On this week's episode of Inside Outside Innovation, we sit down with Marguerite Johnson, author of Disruptive Innovation and Digital Transformation, 21st Century New Growth Engines. Marguerite and I talk about the evolution of disruptive innovation theory and how legacy companies can embrace digital transformation and open innovation. Let's get started. 

Inside Outside Innovation is the podcast that brings you the best and the brightest in the world of startups and innovation. I'm your host, Brian Ardinger, founder of Insideoutside.io, a provider of research, events, and consulting services that help innovators and entrepreneurs build better products, launch new ideas and compete of change and disruption. Each week we give you a front row seat to the latest thinking tools, tactics, and trends in collaborative innovation. Let's get started.

Interview Transcript with Marguerite Johnson

Brian Ardinger:  Welcome to another episode of Inside Outside Innovation. I'm your host, Brian Ardinger and as always, we have another amazing guest. Today we have Marguerite Johnson. She is the author of a new book called Disruptive Innovation and Digital Transformation: 21st Century New Growth Engines. Welcome to the show. 

Marguerite Johnson: Thanks Brian for inviting me and thank you to your Inside Outside audience for listening. 

Brian Ardinger: I'm excited to have you on because you've got a new book and it's all about disruption and we are clearly in that particular pathway. That train is hitting us full force. Why don't we talk about how you got involved in innovation space? Give us a little bit background about your career and why this is so important to you. 

Marguerite Johnson: I've been in innovation as a practitioner for just over 20 years and my career. Initially started in market research in the big dot com era where anyone, everyone with a website could make money. 

It evolved from there into doing a lot of scientific research on cardiovascular blood pathogens for Bristol Myers. And so, moving the large context of digital and how digital was basically burst onto the scene with a lot of companies in this kind of new, exciting way. All the way to how large established companies like pharma was using science and research to touch patients who were experiencing either the need for, the drug at that time was Plavix a blood thinner, primarily used to help patients after a cardiovascular event or primarily a stent. And so my background in innovation was very much a convergence of technology becoming a key player in the role of business. And the larger companies that we're learning to navigate to use it in unique ways and spaces that touch people's lives. 

And then it evolved into mostly industrial businesses. So, your large-scale engines, fracking, air motors, industrial pumps, and mixers, and mixing systems and conveyors, and all the way to automotive and electronics and seating systems and safety systems. And so, I've gone through the full gamut, starting with the digital.com era and then evolving into a lot of other what we call nonnative digital, traditional big businesses.

Brian Ardinger: Yeah. Those legacy industries that are facing that disruption and may be in a little different position than some of the new startup technology companies that we're seeing today. Tell me a little bit about why you decided to write this book. 

Marguerite Johnson: Like so many other people right now, we're looking around and we're trying to understand and interpret this system environment that we're in. In the past, digital and these large traditional companies were basically separate and apart from one another, they were playing in their own space.

And now we're seeing this drive to bring these competencies together. And when you look at big traditional legacy companies and you look at your native digital, such as your Apples, your Amazons, and Googles, and you see this apex or this inflection point where everyone is moving it into creating more value with digital. And the traditional innovation literature was not ready for this. 

When you do any type of research on disruptive innovation and you look at all of the practices around, where do you find new growth in these new spaces? They were all around B2B enterprises and B2B enterprises positioned themselves to defend against new market entrance. And that was primarily focused around a new market entrant coming in with a cheaper, more simple, maybe a less functionality product, and then grabbing additional functionalities and moving up market and taking bigger share.

And so that was the conversation. It did not include digital at all. In fact, Christensen later on came back to explain the reason why the iPhone wasn't included in his original assumptions about disruption. It was more related to the evolution of the laptop, which I challenged that in the book. And, you know, I want to make clear to the audience that my desire is not to rewrite the history or up end the history of disruptive innovation, as it pertains to Christensen's original theory.

I build on his theory. I pride myself in taking all of the published works from many, many authors and researchers in the past and using it to evolve my own knowledge. And that is a reason why I wrote the book as well is, I wanted other people to live their evolution on disruptive innovation through me, as other authors have given me the benefit to live it through them.

