Alan Kay, a great computer scientist, wrote that “the best way to predict the future is to invent it.” Ivan Bofarull, chief innovation officer at Esade, has just published his first book, Moonshot Thinking. Transform disruptive innovation into an opportunity (Editorial Arpa). In it he endorses Kay’s words to propose a new method that helps entrepreneurs and managers of large companies to understand the world that is brewing. The challenge for new players — newcomers — is to scale their business models; incumbent companies — those that dominate the market — must instead transform narratives of threat into narratives of opportunity. The only thing they should both share is the ability to tell good stories, the main skill in the field of innovation, transformation and disruption.
He talks about disruption constantly in the book, but that’s a concept we’ve come up with a lot. How would you define it?
Disruption is a form of innovation, as it is a process that creates new value. In addition, it is a type of innovation that makes the above obsolete, be it a product, a service or a habit. Disruption causes a replacement. For this reason, in the current environment of the covid-19, disruption is crucial: when changing many areas in a forced way, there is a window that invites us to this replacement.
Disruption comes from disrumpere, which means breaking into pieces. That is what the digital economy consists of: big tech seizes these small pieces of established companies, while the managers of these companies fear that technology companies may interrupt their activity at any time.
And it is a fear that is well founded. One of the paradigms of the digital age is that in all business models there is a piece that is digitizable or algorithmizable. This means that a startup or a big tech can enter your sector and take that piece of the business model.
And how can incumbent companies face this great challenge?
I propose a three-headed organization with three engines based on 10X thinking: that of exploiting our core business, that of adjacent exploration of the core business and that of creating markets that do not yet exist. If we do not transform we will be disrupted, but to transform we need to experiment. Leadership styles that allow experimentation are needed, so that learning from error is not penalized, but rewarded. But really, if we want to have a great capacity for differentiation, we cannot be a company that only makes decisions based on data. Because any prediction of any artificial intelligence is made up of past data. If you want to build a lasting competitive advantage, you have to make decisions that are not linear, that do not come from data correlations. Elon Musk or Jeff Bezos have understood it very well.
Because they have a story.
Exactly. As data science gains relevance, the ability to tell good stories does, too. They are communicating vessels because the more data we have, the more complex the future becomes. Having narratives that move us is increasingly important. When we look at companies like SpaceX or Amazon we see that one of the aspects that distinguish them is that they have a much higher ability to finance themselves than any other traditional company. Amazon does not distribute dividends. Which company in the world is forgiven dividends? And because? Because Bezos has tremendous narrative ability. He says that Amazon is going to be a ubiquitous company in everything that has to do with our material needs and that story investors believe it. Because it is true and because it is seductive. This means that Amazon, Tesla or SpaceX have a much lower cost of access to capital and can undertake much higher strategic investments. Of course, it is one thing that you know how to disrupt and another that you do well with that disruption. For you to be disproportionately good, you must tell a good story. An iPhone, for example, is a story that begins in that kind of temple where you buy it, the Apple Store, and ends in what others think of you when you have an iPhone.
In the book he remembers when one of the Netflix bosses says, “We have to become HBO before HBO becomes us.”
Clear. But which path is shorter, going from being a new player to an incumbent or being an established company and reinventing yourself? Clearly the first. Because the other is full of organizational barriers based on human nature itself, because we have a bias aimed at preserving what already exists. Any change in an established company generates discomfort, so that purely aesthetic transformations are undertaken. But I insist, if you are only a data company, the probability of being replicated is high. So you have to make that synthesis between technology and narrative. But again, it’s easier to get to that synthesis from the new player side than from the incumbent side. One of the characteristics of leadership should be unlearning and relearning constantly. In a world of continuous disruption, if you do not unlearn you will reach the level of obsolescence that the disruptor wants from you.
He speaks in the book of innovation by mimicry and says it gives incremental but not exponential improvements. It also demystifies the figure of the first-mover, the one that takes the initiative in a sector.
If we think about it, what we would all like is to be the last-move. If you have to jump into a pool where there is a 5% chance that there is a shark inside, we would all like to be the last because if everyone jumps in front and no one has been attacked, we will know that there really is no shark. But the virtue is knowing when you have to move. It is normal for managers of large companies to panic being first because they believe they can be left out of the picture, but they also do not want to be the last-move because they will be left without the new cake that is being created. In the end, they all innovate by mimicry and end up copying their immediate competitor. Which is a recipe doomed to failure. When everyone competes against everyone is the least option you have to capture value. Sometimes, instead of being the first-move, it’s more valuable to synthesize what two or three players have done before it’s your turn. Remember that Facebook was not the first social network and Google was not the first search engine.
For that you propose a method called moonshot thinking. What does it consist of?
It is a mental model that is based on moonshots, that is, on very ambitious large projects in which we are looking at in the long term and try to achieve benefits that will be very disproportionate to humanity and in which we do not compete against anyone. This concept is taken from the famous 1962 Kennedy speech, when the United States chooses to go to the Moon. What I’m saying is that moonshots are very good, but how can we make the learning of moonshots exponential? That is, each manager incorporates them as a habit in their day to day. And there appears the moonshot thinking, which allows you to prioritize the decisions that improve by what exists (10x), compared to those that represent a change of 10%. And when I say prioritize I don’t mean substitute or put in a much lower range. I mean, you have to force yourself to make that 10x emerge in your day to day because it is so unnatural that, if you don’t force yourself, you never will. Incorporating this allows us to solve the dilemma of the innovator of Clayton M. Christensen, since we will have shields to anticipate the disruption and overcome it, we become disruptors and, in addition, we will reduce the corporate risk of our company.