody…) >> ‘new market’

WHO WILL USE THE NEW INNOVATION?

▪ Consumers who use similar products/services >>

‘sustaining’

▪ Consumer who use adjacent or completely

different products/services will migrate over >>

‘low end’ or ‘sustaining’

▪ Hard to assess >> ‘new consumers >> ‘new

market’

WHERE WILL THE INNOVATION BE USED?

▪ Where existing similar products/services are

used >> ‘sustaining’ or ‘low-end’

▪ In a new location/time/context >> ‘non-

consuming context’ >> ‘new market’

TWITTER – CIRCLE THE CHOICES

Undershot Customers

Overshot Customers

Non-consumers

Nonmarket Contexts

Low cost

New capability

Ease of use

New place

New time

Change in legislation

Sustaining

Move along a known path such as improve an existing

product.

Low-end

Existing products are “too good” and relatively

expensive

New-market

Change the product to get new people by changing its nature or by making it more

convenient

TYPESMEANS

1. Appreciate lifestyle of

active consumers

7. Organize UI to meet needs

4. Identify tech skills of

active consumers

2. Target ‘active’

consumers

3. Identify needs of

active consumers

8. Appreciate available IT

for active use

9. Provide content

6. Source content

5. Negotiate content sources

11. Monitor use12. Define

measures for ‘active’ users

10. Report leads to

advertisers

15. Take control action

13. Evaluate activeness

14. Change content

HULU – PROPOSED SYSTEM

HULU – A SPECIFIC IDEA

A Hulu owned and operated system for consumers to view professionally produced curated content for socially active consumers, that is easy to find and enjoy, and which serves the needs of advertisers and content owners, and increases the revenue and long term viability of Hulu.

Customers The subject of T Socially active consumers, relevant advertisers, relevant content owners

Actors Those who do T Active content curators

Transformation process Input > output Acquire and serve active content

Weltanschauung Worldview assumed in the T Socially active consumers want relevant content and want to view it on the internet…

Owners The power to stop T Content owners, Management

Environmental constraints Fixed but relevant outside elements that can influence T

Technical skills of employees, Bandwidth, device capability, availability of active digital content

MEANS AND TYPES – HULU PROPOSAL

Undershot Customers

Overshot Customers

Non-consumers

Nonmarket Contexts

• Cheaper than cable?

• “Free” movies?Low cost

• Create own content?

• Source foreign content?New

capability

• Can TV be easier to watch?Ease of use

• Watch at work? In the car?New place

• During vacation?

New time

• Relaxation of copyright rules?

Change in legislation

Sustaining

Move along a known path such as improve an existing

product.

Low-end

Existing products are “too good” and relatively

expensive

New-market

Change the product to get new people by changing its nature or by making it more

convenient

ACTIVITY: GENERATE AN INNOVATIVE SYSTEM

Draw a rich picture of a problem

Propose a digital system

Identify the context

SystemIs it a ‘disruptive system’?

What is the disruption?

What are the measures?

DisruptionRich picture of problem

Context table

Describe/draw systems solution

Measures

Form of disruption

Deliverables

ACTIVITY - CONTEXT TABLE

Customers The subject of T

Actors Those who do T

Transformation process Input > output

Weltanschauung Worldview assumed in the T

Owners The power to stop T

Environmental constraints Fixed but relevant outside elements that can influence T

ACTIVITY – RICH PICTURE OF THE PROBLEM

ACTIVITY – DRAW/DIAGRAM THE SYSTEM

ACTIVITY – WHAT KIND OF SYSTEM? - CIRCLE ONE

ACTIVITY – PICK MEASURES

Efficacy

• does it work?

Efficiency

• Is there sufficient value given the required resources?

Effectiveness

• Does it achieve long term goals? (i.e., R)

Ethicality

• Is this system morally correct?

Elegance

• Is the system aesthetically pleasing?

ACTIVITY – CIRCLE THE RELEVANT ITEMS

WHAT IS THE NEW TECHNOLOGY INNOVATION?

(you must be able to specify this, otherwise

Christensen is likely not applicable)

▪ A single new feature or a bundle of new features

▪ A new attribute/representation/bundling that

simplifies previously complex features

▪ A new kind of product/service

▪ A mix of other innovations

WHAT WILL THIS NEW INNOVATION COST?

▪ It will be much lower cost than what you spend

to get the capabilities now >> ‘low end’

▪ It will cost quite a bit more or it will be a new

cost that cannot be compared >> ‘new market’

HOW EASY TO USE IS THIS NEW INNOVATION?

▪ Much easier to use >> ‘low end’ or ‘new market’

▪ It will do something entirely new which will

require a learning curve >> ‘new market’

HOW DOES THE ABOVE COMPARE TO EXISTING

SIMILAR PRODUCTS/SERVICES?