That's very, very important to me. I did not want to keep all this knowledge to myself and be the little wizard behind the scenes and say, aha, I have the secret sauce. Knowledge should be shared. And with the accumulation of knowledge, I think we all grow as a society and we all benefit. That was very important to me.

So, understanding the context of disruptive innovation in the past, making sure it was relevant to today, looking around at the science and the research and, and understanding that it wasn't there. And then building on what others have done to bring us to the point where we can have this discussion and move forward as a society and innovation.

Brian Ardinger: So legacy companies obviously need to embrace digital a lot more than they have in the past and that. Why is it so difficult for them to do so, or what's been holding them back? 

Marguerite Johnson: If you've spent a century building talent, assets, operations skills, supply chains, and your entire profit model is built around those assets. It's very hard. I mean, it's literally throwing the baby out with the bath water. I mean, that's what it seems like. Okay. So that's absolutely not what it is, but that's how it could sound. 

You come to some of these conferences and digital is presented as a disruptor. Digital itself is not a disruptor, how it changes innovation, product services and business models can be a disruptor, but it's not a competency and a capability that's out of the scope of knowledge and abilities of a big company.

You have the customers; you have the biggest part of digital that you need. You can learn to add value to the products and services you're already delivering to them by enabling it with technology. By providing additional value through some connectivity. So traditional companies shouldn't feel like they're the underdog in this race.

And I want to be clear about that because most of my career is in industrial businesses. I have absolutely affinity for the likes of Amazon and Google and Microsoft. And I cover them and Netflix, in my book. Right. I don't leave them out. But I also include Siemens, Walmart Volkswagen, Magna Seating, Proctor & Gamble. I don't leave anyone out of the conversation. I should say when it comes to digital, because it impacts everyone, and everyone should be prepared to engage across the board. 

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Brian Ardinger: Let's dig into the book a little bit. What are some examples or some things that you've researched or seen that are good examples of how companies are adapting to the new changes in the world? 

Marguerite Johnson: There's an interview with the CEO of Duke Energy, with MIT Sloan, and it's available online. And Ms. Good talks about how Duke energy had to learn to talk to customers that they've never had direct contact with before. Their conversations were with the meter on your house. So they knew more about the meter and your house and your energy usage and you know, your peak hours and all of that than they knew about the occupants of the house. 

And she talks about the need to move toward mobile communications, such that users can get analytics and data and usage and make lifestyle changes for themselves as it impacts their energy, as well as a lot of users are using renewable energy, either backup power or solar power, and they're building their own micro grids.

She recognizes the fact that in the past the conversation that Duke was having was not with the customer who they were delivering the value to, and they need to shift that. I'm outside of Detroit and one of the Northern suburbs in Bloomfield Hills, but I grew up most of my childhood in Detroit. So, I have a deep passion for the innovators and the grit that comes out of that city.

And I would be remiss to leave out an example. That's automotive related here. Anyone who's been driving a car, owned a car, or been a passenger in a car has seen the evolution of technology in the vehicle. There’re millions of lines of code there's millions of sensors. You know, it's literally a computer, a supercomputer in some instances, on the road and that discussion of how the vehicle has been impacted by disruptive innovation I take the reader through that in a very simple way. Right. So, I don't talk about the hundred years of the internal combustion engine and how that evolved. I assume everyone's got that. I assume everyone couldn't digest all of the dependable aspects with brakes and airbags and safety systems, you know, check. We all have that. 

So, where I opened the conversation about automotive is in the business model shifts that are happening and not in the traditional context, Brian, of where everyone's talking about how Uber and Lyft and the likes of ride sharing will just completely destroy automotive. But I talk about it in the context of when you're innovating in this disruptive theory that I designed in this book, the key point you want to make sure that you keep in front of you is that as the product or service is evolving, as It's being disrupted, if you want to capture and create value around that product, it has to be stable first. 

That means the customer expectations for the thing that you're building and creating value for has to be at least in a position where you can identify what that value is in order to build a business model around it. And so, in that sense, I say, leave the conversation open. Don't completely write the obituary for automotive to this point because there's a lot of fights still left. I believe in the city and we are the comeback kids. And I think we still got one more in us.

