Davos briefing: Disruptive innovation

Disruptive innovations of all sorts are a key focus at the World Economic Forum Annual Meeting 2014 in Davos and a hot topic not only in technology, but almost all sectors and industries.

While disruptive innovation is today dominated by technological advances, such innovations are not simply technical; such disruptions can create great anxiety in businesses and governments. This is a small price to pay, however, for the potential benefits.

Disruptive ideas often fill niches or fulfil needs that are identified at the base of traditional power pyramids – among consumers living hand-to-mouth, or citizens who feel disenfranchised from existing spheres of influence.

In business and commerce, the prevailing focus on short-term business results is often at odds with the freedom to experiment and a willingness to fund innovation, making it hard to jump the hurdle of immediate profitability. Businesses also tend to be defensive of established products and ways of working; fears of “cannibalizing” their existing business can deter them from pursuing disruptive innovation themselves. Yet, if they do not innovate, they know others are likely to.

Disruptive innovation’s key benefit is often, at its simplest level, that of making previously out-of-reach products affordable to a broader audience. Nanotechnology, for instance, has many potentially life-saving applications, but remains largely unaffordable. 3-D printing is another example of an innovation that has not yet been deployed at scale in a potentially disruptive – and job-creating – way.

Smart businesses have realized that the data generated at every step of our digital lives promises more efficient, personalized goods and services. Businesses have the ability to capture, organize, extract insights from and transact with data in ways that show a clear correlation with productivity (yet there remains deep public fear over what’s mourned as a loss of privacy, and distrust of those who hold and use data).

Disruptive innovations are quickly changing other aspects of our lives as well.

Disruptive innovation can generate huge new growth markets and the employment opportunities of the future at a time when persistent structural unemployment is a central global problem and billions of young people aspire to join the world of work. Nevertheless, training and education needs to be made more relevant and widely available, equipping men and women for the new workforce. In a disrupted market, there are jobs being created that can’t be filled, while education often equips graduates with skills that employers no longer require.

The educational skills necessary to start companies that focus on empowering innovations are scarce, and innovation that brings efficiency can lead to redundancy. This could possibly be better achieved through Massive Open Online Courses (MOOC), for instance, which have made higher education accessible to anyone with an Internet connection.

Through disruptive technologies, citizens are also able to organize themselves and ideas can percolate upwards. Ideas exist in emerging markets that have applications in other contexts.

But to truly take advantage of the changing landscape, business and government leaders can do more. Knowing that more disruption is on the way, they need to prepare for it and be vigilant against its risks, but also be bold and decisive in embracing the power of disruptive innovation. New approaches, business models and partnerships are essential, and technology can be the enabler.

Business environments need to be formed in which daring suggestions are encouraged and experimentation funded. Access to finance must be improved, particularly for young entrepreneurs; 30 million young people worldwide meet the criteria for credit, but have no access to finance. Social entrepreneurs – those individuals and organizations pursuing solutions to some of the world’s most weighty social problems – need support.

New partnerships, spanning industries and public and private sectors, must be forged; disruptive innovation has little respect for traditional competitive battle lines and innovative organizations are increasingly able to operate outside their primary domain. New approaches to employment must be harnessed. The data-driven world requires people with new and adaptable skills; diversity of talent is a catalyst for growth of the collective imagination, fuelling new ways of thinking and problem-solving.

A new kind of dialogue, at once more inclusive and more responsive, is needed to build trust in the power of regulatory authorities to effectively balance data privacy with security and convenience. Public and private sector organizations need to build a new social contract with communities that encourage people to join the discussion.

When growth, efficiency and innovation are finely tuned, however, a virtuous cycle results: disruptive innovation creates new demand and consumption, and efficiency gains can liberate resources to drive further innovation. This is not just a survival strategy for big business, nor simply of doing the right thing in order to lift people out of poverty. Yet, these promise to be the prizes of disruptive innovation.

Embracing Disruptive Innovation is one of four thematic pillars of the World Economic Forum’s Annual Meeting 2014. This is a summary of discussions from experts in the Network of Global Agenda Councils, led by Martina Gmür.

Image: A woman speaks on her iPhone in downtown Shanghai. REUTERS/Aly Song.