Presentation to MNP Risk Management

1. HOW TO ANTICIPATE
DISRUPTION
AND WHAT YOU CAN DO
ABOUT IT
DR. ANDREW MAXWELL
LASSONDE SCHOOL OF ENGINEERING, YORK UNIVERSITY
CANADIAN INNOVATION CENTRE

2. WHAT IS DISRUPTION?
• CHANGES IN THE MARKETPLACE OR ECOSYSTEM THAT AFFECT:
• THE PLAYERS, THE INTERACTIONS AND THE FUNCTIONS THEY
DO
• CREATES NEW LEVELS OF PERFORMANCE, TYPICALLY
• SATISFICING PERFORMANCE FOR MUCH LOWER COST
• NOVEL SOLUTIONS THAT MEET PREVIOUSLY UNMET NEEDS
• CHANGES THE NATURE OF COMPETITION AND COMPETITIVE
ADVANTAGE
• OFTEN CAUSED BY A CHANGE IN TECHNOLOGY, A CHANGE IN

3. CAN YOU SEE DISRUPTION COMING?
CHANGES IN BUSINESS MODEL (DIFFICULT TO ANTICIPATE)
• SOME SAY THERE ARE NO NEW BUSINESS MODELS – JUST THE
APPLICATION OF AN EXISTING MODEL TO A NEW INDUSTRY
CHANGES IN TECHNOLOGY (CAN SCAN TRENDS)
• TECHNOLOGY CHANGES ENABLE NEW LEVELS OF PERFORMANCE
(NOT BETTER)
• TECHNOLOGY CHANGES ENABLE YOU TO DO NEW THINGS
• HOWEVER, CHANGES IN TECHNOLOGY DO NOT ALWAYS CAUSE
DISRUPTION

4. IS INNOVATION INCREMENTAL OR
DISRUPTIVE?
• ASK THE QUESTION – WHAT JOBS CAN THE TECHNOLOGY DO….
• LIKELY THE TECHNOLOGY CAN DO SEVERAL JOBS……
• SO THE QUESTION IS:
• HOW WILL IT BE USED TO DO EXISTING JOBS BETTER?
• HOW CAN IT DO JOBS THAT ARE CURRENTLY UNMET NEEDS?
• IF IT IS DOING EXISTING JOBS BETTER
• CAN EXISTING SUPPLIERS REPLACE THEIR CURRENT SOLUTIONS WITH
IT?
• CAN NEW COMPANIES EXPLOIT THE OPPORTUNITY BETTER?
• IF IT MEETS UNMET NEEDS
• CAN EXISTING SUPPLIERS ADD PRODUCT/SERVICE TO THEIR
PORTFOLIO

5. WHO ARE LIKELY TO BE THE
DISRUPTORS?
• EXISTING COMPANIES OR ORGANIZATIONS IN THE MARKET
• NEW DIVISIONS OR UNITS OF EXISTING ORGANIZATIONS IN THE
MARKET
• EXISTING COMPANIES OR ORGANIZATIONS NOT CURRENTLY IN THE
MARKET
• NEW COMPANIES
• IN MANY CASES, NEW VENTURES ARE THE OPTIMAL WAY TO DISRUPT THE
MARKET:
• THEIR STAKEHOLDERS HAVE AN APPETITE FOR RISK LINKED DIRECTLY TO
THE OPPORTUNITY
• THEY HAVE A FOCUS AND STRATEGY COMMITTED TO THAT OPPORTUNITY
• THEY ARE NOT CONSTRAINED BY LOOKING AFTER EXISTING CUSTOMERS
OR MARKETS

6. LINK BETWEEN RISK AND INNOVATION?
• INNOVATION, BY DEFINITION, IS DOING SOMETHING NEW.
• IT CAN BE NEW TO THE WORLD, NEW TO THE INDUSTRY OR NEW TO THE FIRM
• AS SUCH THERE IS A LEVEL OF RISK, BECAUSE YOU ARE CHANGING
SOMETHING
• THERE ARE MANY TYPES OF INNOVATION RISKS (WHICH MUST BE
CONSIDERED):
• TECHNICAL RISK – THAT THE TECHNOLOGY WILL NOT PERFORM AS
EXPECTED
• MARKET RISK – THAT USERS AND CUSTOMERS WILL NOT WANT OR NEED
THE SOLUTION
• FINANCIAL RISK – THAT THE SOLUTION CAN NOT BE OFFERED AT A VIABLE

7. HOW DO YOU MANAGE INNOVATION
RISK?• AT THE SIMPLE LEVEL YOU MUST MITIGATE EACH OF THESE RISKS, FOR EXAMPLE:
• TECHNICAL RISK CAN BE MITIGATED BY USING THIRD PART COMPONENTS
• MARKET RISK CAN BE MITIGATED BY ENGAGING USERS IN PRODUCT DEVELOPMENT
PROCESS
• FINANCIAL RISK CAN BE MITIGATED BY RELYING ON MARGINAL COST SUPPLIERS
• OPERATIONAL RISK CAN BE MITIGATED BY OUTSOURCING COMPONENTS OF SUPPLY
CHAIN
• AT THE DEVELOPMENT LEVEL, YOU CAN USE A LEAN START UP APPROACH:
• DESIGN A SERIES OF FAST AND LOW COST STEPS TO VALIDATE THE OPPORTUNITY
• DEVELOP A MINIMUM VIABLE: IDEA, VALUE PROPOSITION, OR PRODUCT BEFORE
PRODUCING THE FINAL SOLUTION (OR SCALING UP)

8. HOW TO MANAGE AN INNOVATION
PORTFOLIO?
• THE INNOVATION PROCESS IS A SEQUENTIAL ELIMINATION PROCESS
WHERE
• NEW PRODUCTS (OR SOLUTIONS) CAN FAIL AT ANY STAGE.
• EACH PROJECT WILL THEREFORE SUCCEED, PIVOT OR FAIL
• AS MOST PROJECTS FAIL, OUR PORTFOLIO APPROACH ASSUMES THIS
• THEREFORE YOU CANN’T USE TRADITIONAL APPROACH TO PORTFOLIO
MANAGEMENT
• YOU NEED TO USE A PORTFOLIO APPROACH DESIGNED TO INCLUDE
FAILURES

9. QUESTIONS
ANDREW MAXWELL ANDREW.MAXWELL@LASSONDE.YORKU.CA