Brian Ardinger: And you make a good point that at the end of the day, it's all about customers. And how do you create that value for the customer? And there's a lot of different ways you can do that, whether it's through technology, whether it's through a business model, whether it's through, you know, even partnerships and that. And I think, you know, a lot of legacy companies are not only hamstrung from the fact that they've been doing it the same way, but they've created a network of suppliers and partners that have been doing it for the same way. And it's, it's hard to change that ship or move that ship when there's so many different components that have been doing it the old way.

Can you give us any recommendations or things that you've seen out there for companies that are being able to create that change? What are some kind of low hanging fruits that companies can, if they want to focus on the disruption and better understand and better position themselves for the new way, what are some of the things they should be doing right away to put them in the best position?

Marguerite Johnson: To your point. I mean, a lot of the mindset of the organization was built around that established understanding of the environment. Who their customers are, who their competitors are, where they played, what markets they were in, in the industry standards and elements around you.

So, a lot of the mindset of the organization has to be pried open. And the way that you would do that very simply is start to engage in some of these innovation ecosystems around you. Start bringing in not only ideas around the problems and solutions that you're aware of, but ideas around problems and solutions that are completely foreign to you.

And you know, a lot of that mindset breeds ideas that are similar. When you go internally to your organization and you ask your engineers and your product developers and marketers, and you say, give me ideas. Don't be surprised that those ideas that they're giving you replicate or very close to the ideas that are already in existence in your industry, in with your competitors. The way to bring in ideas from the outside, I love the title of this podcast Inside Outside because that's exactly what you want to do. You want to go to the outside and you want to ask yourself, what can't I see from my vantage point? 

So, there's three questions that I would ask any product marketer or innovator when you're approaching a problem or a solution you ask yourself, what do I know?  And those are the things that can be verified and then ask yourself what are things I don't know, but I have access to.  Which means I can ask a customer, a supplier, a partner. And then the third group is what do I know that I can't know from my vantage. Those are the ones that typically get filled in, glossed over with assumptions.

And if you're empowered with those three categories of questions, you can start to understand where are some of the places that you need to look to find additional ideas and be inspired by other solutions and problems that are not close to you. I would say the mindset is something that you can instantly do that has absolutely nothing to do with the technology, is doing some of that work, that internal work to shift the mindset.

Brian Ardinger: Well, I like where you're going with that too, because it also then helps companies understand what role does startups play in this disruption? It's not only the fact that they could be potential competitors in the future and that, but they also could be potential partners potential eye-openers as far as new ideas and new roles, and that companies need to be much more adaptable and flexible at looking outside of their existing walls to figure out what they can do to create new value in the new world.

Marguerite Johnson: Yeah. I cover open innovation, collaboration, ecosystems in the book as well. This book is content heavy. It's highly organized, but it peels back all of the layers. If you were to think of innovation practices as this magic box, this glowing box, and you know, the likes of Steve jobs and other innovators, like, you know, Jeff Bezos and Bill Gates, they, they walk up to the box and magic comes out.

Right. Everyone thinks of this, but I take that box and I segment that box. I explain why certain elements in the box are the most important, which is the aspects from the customer expectations, and the need to understand those expectations that drive your future. Drive the value that you'll create through business model services and products. 

And then how to use that customer knowledge to create a data strategies, customer loyalty programs, how to interpret the digital channels that customers are communicating with, how to organize your internal resources, such that you're moving from that ad hoc position of innovation, where you're being whipped lashed by all the things coming out, to something that's a lot more portfolio driven. All the way to open innovation and platforms and how to network those systems.

And so one of the things I think is a strong play for businesses is not only dealing with startups but understanding that most startups don't have the resources that a big company has. And when you come to them and you're asking them for all of these very detailed technical specifications and drawings and tests, and you want them to go out there and put tens of thousands of dollars behind a prototype, that that's just not available to them.

And that from that standpoint, as an organization, if you have your house in order your innovation house in order, you can do a better job of bringing that startup in and making them a partner of equal value, particularly around a project. 

Brian Ardinger: And being able to co-develop or work together towards an end goal that will help both the startup and the company. So, I had a chance to get a preview copy of the book it's coming out here in a couple of weeks. And I was impressed with all the research that you had done. What's your research process and how do you go about learning and keeping up to date with all the things that are going on, especially in an environment and a topic that's so changing, like innovation.

