The Need to be Aware of Disruption
Clayton Christensen (2020), Harvard professor, presented his theory of disruptive innovation in his 1997 book The Innovator’s Dilemma[1]. He was aware of the 4th industrial revolution, and he tried to prepare us for the disruption of business as we know it. His book appeared in three editions, 1997, 2000, and 2016; in 2011, he published two books, The Innovative University and The Innovator’s DNA. Unfortunately, he was diagnosed with follicular lymphoma in February 2010, and in July of 2010, he suffered an ischemic stroke that damaged his speech, recuperating with therapy. On January 23, 2020, he succumbed to death from complications of leukemia, silencing his brilliant mind.
His theory of disruptive innovation is especially important with the exponential increase of technology today. The life and death of great companies fill the pages of history with stories of well-managed businesses that failed with the arrival of disruptive innovations. Christensen’s book, The Innovator’s Dilemma, recounts a list of many companies like Sears Roebuck, IBM, Digital Equipment Core, Xerox, and Kodak that failed, not because they were poorly managed but because “they missed huge growth and profit opportunities in the market” for smaller, more convenient, and easy-to-use devices of “minor players” (Intro. p. xv). “There was something about the way decisions get made in successful organizations that sow the seeds of eventual failure” – “they lost their place of leadership” (Intro. p. xvi).
In the Preface, Christensen explains his “dilemma” as “doing the right thing is the wrong thing” – perfect management blinds leaders to the rise of innovation at the low end of the market. He is reminded of Joseph Schumpeter’s[2] “creative destruction” – “the process of industrial change in which the economic structure is so radicalized from the inside that the system falls apart while a new system is made.”
Christensen outlines the success of disruptive innovation based on five rules that must be followed like the rules of nature. He cites the example of aeronautics – flight demands lift, drag, and resistance. Disruptive innovation demands rules or principles:
- Companies depend on customers and investors for resources. Creating an independent organization, with a cost structure honed to achieve profitability at the low margin characteristic of most disruptive technologies, is the only viable way for established firms to harness this principle.
- Small markets don’t solve the growth of large companies. The evidence is strong that formal and informal resource allocation processes make it very difficult for large organizations to focus adequate energy and talent on small markets, even when logic says they might be big someday
- Markets that don’t exist can’t be analyzed. Discovery-based planning … drives management to develop plans for learning what needs to be known, a much more effective way to confront disruptive technologies successfully.
- An organization’s capabilities define its disabilities. … Managers can use examples from failed companies when the processes and value of their present organization would render it incapable of successfully addressing new problems.
- Technology supply may not equal market demand. Only those companies that carefully measure trends in how their mainstream customers use their products can catch the points are which the basis of competition will change in the markets they serve.
Clayton Christensen believed the future will be different from past failures if managers recognize disruptions as they are and account for and harness the fundamental principles expressed in the rules.
Take-away: As big companies take on more changes in technology, they need to be vigilant of how disruptive innovations could find their way into their company’s management.
Sources:
[1] Christensen, Clayton, (1997); The Innovator’s Dilemma: When new technologies cause businesses to fail; Harvard Business Review Press, Boston, MA
[2] https://academy4sc.org/video/schumpeters-creative-destruction-die-to-live/
