MBA vs. Innovator: Battle of the Minds and How They Approach Business Differently

“In every work of genius, we recognize our once rejected thoughts.” — Ralph Waldo Emerson

For 20+ years at Microsoft, I’ve watched how businesses are born, grow, and die, not just within Microsoft but with thousands of customers.

I became deeply fascinated with the kinds of choices that leaders make and whether it leads to business growth or business decline.

I especially focused on innovation-driven business growth because I learned the only sustainable business model is one that evolves.

And I dug deep into culture change because I learned how the best laid plans of strategy get eaten by culture.

And on the flip side, I also learned that a culture that doesn’t embrace strategy to figure out long-range winning positions in the market, is also doomed to fail.

It took me a while to see the patterns and to have enough years under my belt where I could look back with hindsight and reason over what worked and more importantly, why.  Without understanding why, it’s difficult to reproduce results when conditions or context changes, unless you really know what drives the essence of business growth.

“Change the Business” vs. “Run the Business” Leaders

Among innovators there is a quick way to classify a leader’s focus:

Are they a “Run the Business” leader, focused on incrementally growing their KPIs and sustaining and operating the business?

Or are they a “Change the Business” leader focused on innovation and growth and embracing new customer segments, new products and new business models?

While some leaders can function as both, what I’ve seen is the most self-aware leaders balance themselves by pairing up with somebody to complement their strengths and weaknesses.

It’s actually how I’ve seen “ambidextrous” organizations work in practice when one leader is really good at the operations and running the business, while the other leader is relentlessly focused on future business growth and validating that business growth through small business experiments today.

The MBA vs. The Innovator

How do MBAs and Innovator’s think and approach the business differently?

You’ve probably seen it in action, but here is a chart adapted by Reuven Gorsht from Jeanne Liedtka’s book Designing for Growth.   It shows key distinct differences between how MBAs and Innovators approach what they do.

	The MBA	The Innovator
Underlying Assumptions	Rationality, Objectivity, Reality as fixed and quantifiable	Subjective experience
Method	Analysis aimed at proving one best answer	Experimentation aimed towards iterating a better answer
Process	Planning	Doing
Decision Drivers	Logic, numeric models	Emotional insight, Experiential models
Values	Pursuit of control and stability.  Little tolerance for ambiguity	Pursuit of Novelty.  Dislike of status quo
Level of Focus	Abstract or Particular	Iterative movement between abstract and particular

What I learned is to embrace the best of both worlds, yet the conflict can cut deep.

People don’t like when their thinking is challenged.

So, MBAs and Innovators often find themselves on two sides of the same coin, violently agreeing but can’t see past their perspective, or can’t bridge the divide.   After all, these can be tough strategic choices around, what’s good for the future vs. what’s good for now, and whether to focus more on the current customer set or more on the future customer segment, or even a new business model.

That’s why adopting a Growth Mindset and embracing diversity and creating a culture of inclusion are key to business growth.

Innovation is Counter-Intuitive and Counter to the Culture

Innovation gets trained and groomed out of people as they naturally focus on “business success”.

Schools, organizations and business leaders reinforce the predictable mindset.

Business leaders climb the ranks by managing predictable businesses based on metrics.

In the Forbe’s article, Why You Shouldn’t Have “Innovation” in Your Job Title, Reuven Gorsht writes:

“Innovation is counter-intuitive to what we’ve been taught in business schools.

Most of the folks at the helm of organizations are MBAs or finance types that have been taught and came up the ranks managing predictable businesses based on metrics.

We’ve thoughtfully designed the modern organization to produce predictable outcomes, increasing reliability and reducing risk.

Innovation is an unnatural act within the current system and metrics-driven mantra. “

The Innovators Dilemma

What keeps business leaders stuck?

It’s the Innovator’s Dilemma, where your past success reinforces your future at the expense of new opportunities.

In the book, The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail, Clayton Christensen coined a key concept that is core to managing innovation.

The Innovator’s Dilemma is the choice that every innovator faces whether to continue their success by investing in their existing customers and products, or invest in new uses cases, new business models, and new markets.

It’s a paradox because the same practices that lead the business to be successful in the first place, can eventually result in it’s demise.

It’s the practice of focusing investments on those innovations that promise the highest returns.

That’s smart business.

But that’s also how companies miss out on new waves of innovation.

If you keep doing what you’ve always done, as the world changes around you, eventually that’s how you lose.

