Value Displacement™ Part 3: Identifying Priorities and Establishing Initial Strategy

For innovators to succeed, they must understand the value they are displacing with the same rigor they apply to the value they are creating.

In the first installment of this series, I introduced the concept of the Value Displacement™ Proposition, arguing that one of the key reasons innovations fail is that those who have something to lose may actively resist adoption—even when the innovation brings real value to the system as a whole. There is a strong motivation to sub-optimize for personal or organizational gain. I discussed in broad terms that some set of stakeholders will be worse off as a result of the innovation.

The second installment made the point that Value Displacement is not the same as implementation cost. It is another, often more substantial, barrier to adoption that must be overcome. Examples in heat treating, artificial intelligence, healthcare administration, and internal organizational barriers illustrated how stakeholders can be negatively affected by innovation.

Identifying and prioritizing the stakeholders whose value will be displaced, and beginning to establish a strategy to address that displacement, is the subject of this third installment.

Assessing Value Displacement

Because Value Displacement involves human motivations, organizational dynamics, and political considerations, precise measurement is rarely possible, especially at the outset. Qualitative assessment is therefore the logical place to begin setting priorities.

Start with a stakeholder inventory. List every stakeholder who may be affected if the innovation succeeds. This is common practice in innovation management, but with one important twist.

Instead of asking:

How will they benefit?

Ask:

How might they lose?

Document every possible answer:

·        Revenue loss

·        Margin reduction

·        Reduced relevance

·        Loss of authority

·        Loss of expertise

·        Loss of status

·        Reduced headcount

·        Reduced influence

·        Loss of strategic importance

·        Other stakeholder-specific impacts

This exercise identifies potential sources of resistance and begins to define an adoption strategy that anticipates and addresses them.

Estimating Resistance Potential

Once displacement has been identified, assess three factors.

1. How much value is threatened?

Stakeholders facing significant value displacement typically resist more aggressively than those facing inconvenience.

The Luddites were not opposed to machinery, per se. They understood that the new textile machinery represented an existential threat to their livelihoods as skilled artisans. Their resistance was therefore rational from their perspective.

2. How concentrated is the impact?

A small number of stakeholders losing significant value often generate more resistance than a large number losing relatively little.

We see this dynamic in many industries. A relatively small number of companies or individuals may have substantial economic interests at stake and therefore have both the motivation and resources to resist change.

3. How much influence do they possess?

Can they shape regulations, control purchasing decisions, influence standards, delay approvals, or affect industry opinion?

The automotive industry, for example, has significant influence over regulations and standards affecting the introduction of new technologies. This influence can either accelerate or impede innovation depending on how the technology affects the industry's existing interests.

Together, these factors provide a useful qualitative estimate of resistance potential.

Following the Money—and the Influence

One of the simplest diagnostic tools is also one of the oldest: follow the money.

But don't stop there.

Value displacement is personal, but it is also organizational and political. An effective adoption strategy must identify who has something to lose, how much they have to lose, and what they can do about it.

Ask:

·        Who benefits from maintaining the status quo?

·        Who profits from the problem the innovation intends to solve?

·        Which organizations become less important if the innovation succeeds?

·        Which products become less necessary?

·        Which services become redundant?

·        Which experts become less indispensable?

·        Will the change be an existential threat, an inconvenience, or somewhere in between?

·        How will each affected stakeholder likely react?

·        Which stakeholders have the resources and influence to create hurdles?

The answers often reveal the true sources of resistance and the likely magnitude of that resistance.

This is where the Value Displacement Proposition becomes particularly useful. It moves the discussion from the abstract question of whether an innovation is a good idea to the practical question of what will happen when it succeeds.

Prioritizing the Stakeholders

Not every displaced stakeholder deserves the same level of attention.

Some may lose significant value but have little ability to influence adoption. Others may lose relatively little but have substantial influence. Still others may have both a great deal to lose and the ability to create significant barriers.

The highest-priority stakeholders are those who combine substantial displacement with the ability and motivation to resist.

These stakeholders should become an explicit part of the innovation strategy. The first step is to fully understand their concerns so that they can be treated objectively. Among the options:

·        Engage those stakeholders early and make them partners in some way

·        Modify the innovation to reduce unnecessary displacement

·        Create a head-on counter to those stakeholders

·        Engage at a higher level – go directly to whomever will benefit most

Regardless of the approach, make the choice consciously rather than discovering the resistance after the innovation has reached the market.

Intent and Ramifications

The purpose of identifying Value Displacement is not to create conflict. It is to recognize where conflict is likely to emerge so that innovators can navigate it successfully.

Remember that threatened stakeholders are not acting irrationally. In almost every case, they are behaving exactly as economic and organizational incentives would predict.

Their arguments may have validity.; don’t dismiss the objections too quickly. An alloy producer opposing a new heat-treating process may raise valid technical concerns. A physician concerned about AI may have legitimate questions about patient safety. An employee whose role is threatened by automation may identify genuine operational risks.

The fact that a stakeholder has something to lose does not mean that everything they say should be dismissed.

For innovators to succeed, they must understand the value they are displacing with the same rigor they apply to the value they are creating.

In the next installment of this series, I will explore methods for addressing Value Displacement, including identifying key influencers, communicating honestly, and respecting stakeholders who may not benefit from the proposed change. We will examine how innovations can be designed, positioned, implemented, and commercialized in ways that reduce opposition and increase adoption.