Marguerite Johnson: I read a lot. This mindset that I have dates back to undergrad. My undergrad is in public policy, and so I read a lot. And I found myself having trouble keeping up with all of the approaches, every scientist, political, or otherwise, every framework strategy has a, this or that, that's nuanced about it. And I struggle with that and I recognize that.

So I said to myself, I need a way to like package all this stuff, because I can't possibly know what they're saying different than what I'm thinking. I'm not kind of getting this cross pollination in my mind is being whiplash. So, I came up with this acronym, Brian, that is very simple. T L C. Thought, what's the original thought? What are they trying to tell me? Logic. What's the framework they're using? How are they trying to prove this to me? And can it be tested. And then Clarity, because not all things stop when you have a thought and you have a logical framework. Sometimes there's clarifying context around it that different that makes it special, make it unique, make it broken.

And so, I read a lot and I've kept that mindset discipline throughout my life. And I read a lot of innovation, but I also read a lot of topics that are not in my field. One of the topics that is very inspiring to me at this point is I'm trying to read as many biographies. I'm not a fan of fiction. I've never been attracted to fiction. I'm finding that I'm liking biographies. And so, my son and I we're trying to read style and together. Probably not the best one to start with... 

Brian Ardinger: Well, the good thing is there's a lot of them out there. 

Marguerite Johnson: Exactly. Exactly. I engage myself with a lot of different people. I challenged myself to think differently. Where did my thoughts come from? Can I justify them still being there? So, a lot of that.

Brian Ardinger: Because obviously we're in the coronavirus age and a lot of things have changed dramatically. A lot of companies and that are realizing, Oh yeah, this disruption thing. I get it now. What are you hopeful for coming out of this new change in this new disruption around the world? Are there things or trends that you're seeing that make you hopeful? 

Marguerite Johnson: Yes. A lot of customers are starting to solve their own problems and that should terrify big companies, but it also should give them some hope that these things that seem magnanimous. So, we have this pandemic, you know, when really understood how it was affecting everyone. And we were in this, you know, everyone's feeling around in the dark trying to figure out what, what should we do? What should we stop doing? You know, a lot of customers are figuring out a lot of things. They're putting gardens in their yards. They're completely transforming their homes so that they can live in them, basically in a quarantine state and not lose their minds.

My son is in virtual school right now. He attended virtual school at the end of the last academic year, and it was more difficult for him. But now he has worked out the glitches. The school system has worked out the glitches. He's in there. He has a zoom light. He knows how to pause the audio and shut off the video.

You know, customers, they're learning to solve some of these problems on their own, and that should inspire companies, but it also should terrify them because by the time we come out on the other side of this, if you are a company who lost focus and who didn't have the customer at the center, and you were understanding their expectations, your customer may have moved by the time you come out of this. And that's a deep concern I have for a lot of companies. 

And, you know, you hear a lot about small businesses and how they weren't ready. They weren't digitized, they weren't connected. They had no ability to take in orders through apps and that just this whole host of things. And I think a lot of big traditional companies were also scrambling. They just weren't on the news for it. So, when you come out on the other side of this, your customer is going to be different. And if you're not accustomed to communicating with customers directly, it's going to be a challenge. 

Brian Ardinger: Well, we can continue this conversation for years I'm sure. And we probably will as things evolve, but I want to get people an opportunity to find out a little bit more about yourself in the book. What's the best way to do that?

Marguerite Johnson: The best way to do that is businessexpertpress.com. That's my publisher. You can search by my last name. J O H N S O N. I am the only Marguerite Johnson on the list in the author group there. And my book is Disruptive Innovation and Digital Transformation: 21st Century New Growth Engines. 

Brian Ardinger: Well Marguerite, thanks for being on Inside Outside Innovation. Look forward to continuing the conversation in the future. 

Marguerite Johnson: Thank you for the invitation and have a good day.

Brian Ardinger: That's it for another episode of Inside Outside Innovation. If you want to learn more about our team, our content, our services, check out InsideOutside.io or follow us on Twitter @theIOpodcast or @Ardinger. Until next time, go out and innovate.

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