Sustaining Innovation

Whenever I ask a leader how they support innovation, the answer almost always goes something like this:

We wrap our business around our top paying customers.

We solve their worst problems that they pay us the most for.

And that’s how Sustaining Innovation happens.

It’s a good thing.  It’s smart business.  But it’s not the only thing.

It’s the trap that can lead to a lack of business growth and the eventual demise of the business.

And that’s also how leaders get stuck in the Innovator’s Dilemma.

Sustaining innovation is simply an improvement to an existing product or service.

This is where you make your good products better for your most sophisticated and demanding customers.

This is where big companies tend to focus because they find their best profits.  And this is what actually creates space for new entrants and disruptors.

Sustaining innovation is a common way for organizations to achieve 10% growth.

Disruptive Innovation

How do leaders great free of the Innovator’s Dilemma?

Leaders break the trap of the Innovator’s Dilemma through Disruptive Innovation.

Disruption can be low-end or new-market, and disruptive innovation is a process rather than a product or service.

Clayton Christensen coined the term “Disruptive Innovation” in his 1997 book, The Innovator’s Dilemma:

“Disruptive Innovation describes a process by which a product or service initially takes root in simple applications at the bottom of a market—typically by being less expensive and more accessible—and then relentlessly moves upmarket, eventually displacing established competitors.”

In other words, Disruptive Innovation is a process where a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up the market, and eventually displaces established competitors.

1. Low-End Disruption.  Low-end disruption is when businesses come in at the bottom of the market with a “good enough” product at a cheaper cost.  According to Christensen, this is disruptive innovation where a smaller company with fewer resources moves upmarket and, ultimately, captures the incumbents’ customers, who have adopted it into the mainstream.
2. New-Market Disruption.  This is market-making disruption.  New-market disruption is when businesses create a new segment in an existing market to reach underserved customers. These businesses basically turn products and services that were once expensive and unattainable into something affordable and accessible to a larger population of people.

Disruptive innovation is how some organizations achieve 70% growth.

Sustainable Innovation is 10% Growth, Disruptive Innovation is 70% Growth

I had already experienced how different types of organizations and focus produce different types of business growth.

But I really enjoyed seeing some of the numbers that HBR put to the different types of innovation and their impact on business growth.

In the HBR article Managing Your Innovation Portfolio, Bansi Nagji and Geoff Tuff share interesting insight on the return of innovation efforts:

“We’re finding consistently that the return ratio is roughly the inverse of that ideal allocation described above: Core innovation efforts typically contribute 10% of the long-term, cumulative return on innovation investment; adjacent initiatives contribute 20%; and transformational efforts contribute 70%.”

Business Leaders Focus on Sustaining Innovation

Business leaders focus on predictable, incremental results.

In the Forbe’s article, Why You Shouldn’t Have “Innovation” in Your Job Title, Reuven Gorsht writes:

“Roger Martin, former dean of the Rotman School of Management said ‘We live by adages like: ‘Show me the numbers’ and truisms such as ‘if you can’t measure it, it doesn’t count.’

While we are proud of our spreadsheet models and our ability to predict the future based on the past, using only the left side of the brain, he says, is that the analysis of past data can only, at best, produce reliable incremental results – not game-changing ideas and fundamental steps forward. “

Innovation is Always the First to Go

Innovation seems like the logical place for cost reduction to the MBA.

It’s fuzzy and it doesn’t fit well within the predictable mindset.

In the Forbe’s article, Why You Shouldn’t Have “Innovation” in Your Job Title, Reuven Gorsht writes:

“Understandably so, executives who take a “show me the numbers” approach to innovation see expensive experiments, lots of novelty, lack of planning and worst of all, no defensible numbers (at least in earlier stages) to justify the big bucks being spent.

In their eyes, innovation seems like a boondoggle and a logical place for cost reduction when times get tough.

As a result, ideas get killed before they ever have a chance to take flight.”

Questions for Reflection

1. Does your organization focus on Sustaining Innovation or Disruptive Innovation?
2. Can your organization survive the future through Sustaining Innovation?
3. How can your organization leverage and support both Sustaining and Disruptive Innovation?
4. What would you need to change about your culture for innovators rise and thrive?
5. Are you able to communicate up, down, and sideways the business impact of the Innovators Dilemma and Disruptive Innovation vs. Sustaining Innovation?

You Might Also Like

Innovation Hub
Innovation Explained—All the Big Ideas of Innovation on a Page
The Agile Innovation Framework
How To Become an Innovator
The Innovation Guide
What is Innovation?