Hello Innovator!

We talk a lot about what it takes to foster innovation — the actions and activities that companies can execute to make innovation a tangible outcome. But we haven’t yet spent much time discussing the factors that enable innovation as a capability within large organizations.

This edition aims to fix that oversight by sharing the RPV (resources, processes, values) approach to defining organizational capabilities.

Here’s what you’ll find:

• This Week’s Article: Are You Capable of Disruption?

• Share This: Org. Capbilities, Defined; Finding the Right Org Structure for Disruption

• Case Study: How Intuit Leveraged Resources, Processes, and Values to Drive Disruptive Growth

Are You Capable of Disruption?

As we’ve discussed at length in past editions (dating all the way back to our first newsletter), established companies excel at sustaining innovation. They’re literally designed to be excellent at making incremental improvements to their existing products and services. However, when it comes to disruptive innovation, big orgs struggle.

Which begs the question: Are large orgs even capable of disruption? 

Let’s break down the idea of “capability” to come up with an answer — and a framework for defining what an organization is “capable” of.

What Determines an Organization’s Capability?

Resources: The Foundation of Your Capabilities

Resources are the people, technology, cash, partnerships, and intellectual property that make a company tick. While critical to operations, resources are also quite flexible.

They are generally visible and measurable.
They’re transportable and transferrable.
They can usually be hired and fired, bought and sold, built and depreciated.

In early-stage businesses, success often hinges on resources: key individuals along with their expertise, decision-making, and ability to adapt rapidly. A small team with the right skills and vision can have an outsized impact.

But, resources alone do not determine success. It’s how they’re used that matters.

As an organization grows, its ability to sustain an outsized impact depends less on individual talent and more on the processes and values that shape decision-making. This transition is where many companies struggle—what worked in a startup phase may not translate effectively into a growth-stage org.

Processes: The Invisible Structure of Execution

Value is generated within an organization through the transformation of resources into products that are more than the sum of their parts. And the patterns by which this transformation is accomplished — the interactions, communications, and decisions — are the processes that enable the generation of value.

Processes define how work gets done and how resources are deployed.

Established companies often optimize for efficiency and predictability. The processes that work well for sustaining innovation can be barriers to disruption because they makes it difficult to experiment with uncertain, high-risk innovations.

For example, if a company’s approval process requires every new project to show immediate revenue potential, a disruptive idea that initially targets a small, unproven market may never get funded.

Values: The Priorities That Guide Decision-Making

Values dictate what an organization considers important: what gets funded, what metrics define success, which markets are worth pursuing, and which projects get prioritized.

Note, “values” in this context are not strictly the ethical guard rails that many companies tout on their “About” pages. In this instance, values are the engrained standards that guide employee decision-making. Values determine what employees feel they can do, but more importantly they also define what employees feel they cannot do.

Values often represent constraints within the decision-making process. 

In large companies, values tend to favor high-margin, high-revenue opportunities. This makes it difficult for employees to justify the pursuit of disruptive innovations that initially have lower profitability. As a result, companies literally outgrow the ability to enter small and emerging markets where disruptive efforts are likely to find early traction. The company values simply don’t allow for it.

The Role of Culture

Resources are easy to change and adapt. In the early stages, when an org’s capabilities are largely grounded in resources (people, cash constraints, etc.), finding new resources to solve for challenges is straightforward. However, over time as a company grows and its processes and values become cemented, change becomes increasingly difficult.

This is your company’s culture.

The Disruptive Growth Dilemma

Companies struggle with disruptive innovation because their processes and values are misaligned with the needs of disruptive opportunities.

This creates a dilemma (ya know, The Innovator’s Dilemma). Trying to force disruptive innovation into existing structures leads to failure. Ignoring disruptive opportunities leaves the company vulnerable to new entrants…and leads to failure. Innovation efforts that do not align to your organization’s processes and values leads to failure.

How to Build an Organization Capable of Disruption

1. Identify Misalignment Between Strategy and Capability by asking: Does this new opportunity fit within our existing processes and values? If not, does it require a new way of working?

2. Create Independent Structures When Necessary to enable autonomy. If a disruptive idea conflicts with your processes and values, consider setting up a separate team, business unit, or even an external spin-off that can operate with a different approach. This allows the innovation to flourish without being constrained by the core business.

3. Invest in Adaptive Leadership and train leaders to recognize when different decision-making frameworks are applicable. Leaders must be able to balance sustaining the core business while allowing disruptive teams to develop new capabilities. But these skills aren’t generally taught in business schools today.

From Capability to Execution

Innovation doesn’t fail due to a lack of ideas. Innovation fails because organizations are not structured to execute disruptive opportunities effectively.

By understanding the role of Resources, Processes, and Values, companies can evaluate their real capability for disruptive growth and take deliberate action to build structures that support it.