To defeat terrorists, military services must innovate, disrupt.

BY ANY MEASURE, REFORMING THE half-trillion dollar, 3 million-member Defense Department is one of the largest innovation projects in history.

Former Defense Secretary Donald Rumsfeld led the Pentagon's transformation efforts for nearly six years and trumpeted some transformation's successes. However, transformation as a whole will not lead to success if the military cannot win the wars it fights.

The undeniable difficulties that U.S. forces are experiencing in Iraq, in Afghanistan, and against terrorist networks around the world show that the Defense Department has much work to do before it credibly claims that transformation is a success overall.

The disruptive innovation approach--a framework for action originated by Harvard Business School Professor Clayton M. Christensen--provides a way to understand some important reasons why the Pentagon struggles to overcome nontraditional challenges. The approach also provides an innovation methodology for solving these key problems

Current defense innovation efforts face a dilemma: how to both ensure that America will win future conventional wars and improve its ability to counter current and emerging nontraditional threats. Investment in one of these areas risks depriving the other of necessary resources, but under-investing in either may leave the nation vulnerable in important ways.

Overall, the U.S. military is doing well in its preparation for future conventional wars and remains the world's most dominant conventional force.

All is not perfect, however. The Army claims that it is billions of dollars short of what it needs to keep its force running, and the Air Force is cutting thousands of airmen to save money for other programs. Aging equipment places stress on maintenance systems in all the services.

The source of most of this stress is current operations in Afghanistan and Iraq, which drains resources from the rest of the military.

Afghanistan and, especially, Iraq illustrate how the U.S. military, in spite of its conventional strength, is struggling against unfamiliar challenges posed by nontraditional adversaries. These conflicts have brought to light systematic problems in areas of nontraditional warfare. Examples include:

* The Defense Department did not recognize the Iraq conflict as a counterinsurgency for more than a year after the liberation of Baghdad

* Although the U.S. military eventually recognized the Iraq situation as a counterinsurgency, and although securing the population is of prime importance in counterinsurgency, the U.S. military has been unable to keep the Iraqi population secure

* British Brigadier Nigel Aylwin-Foster, who served alongside Americans in Iraq for a year, wrote an influential article stating that the American ability to adapt was "insufficient" and that the U.S. Army's focus on conventional war fighting is counterproductive to effective counterinsurgency

* The U.S. military represents the preponderance of the nation's effort in Iraq, even though the bulk of effort in counterinsurgency should be nonmilitary according to accepted counterinsurgency theory, history and doctrine

One solution could be to shift large amounts of conventional resources and invest in nontraditional capabilities. Even if this solution were desirable, it would a political "nonstarter" because of the entrenched interests involved.

Another approach is to train and equip forces for both traditional and nontraditional warfare. The Pentagon seems to be adopting this track. To use the Army's current analogy, soldiers are supposed to become "pentathletes" who can succeed in a variety of different "events," or warfare domains.

This attempt at a solution is unlikely to be successful. Compelling research in the field of innovation indicates that organizations are unable to broadly adapt as a whole to new, challenging circumstances in reasonably short periods of time. This research, conducted during a decade and a half by Clayton Christensen and his team, suggests that trying to enable large organizations to be able to adapt to multiple circumstances is a recipe for long-term organizational difficulty, frustration and decline.

The Defense Department's problems display a familiar pattern, which was first described in Christensen's 1997 book, "The Innovator's Dilemma." He showed that market-leading, admired, well-managed companies frequently fail because they cannot adapt to competition from what he termed "disruptive innovations."

Innovation comes in two types: sustaining and disruptive. We are all familiar with sustaining innovation, which occurs when a product, service or technology improves along the established measure of performance. When automobiles are able to go faster, computers become more powerful, airliners carry more passengers, and stereos deliver higher fidelity, they display sustaining innovation. In defense, sustaining innovation is at work when submarines are quieter, missiles are more precise, fighter planes are faster, soldiers are more lethal, "command and control" is more efficient, and artillery has a longer range.

Managers and organizations are good at producing sustaining innovations because they respond to the needs of their most demanding users by delivering better performance.

Sustaining innovations present a hidden problem, however. Most users of a given technology can absorb improvements much more slowly than engineers can deliver them. For instance, car companies can produce advances in speed and power at rates much greater than most drivers can use them. High-end sports car enthusiasts will always demand better performance, but most drivers will not pay a premium for additional performance that far exceeds what they can use in normal traffic. Most innovators, however, are trained to respond to the most demanding customers--like sports car enthusiasts--and tend to continue to produce sustaining innovations the needs of most customers.

