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The
Innovator’s Solution: Creating and Sustaining Successful Growth by
Clayton M. Christensen and Michael E. Raynor Rating: ••••• (Outstanding book-read it now) |
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Using Theory There’s a lot to like in Clay Christensen’s
sequel to The Innovator’s Dilemma, titled The
Innovator’s Solution: Creating and Sustaining Successful Growth. I always
like authors who articulate the questions they grapple with, and who
recognize that the answers require time, thought and effort, and must be
tailored to specific situations. Most chapters of The
Innovator’s Solution begin with questions. Here are the ones from Chapter
6, “How to Avoid Commoditization”: “What causes
commoditization? Is it the inevitable end-state of all companies in
competitive markets? Can companies take action at any point in their development
that can arrest its onset? Once the tide of commoditization has swept through
an industry, can the flow reverse back toward proprietary, differentiated,
profitable products? How can I respond to this?” After posing the questions, Christensen
presents a theory that he describes thoroughly along with examples of success
and failure. Then, he presents a wrap-up. Here’s part of the one from the
commoditization chapter: “The power to
capture attractive profits will shift to those activities in the value chain
where the immediate customer is not yet satisfied with the performance of
available products. It is in these stages that complex, interdependent
integration occurs - activities that create steeper scale economics and
enable greater differentiability. Attractive returns shift away from
activities where the immediate customer is more than satisfied, because it is
there that standard, modular integration occurs.” Finally, at the end of each chapter there
are pages of footnotes that will interest academic and other skeptical
readers about the basis for the theory and the sources of many statements
made. Most managers are reluctant to embrace
theories. Christensen has spent a lot of time struggling with innovation. Most
managers like the concept of innovation, and think they’re good at it. A few
hours with The
Innovator’s Solution will broaden any manager’s thinking and perspective.
If you remain unconvinced that this
is an outstanding book that you should read at once, sample this excerpt from
the epilogue (pp. 287-292): Who? Me? Use Theory? While
The Innovator's Dilemma sought to build a theory,
our purpose in writing The Innovator's Solution has been
to teach you as a manager how to use theory. If your reaction has been
that theory is too complicated—that you're an action-driven manager and are
not a theory-driven person—think again. Reread the passage in Moliere's The Bourgeois Gentleman in which Monsieur Jourdain finds
the writing of poetry intimidating. Remember how delighted he is to learn
that he can use the other option, which is to compose his love letter in
prose, because he has unwittingly been speaking prose all his life? While you
may not have known it, you have been using theory for the whole of your
managerial life. Whenever you have taken an action or made a plan, it was
predicated upon a theory in your mind that your actions would lead to the
envisioned outcome. So using theory to create successful growth businesses
needn't feel strange. You are—though perhaps unwittingly—a practiced
theoretician. We
conclude with a summary of our advice to executives who seek solutions to the
innovator's dilemma. 1.
Never say yes to a strategy that targets customers and markets that look
attractive to an established competitor. Keep sending the team back to the
drawing board until they've identified a disruptive foothold that established
competitors will be happy to ignore or be relieved to walk away from. If you
create asymmetries of motivation, your competitors will help you win. Though
you may not have done this before, it should feel good if you are accustomed
to bloody fights of sustaining innovation against motivated competitors. 2.
If your team targets customers who already are using pretty good products,
send them back to see if they can find a way to compete against
nonconsumption. When your customers are delighted to have a simple,
inexpensive product because their alternative is to have nothing, all the
techniques for pleasing customers that you learned in Marketing 101 will be
easy and inexpensive. This also should spell welcome relief compared with the
alternative, which is the massive investment typically required to make
disruptive technologies preferable to the established products that customers
already are comfortable using. 3.
If there are no nonconsumers available, ask your team to explore whether a
low-end disruption is feasible. They must devise a business model that can
make attractive profits at the discount prices required to capture customers
at the low end of the market, who can't use all the functionality for which
they currently must pay. If this isn't possible either, then don't invest—or
at least, don't invest with the expectation that this will create a
significant growth business. 4.
If the project leader ever uses the phrase, "If we can just get the
customer to . . . ," terminate the conversation. Send the team back to
find a way to help customer? get done more conveniently and inexpensively
what they already are trying to get done. Competing wishfully against customers'
manifest priorities has shortened the tenure-in-job of some pretty good
people. 5.
If the team's product or marketing plan focuses on market segments whose
boundaries mirror your organization's boundaries, or if the targeted market
is segmented along the lines for which data are readily available (by product
type, price point, or demographic category), send the team back. Ask them to
segment the market in ways that mirror the jobs that customers are trying to
get done. Remind the team that you still have no alternative but to
hire a one-size-fits-all milkshake for at least two different jobs that arise
regularly in your life. The milkshake business is stalled because
quick-service restaurants keep improving the shake's attributes rather than
doing each job better and better—which would grow the category by helping
shakes to steal share from the real competition. 6.
