Leading Disruptive Innovation

Why it hurts to listen to Clayton

Leading Disruptive Innovation

A short while ago, Harvard Professor Clayton M. Christensen from Harvard Business School visited Denmark and Norway to speak on the subject he is most passionate about; disruptive innovation. To Norwegian listeners, it was a painful speech. It hurts to hear his views; because they are alarmingly relevant.

Why it hurts to listen to Clayton

Time for new growth

Let us begin with a situational analysis of Norway as it looks in October 2014: A nation with several industries and business sectors that are at the very top of their life cycles, at least as we know the lines of business today (telecom, oil, shipping, large areas of traditional industries etc.). Industries that have been key in the building of the nation for the past 30 years, are now struggling with productivity, efficiency and marginal costs.

 

These are industries where Norwegian companies are under pressure from companies in other countries, where the conditions for profitability are better and there are other comparative advantages. Every day, we experience how senior economists, managers and writers share their concerns about our nation’s competitiveness, our weakened ability to meet future pension obligations, our rising welfare costs and our lack of adaptability to changing conditions as a nation and as individuals.

Norway is an expensive country in which to run a business. This is driven by nature, extensive regulations and the expectations that people have concerning life quality, working hours, salary, level of comfort and prosperity. The most important political task in the past decade has been distribution of wealth, not creation of growth.

Cost-cutting is not a strategy – it is a prerequisite

It is both understandable and necessary to focus on cost reductions, process optimisation, efficiency, outsourcing and to keep a close watch on the quarterly financial statements. There is no doubt that the Norwegian business world, private sector as well as the public sector, could be run more efficiently. In the past, we could earn money on an oil barrel at a price of $20 and upwards. Today, we are dependent on a price closer to $80 per barrel.

Still, a one-sided focus on cost cuts and optimisation is not enough. We are able to prolong the life cycle of a sector and strengthen companies’ ability to survive, if we reduce operating costs. Unfortunately, this might just be a way of postponing being outcompeted. Let me introduce the difference between two concepts: competitiveness and competitive advantage.

A nation’s or a company’s competiveness is the result of its ability to produce attractive products in a clever and efficient manner at costs which correspond to or are lower than those of its competitors. A competitive advantage, on the other hand, is what distinguishes a nation or a company from another in a positive manner, such as a feature or quality where the nation is superior to its competitors. The strength of a company’s competitive advantage can be measured by differentiation and the market’s willingness to pay.

Differentiation is fundamentally about how we create a relative higher perceived value for our customers in a unique way. Why this clarification? Well, because the difference between competitiveness and competitive advantage is a question of Norway’s future. We do not have very good prerequisites for becoming costleaders and outcompeting international companies on price. We are destined to seek leading positions in areas where our companies develop technology, solutions and concepts for which the market is willing to pay a higher price. Solutions that are better than those which companies in other countries are able to develop.

We need to focus on increasing revenues in order to create economic growth. To put it simply, it is crucial that we help accelerate growth in our country. Much of the success of Norwegian companies and the Norwegian government for the past 30 years is founded on competitive advantages through a practical and creative solution orientation, technological advantages, practical test facilities and a focused and targeted educational system.

Compared with many other countries, we have a well-functioning co-operation between the business world, the R&D environment, the academic world and the public sector. We have added competence, innovation and capital in combination with access to raw materials. This has been part of building new and world-leading Norwegian companies, e.g. in the subsea industry, oil service industry, maritime industry, seafood industry and other processing industries. These are supported by increasingly efficient public policy programmes, including cluster programmes (Innovation Norway), Siva and Norges Forskningsråd and political support for these.

We need more of this!

Ida Eikvåg Groth
Ida Eikvåg Groth
+47 924 10 556

A need for further growth

Norwegian companies need, to challenge the core of our business. That is, to develop solutions which disrupt or even overthrow the existing core business before anyone else does. Because if one thing is certain, it is that others are working to gain access to existing profit pools by doing exactly that.

We will need new setups; new units or companies, isolated from the current core business to ensure sufficient focus on what will be, not on what has been. In order to maintain leadership and a top position, Norwegian companies, policy instruments and the government need to realise that this task not only relates to improvement of what we have got, but also innovation of what is to come. At Implement Consulting Group, we work with initiatives that aim to give significant contribution to increased competitive strength and new revenue streams. We want to contribute to the development of new competitive advantages for Norwegian companies.

Furthermore, we want to help generate further growth, based on the strengths and conditions we have in Norway; our specialised knowledge, collaborative skills, the will to think in new directions, access to risk capital and supporting policy instruments. We believe that this will lead us, as a nation, to new advances and new leading positions.

Go to Clayton Christensen's page on our management heroes to learn more about his work on Disruptive Innovation.