▪ Significantly better >> ‘new market’ or ‘low-end’

▪ Slightly or somewhat better >> ‘sustaining’

WHO IS USING THE EXISTING PRODUCTS / SERVICES?

▪ (describe the customers, their demographics,

size of market, etc.) >> ‘sustaining’ or ‘low-end’

▪ (nobody…) >> ‘new market’

WHO WILL USE THE NEW INNOVATION?

▪ Consumers who use similar products/services >>

‘sustaining’

▪ Consumer who use adjacent or completely

different products/services will migrate over >>

‘low end’ or ‘sustaining’

▪ Hard to assess >> ‘new consumers >> ‘new

market’

WHERE WILL THE INNOVATION BE USED?

▪ Where existing similar products/services are

used >> ‘sustaining’ or ‘low-end’

▪ In a new location/time/context >> ‘non-

consuming context’ >> ‘new market’

ACTIVITY – DISRUPTION – CIRCLE THE CHOICES

Undershot Customers

Overshot Customers

Non-consumers

Nonmarket Contexts

Low cost

New capability

Ease of use

New place

New time

Change in legislation

Sustaining

Move along a known path such as improve an existing

product.

Low-end

Existing products are “too good” and relatively

expensive

New-market

Change the product to get new people by changing its nature or by making it more

convenient

TYPESMEANS

Systems

Stakeholders Model

Types and means

Measures

Innovative Systems

SYSTEMS INNOVATION APPROACH

REFLECTION

What did you learn about the relationship of systems thinking to innovation?

What did you learn today?

Crossing the Chasm – Geoffrey Moore

https://www.amazon.com/Crossing-Chasm-3rd-Disruptive-Mainstream/dp/0062292986/ref=dp_ob_title_bk© Geoffrey Moore

Gartner Hype Cycle

© Gartner – Understanding the Hype Cycle

Learn more

PROCESS THINKING |SYSTEMS THINKING |DISRUPTION

CAN YOU MATCH PROBLEMS TO EACH APPROACH?

Process Thinking

A series of steps and flows

Decompose

Systems Thinking

Collection of processes and technological components

Feedback loop

Synthesize

Business Models

Identify market need

Apply innovations

Evaluate

MORE FORMAL

Describe a purposeful activity as a transformation process

do P by Q in order to contribute to achieving R

P - What to do

Q - How to do it

R - Why do it

A householder-owned and staffed system to paint the garden fence, by hand-painting, in keeping with the overall decoration scheme of the property in order to enhance the appearance of the property.

Adapted from: Checkland, Peter, and John Poulter. Learning for action: a short definitive account of soft systems methodology and its use for practitioner, teachers, and students. Vol. 26. Chichester: Wiley, 2006.

Formal specification important for larger debate

UNDERSTANDING SIGNALS OF CHANGE

Barriers to innovation are

changing

i.e., Government regulation

Nonmarket Contexts

When new markets are

being created

i.e., Facebook, iPad

Non-consumers

When companies are filling down-

market need

i.e., Netbooks, Kindle Fire

Overshot Customers

When companies are filling up-market need

i.e., new data analytics

software to handle “big

data”

Undershot Customers

MORE ‘MEANS’

Low cost

New capability

Ease of use

New place

New time

Change in legislation

The power of free

Digital ubiquity

Fitness landscapes

Network effects

New niches in the ecosystem

Combine systems to

produce new

"Cynefin as of 1st June 2014" by Snowded - Own work. Licensed under CC BY-SA 3.0 via Wikimedia Commons -http://commons.wikimedia.org/wiki/File:Cynefin_as_of_1st_June_2014.png#/media/File:Cynefin_as_of_1st_June_2014.png

MORE ABOUT SYSTEMS

Christensen, C., Anthony, S., and Roth, E. “Seeing What’s Next: Using the Theories of Innovation to Predict Industry Change.” Harvard Business School Press, 2006.

Checkland, Peter, and John Poulter. Learning for action: a short definitive account of soft systems methodology and its use for practitioner, teachers, and students. Vol. 26. Chichester: Wiley, 2006.

Sweeney, Linda Booth, and Dennis Meadows. The systems thinking playbook: Exercises to stretch and build learning and systems thinking capabilities. Chelsea Green Publishing, 2010.

Peter Allen, Steve Maguire, and Bill McKelvey, eds. The SAGE handbook of complexity and management. Sage Publications, 2011.

Holland, John H. Hidden order: How adaptation builds complexity. Basic Books, 1995.

READING

Part of this deck is based on material from Steven Johnson and David Schuff.

Thanks to Yasmin Merali for helpful suggestions.

ACKNOWLEDGEMENT

Stakeholder AnalysisSamples