DISRUPTION to ORDER.
By: Stephen Cass
A counter-intuitive strategy promises to stop
established companies from falling victim to
disruptive technologies. HONEST!
I N 1997, MICHAEL RAYNOR READ CLAYTON CHRISTEN-SEN’S book, The INNOVATOR’S DILEMMA, and was intrigued by its description of companies falling victim to disruptive technologies by doing exactly what good business sense told them to do—focus on products where the return on investment was likely to be greatest.
At the time, Raynor was a Harvard graduate student and Christensen was one of his professors. Now the former student and his teacher have teamed up to write The Innovator’s Solution, which details how to escape the disruption trap. Raynor spoke with IEEE Spectrum about why business leaders should follow the book’s advice.
WHY DID YOU TWO WRITE A FOLLOW UP TO THE FIRST BOOK?
The Innovator’s Dilemma made a compelling case for a rather disturbing proposition: the better your management, the likelier you are to meet with a horrible end. The more effective you are at serving your most valuable customers, the more likely you are to be upended, disrupted, by new entrants.
You don’t realize that you’ve painted yourself into a corner until it’s too late. In The Innovator’s Solution, we try to provide a way out of this dilemma and make it possible for established firms to understand the forces of disruption and enable them to create and sustain successful and profitable growth.
MANY BUSINESS BOOKS TALK ABOUT CREATING GROWTH. WHY IS YOURS DIFFERENT?
Other books tend to rely on correlation; looking at successful companies and then saying if you copy certain aspects they appear to have in common, you’ll be as successful, too. But that approach is not capable of reliably producing valuable prescriptive theory. It’s similar to the history of flight: we didn’t learn how to fly by copying birds. We had to discover the underlying physics of aerodynamics first and that led us in a completely different direction from feathers and flapping wings.
In The Innovator’s Solution, we’re trying to identify the principles and forces that make successful disruption possible. Companies can then deliberately and also repeatedly launch disruptive innovation successfully by creating what we call a disruptive growth engine.
HOW DOES A BUSINESS BUILD A DISRUPTIVE GROWTH ENGINE?
The first rule is to start before you need to start. You must pursue disruptive innovation even as your mainstream business is in its glory days. The second rule is to o make sure there’s a senior executive in charge who can make sure that disruptive opportunities get funded.
You’ll also need a team of movers and shakers; innovative ideas do not spring fully formed from the minds of the people who have them. You need a team of people who understand the subsequent shaping process and can help ensure that ideas get pushed appropriately as sustaining or disruptive ideas.
The last piece is what we call “training the troops,” which is to inculcate these principles into front-line employees, because it’s really these people—salespeople, marketing folks, engineers in the field—who can look at customer reactions and opportunities for product improvements through a disruptive lens and identify opportunities.
A word of warning, however: any attempts to leverage the resources or capabilities of the mother organization in exploring a disruptive idea will probably be counter-productive. There needs to be a high degree of separateness and autonomy between the exploratory unit and the rest of the business. Otherwise, what happens is similar to when established hub-and-spoke airlines try to launch businesses to compete with the new point-to-point airlines, like Southwest: they think, “Why build a whole new reservation system instead of just leveraging the existing reservation system? Why get all new jets instead of just leveraging the existing fleet?” Next thing you know, they haven’t launched a new business; they’ve just created a whole bunch of extra costs without eliminating any of the costs they had in the first place.
HOW CAN COMPANIES DISTINGUISH GOOD DISRUPTIVE INNOVATIONS, FROM SIMPLY BAD IDEAS?
A defining characteristic of disruptive opportunities is that they initially look like very unattractive, bad ideas! Of course, some markets and opportunities look very unattractive because they truly are. One of the ways to ensure you’re on to something is to insist that the business units exploring disruptive opportunities show a profit almost immediately. If they can’t do that, it probably really is a bad idea.
The aphorism we use is: ‘Be impatient for profit, but patient for growth.” This leads to a paradoxical, Zen-like prescription, which is that the best way to achieve growth is to not seek it!
Another characteristic of a disruptive opportunity is that you are pursuing your competitor’s least attractive customers, ones on which they make their smallest profits and which they’re most motivated to abandon. Even better is when you’re going after consumers that no one is serving at all.
WHAT’S BEEN THE RESPONSE TO YOUR THEORIES?
It’s been quite positive, even though “theory” has almost become a pejorative to a lot of working managers. But this is because a lot of what gets called theory is actually just really bad theory! Managers are tremendously hungry for good theory.
January 2004. (Pgs. 83-4)
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