When most customers are overshot by sustaining innovations, there is an opportunity for disruptive innovation to find acceptance. Disruptive innovations result in decreases in performance along standard measures and instead show improvement along new dimensions, such as greater convenience, more simplicity, or lower cost. Disruptive innovations appeal to those who lack the skills, access, wealth, time or knowledge to use existing products. For instance, Japanese compact cars were disruptive innovations when they came to America in the 1960s and '70s. These cheap, simple cars appealed to drivers who wanted simpler, cheaper alternatives to the products of Ford, GM, and Chrysler.

Innovation research went on to find that when incumbent companies compete with new entrants on the basis of sustaining innovation, the incumbent almost always won. This is unsurprising because incumbents usually are experts at their businesses. However, Christensen also found that when incumbent leaders competed with new entrants on the basis of disruptive innovation, the new entrant almost always won.

Incumbents either fail to recognize or ignore the threat of disruptive innovations in their early stages. When incumbents finally recognize and try to counter it, the disruptive innovator has already established a foothold market and the incumbent must play catch up or flee the market. Incumbents are unable to build the new capabilities needed to effectively counter the threat.

General Motors' loss of leadership to Toyota and Digital Equipment Corporation's inability to adapt to the advent of the personal computer are two classic examples.

Incumbents are unable to adapt not because they lack intelligent managers or capable engineers; on the contrary, the opposite is usually true. They fail because their "organizational DNA" is designed to address a particular set of familiar circumstances. Different circumstances require different organizational DNA, and the existing organization simply cannot change fast enough.

In the current context, many conventional military capabilities "overshoot" nontraditional military needs. Much of the high performance in traditional dimensions--such as lethality or supersonic speed--are not appropriate or even useful for the nontraditional environment.

The insurgents and terrorist enemies are disruptive innovators, because they use techniques that are simple, cheap and require few specialized skills. Their measures of performance are the ability to generate local popular support, degrade American popular will to fight, or induce the United States to drain its resources.

Seen through the lens of innovation theory, the U.S. military is an incumbent which leads in its traditional field of expertise.

To win against disruptive innovators, the Defense Department needs to adopt a methodology that supports the military's own disruptive innovation efforts while simultaneously maintaining leadership in core conventional warfare capabilities.

The overall effort should be organized around four pillars:

Keep the core healthy. Conventional war fighting capabilities need to stay strong and become stronger. New capabilities need to be an addition to--not a substitute for--these core capabilities.

The job-to-be-done. The first step for any incumbent organization to succeed in disruptive innovation is to discern the "job-to-be-done" of the target user. The job-to-be-done is a conceptual construct that describes an important user need. To use a metaphor popularized by a former Harvard Business School professor, understanding the job is more than knowing that the customer wants a drill with a half-inch bit. It is knowing that the customer really wants to achieve a half-inch hole in a particular kid of wood. Effective innovators provide solutions that help the user do the job in a way that is more convenient, cheaper, simpler or easier than the alternatives. This approach contrasts sharply with the existing military "requirements process," which often involves a great deal of bureaucracy and delay.

Emergent strategy. Disruptive innovation is one area where current members of the military have little experience, and the existing data is of very limited utility. The way forward is a process of rigorous experimentation and discovery, which can be summarized in the phrase "test a little, learn a lot," and assumes an ability to learn and adjust expectations based on results.

The field of reconnaissance provides an apt military analogy to this approach. One main purpose of reconnaissance is to confirm or deny the assumptions in a commander's battle plan. Presumably, the commander will adjust his plan based on the results of reconnaissance. Applying this approach to military innovation implies that iterative tests, experiments and evaluations will lead to a sufficient understanding of the value of a particular innovation. This understanding will then allow senior leaders to make informed decisions regarding investment and deployment of the innovation.

This seemingly common-sense approach to organizational learning is extremely difficult to employ in practice. Examples abound where businesses and governments invested millions or billions before discovering that key assumptions were false. The Apple Newton, New Coke, and the Maginot Line are three monuments of the folly of untested assumptions.

Build tailored organizations. Organizations are good at doing what they are designed to do. The military will need to establish new, autonomous organizations focused on the unique jobs of the emerging security environment. These autonomous organizations can support experimentation, testing, and learning. Leaders of these new organizations must have the freedom to tailor the budgeting, human resources, investment, and other processes to the circumstances that they face, not the circumstances that prevail in conventional war fighting. Traditional promotion paths, organizational structures, and even military-civilian distinctions may no longer apply.

Mark Johnson is president and co-founder of Innosight LLC, an innovation education and consulting firm. Charles McLaughlin is a management consultant at Innosight.