Leadership & Strategy: Drucker’s Discipline of innovation

When Peter Drucker makes an observation, the chances are that it will still be highly relevant many years later. Nowhere is this more true than Drucker’s 1985 HBR article, ’The discipline of innovation’. In it, Drucker make a case for three neglected qualities of innovation: not talent, ingenuity or knowledge, essential though they may be: but diligence, persistence and commitment.

The popular image of the process of innovation is that of serendipity combined with genius; of Archimedes leaping from the baths shouting ‘eureka’; of Newton emerging semi-comatose from beneath the apple tree. Drucker’s article seeks dispel that notion. He argues that innovation rarely comes about in a ‘flash of genius’ but as a result of a ‘conscious, purposeful search for innovation opportunities’. For Drucker, there are seven kinds of opportunity. The first tour tend to occur with an organization or industry, the others are external:

Organisational Opportunities

• ·       Unexpected occurrences
• ·       Incongruities
• ·       Process needs
• ·       Industry and market changes

External Opportunities

• ·       Demographic changes
• ·       Change ion perception
• ·       New knowledge

Unexpected occurrences

For Drucker, these are opportunities where a product designed for one purpose is found to have more valuable or lucrative possibilities elsewhere. Drucker gives the example of IBM who developed the world’s first accounting machine right at the start of the great depression in the early 1930s. Its intended market, the banks, was not interested however but the company was saved by the then prosperous national libraries who found a use for the machines. Drucker notes however that companies are often reluctant grasp those opportunities which they did not forsee. Indeed ‘most businesses dismiss them, disregard them, and even resent them’. There are consequently greater opportunities for those far-sighted and lateral minded enough to know a good idea when they see one, and understand how to adapt it to different circumstances.

Incongruities

Drucker believes that incongruities between expectations and results, between assumptions are realities, are intensely valuable sources of innovation. He notes how the shipping industry faced financial ruin in the 1950s, despite striving towards what everyone though was needed: faster ships requiring less fuel. As soon it was realized that the problem was not the cost incurred travelling from A to B, buth rather wasting time unloading at B, innovation followed. Once the incongruity was exposed, it was a simple matter of adapting the techniques of land-based freight to shipping: roll-on, roll-off and container ships were the logical innovation that resulted and shipping became a significant growth industry.

Process needs

Once again, Drucker explains this term by example, locating the origins of the mass circulation newspaper in 1890s America. For the newspaper as it is known today required two innovations, which resulted from, a process need: the linotype, for the mass production of print; and the social innovation of newspaper advertising.

Industry and market changes

Drucker notes that fast growth often leads to significant changes in the structure of an industry. At times like these, established companies are likely to concentrate on defending existing markets and neglect the major growth industries. Innovative newcomers can take advantages of these changes.

Demographic changes

Of the three external opportunities for innovation cited by Drucker, demographic changes are the most predictable. Drucker urges companies to take advantages of certainty, highlighting how the Japanese manufacturing industry’s ten years lead in robotic began with reliable prediction of a decline in the manual labour force as a result of ‘a baby bust and education explosion’.

‘The innovation opportunities made possible by changes in the number of people – and in §their age distribution, education, occupations and geographic location – are among the most rewarding and least risky of entrepreneurial pursuits.’

Change in perception

How people perceive different situations has important implications for innovation. Drucker speaks of how a shift from an optimistic to a pessimistic view of a situation can either stimulate or impede innovation.

New knowledge

New knowledge is the most complex and time consuming of all innovation opportunities. Example of knowledge based inniovation include commercial banking, the automobile, the computer, the commercial airline industry, all of which required the convergence o numerous different knowledge components, and an individual or group capable of seeing the big picture and pulling them together.

Making use of opportunity

Although it is unlikely that a successful innovator will make use all seven types of opportunity, the chances of being successful are strengthened if each type is borne in mind. Drucker is careful to stress the entrepreneurial element of innovation; identifying a need; analyzing how an innovation will slot to existing markets; studying the habitts and expectations of potential users.

Finally, Drucker stresses how important it is to keep innovation simple. Good innovations ‘try to do on specific thing’. But it should be specific thing that nobody has yet thought to do. And finding what that doesn’t require genius. It needs a lot of hard work.