SLOANREVIEW.MIT.EDU SPRING 2020 MIT SLOAN MANAGEMENT REVIEW 59
20-page case studies highlighting potentially disrup-
tive developments related to their industries. Kodak’s
case focused on digital imaging, for example, while
Hallmark’s focused on online greeting cards. But by
and large, the cases depicted similar disruptive scenar-
ios. “I thought this was going to be the most boring
event ever,” admits Clark Gilbert, an HBS professor at
the time and now president of BYU-Pathway
Worldwide. “We basically had written five versions of
the same case.” But something surprising transpired.
While discussing the cases, it quickly became clear
that while executives easily saw disruption in other
industries, they missed the forces at work in their
own. “It was remarkable,” says Gilbert. “None of the
companies could see their own problem.”^4
When company leaders finally see the problem,
it is usually too late. Leaders must have the “courage
to choose” before they face the proverbial burning
platform. Once the platform is on fire, choices sub-
stantially narrow. Mark Bertolini of Aetna provides
a good example of a leader who didn’t wait that
long to act. When he became CEO in late 2010,
there was no burning platform. The health insurer
had just reported record revenues and record earn-
ings. It would have been easy for Bertolini to
execute yesterday’s strategy for five years and ride
off into the sunset. Instead, Bertolini made the cou-
rageous decision to dramatically reconfigure the
business, which ultimately resulted in Aetna’s
game-changing merger with CVS Health in early
2018, a first-of-its-kind combination of retail phar-
macy and insurance capabilities. The combination
creates the potential for more affordable access
to urgent and primary care. The increasing collabo-
rations could break down the traditional health
care silos — payer, provider, pharmacy, medical
devices — and may signal the beginning of broader
health care disruption.
LIE NO. 2: “It’s too risky.” There is a perception
that making bold investments in innovation carries
systemic risks and that it is safer to stay the course.
Consider a large European industrial company
Innosight advised. The company was seeking to set a
bold new direction and achieve ambitious perfor-
mance targets. Its leadership identified an opportunity
to drive step-change growth by, for the first time in
its history, bypassing traditional distributors to
deliver highly customized products directly to end
consumers. The strategy would require substantial
commitment, but it also promised substantial returns,
including the ability to spur growth, combat com-
moditization, and increase margins. Despite
consensus and a serious commitment among the ex-
ecutive leadership team to the strategy, the outgoing
and incoming board chairs decided — in the bath-
room during a break — to significantly reduce the
scope of the ambition, perceiving that leveraging digi-
tal technologies and bypassing traditional distributors
was too risky and not in the company’s short- and
medium-term interests. The ambitious plan was
scrapped after that bathroom break. Both the CEO
and CFO departed soon thereafter, leaving a demoral-
ized management team with no clear view for the
future except the status quo.
The fear of messing up what has been a proven
strategy is powerful, but the reality is that making
bold investments in innovation doesn’t carry sys-
temic risks. New Coke, Apple’s Newton, Microsoft’s
Zune music player, Amazon’s Fire Phone, and
Google’s augmented reality glasses are all examples
of big companies that made big bets that led to big
write-offs. But while none of these failures was
good, of course, none sank their companies, either.
“Big moves look like they are really risky. By and
large, they are not,” declared a Fortune 500 CEO at
a 2019 Innosight event. “Because what you lose
when you invest a ton of money is the money you
invested. It is capped. When you win, you usually
create not only an annuity but a new ecosystem that
gives you the opportunity to win in new areas.”
What carries systemic risk is not making bold in-
vestments in innovation. In the face of disruptive
change, company leaders consistently invest too
little, too slowly, in doing something different.
Companies increase risk by not taking risk. Walmart
executives knew for years they had to embrace on-
line retail, and yet from 1998 to 2015, the company
kept redirecting or scuttling significant investments
to compete with Amazon and other e-retailers. It
spun off Walmart.com in 2000 and brought it back
in July 2001. It didn’t allow third-party sellers until
2009 and then for years had just six sellers on its
website. It invested in an e-commerce site in China
in 2011, took a 100% share in 2015, and sold it off in- Its acquisition of Jet.com in 2016 has promise,
but Walmart should have bet boldly years earlier