If your team's product improvement road map assumes that the basis of
competition won't change—that the types of improvements that merited good
margins in the past will continue to merit those margins in the future—look
at the low end. Often you can see there the opportunity to change the basis
of competition. 7.
If your disruptive product or service is not yet good enough and your team
seems enthralled with industry standards and the attendant outsourcing and
partnering deals, raise a big red flag. If you prematurely pursue modularity
and open standards, or if you keep a proprietary architecture closed while
the basis of competition changes, you'll struggle to succeed. Remember what
made Wayne Gretzky so good. It is better to develop competencies where the
money will be made in the future than to cling tenaciously to those skills
that made you successful in the past. 8.
If your team assures you that you'll succeed because a new venture fits your
company's core competence, tell them that you can't deal in fuzzy concepts.
Ask for answers to three specific questions: •
Do we have the resources to succeed? •
Will our processes—the ways we have learned to work together to succeed in
our established businesses—facilitate what needs to be done to succeed in the
new business? •
Will our values, or the criteria that folks here use to prioritize one thing
over another, enable the critical people to give the needed priority to this
initiative when compared with the other initiatives that compete for their
time, money, and talent? Use
the answers to these questions to choose the right organizational structure
and the right organizational home for this project. 9.
Ask these three questions about each of the entities that constitute the
venture's channels as well. It's not just you. The channel companies'
processes and values—their methods and motivations—can cause your venture to
come off the rails or even stall before leaving the station. 10.
Unfortunately, you may need to distrust the managers whom you have learned to
trust. The managers in your organization who have most consistently delivered
results in the past may be the least skilled at delivering success in
new-growth businesses. In choosing the management team for your new venture,
don't look at the attributes that describe the people you might tap to
lead a new-growth venture, or at the magnitude of their past
responsibilities. Search their resumes for the problems they have grappled
with, and compare them to the problems that you know this venture must
confront. 11.
Be sure that in the beginning years after a venture is launched, the
development team remains convinced that they aren't sure what the best
strategy is, in terms of products, customers, and applications. Insist that
the team give you a plan to accelerate the emergence of a viable strategy.
Call a halt to decisive plans to implement any strategy before there is
evidence that it works. 12.
Be impatient for profit. When someone tells you as a senior executive that
you must endure years of substantial losses before a new business will become
huge and profitable, this flags a plan to cram a disruptive technology into a
sustaining role in an established market. Some investments in sustaining
technologies with extensive interdependencies across the value chain can
indeed require years of massive investment. Let established competitors
tackle those. In disruptive circumstances, patiently enduring years of losses
generally allows a team to pursue the wrong strategy for a long time. 13.
Keep your company growing so that you can be patient for growth.
Disruption—and competing against nonconsumption in particular—requires a
longer runway before a steep ascent is possible. If corporate growth slows
and you then force the new businesses to attempt too fast a takeoff, you will
force the management to make other fatal mistakes. The other side to this
mandate is important as well. If you're slated to lead a new venture and
corporate management says you need to become very big very fast, what you really
are hearing is that management is going to make you cram your disruptive
technology into an established market. When you sense this, don't take the
job. You are very likely to fail. Note
that there is no mandate on this list that executives be brilliant
strategists in order to supervise the building of new disruptive growth
businesses. That's the whole point of this book. The disruptive companies
listed in chapter 2 didn't succeed because their founders foresaw the entire
strategy. If it depended on the brilliance of the founders and the
correctness of their strategies, then success would be unpredictable indeed. Many
successful companies have disrupted once. A few, including IBM, Intel, Microsoft,
Hewlett-Packard, Johnson & Johnson, Kodak, Cisco, and Intuit, have
disrupted several times. Sony did it repeatedly between 1955 and 1982, before
its engine of disruption got shut down. To our knowledge, no company has been
able to build an engine of disruptive growth and keep it running and running.
That reality has made this a risky book for us to write: Few business books
say "Do this; no one's ever done it before." But there is little
choice. Creating and sustaining successful growth has, historically speaking,
vexed some great managers. Given
the existence of principles but no precedent, we have simply done our best to
suggest how successful growth can be created and sustained. We have offered
an integrated body of theory derived from the successes and the
failures of hundreds of different companies, each of which has illuminated a
different aspect of the innovator's dilemma. And so we now pass the baton to
you, in the hope that you will find our efforts to be a valuable foundation
upon which to build your own innovator's solution. The advice in The Innovator’s
Solution will provide any managers with lots of ideas to think about in
helping your organization grow. Read it once right away, then think about it
for a while, and you’ll want to read it again. Your competitors will be
reading this book. Steve Hopkins, December 22, 2003 |
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ã 2004 Hopkins and Company, LLC The
recommendation rating for this book appeared in the January 2004
issue of Executive
Times URL
for this review: http://www.hopkinsandcompany.com/Books/The
Innovator's Solution.htm For
Reprint Permission, Contact: Hopkins &
Company, LLC • 723 North Kenilworth Avenue • Oak Park, IL 60302 E-mail: books@hopkinsandcompany.com |
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