Is “the Innovator’s Solution” to Sustained Corporate Growth an Unnatural Act?
In their new book, The Innovator’s Solution, HBS professor Clayton Christensen and co-author Michael E. Raynor propose four guidelines for developing a "disruptive growth engine." The problem: According to the authors, few organizations have been able to achieve more than one disruptive technology in their lifetimes. Why is it so difficult?
In the judgment of respondents to the October column, repeating the development of disruptive technologies is an admirable but elusive target. Respondents commonly asked whether it is a process disrupted by too many factors—some of them a product of human nature—and all of which have to be managed effectively on a continuing basis.
As Richard Eckel put it, "'Disruptive' is the clue for why the proposed method of sustained growth will fail in most organizations ... B-schools graduate and laud those who are risk averse and self-indulgent optimizers of existing systems ... business processes [are outsourced] under the pretext of 'cost savings' ... huge compensation packages [encourage cautious leadership]." Mainak Banerjee, in concurring with Eckel's latter point, says, "The worst thing that can happen to a healthy business is to run into problems while you were spending your time on disruptive innovations!" M. P. Singh, a manager in the public sector, suggests, "Expecting corporate culture to tolerate or encourage radical change or innovation is like expecting a country to encourage rebellion against itself." Stever Robbins points out that, at its heart, the problem is a matter of "human nature. People aren't inherently fond of disruption." And Chirag Patel opines, "investors will not be easy on such companies..."
Nevertheless, most respondents thought that the pursuit of the disruptive growth engine was a worthy, if elusive, goal requiring further attention. "This is not an unnatural act but an essential feature for any business," according to K. Hariharan. As Patel points out, "... the right strategic pathways to be followed during disruptive technology adoption at the time of the introduction of this technology still remain a dilemma even after the introduction of 'the innovator's solution.' Research in this direction would be welcome." B. V. Krishnamurthy takes the idea to another level by commenting, "The heart of business success in the future may be in altogether different forms of innovation: process innovations ... innovations in the way we think ... innovations in organization structure ... and so on."
These comments pose the question of whether too many elements, many of them counter to human nature or the training we receive, have to come into alignment over too long a period of time for the disruptive growth engine to function. Can the appropriate culture be created and rewarded and the process—or as Patel terms it, the "pathways" —be designed and managed successfully over sustained periods of time? What do you think?
Long-term growth and profitability are elusive targets for many organizations. The former often is more difficult to achieve than the latter, especially for companies competing in "mature" markets. This presents a problem for today's manager to the degree that investors reward growth more than profitability.
There are at least two antidotes to this scenario. One involves serial acquisitions. But research has suggested that most acquisitions destroy value. This helps explain why the stock of acquiring firms is often discounted by investors in expectation of long-term value dilution, at least until the acquirer proves otherwise.
The other alternative is the subject of a new book, The Innovator's Solution: Creating and Sustaining Successful Growth, by Clayton Christensen and Michael Raynor (HBS Press, 2003). It is a follow-up to Christensen's widely-read The Innovator's Dilemma. In the two books, they present evidence that successful, dominant firms are particularly vulnerable to competitors introducing disruptive technologies, those that offer customers less product capability for much less money.
Among the reasons disruptive technologies succeed is that they appeal to those customers whose capabilities and needs have been outstripped by the development of newer and more complex product features. In the face of a "disruptive technology," dominant competitors flee to the upper end of the market where their increasingly sophisticated products can enjoy higher margins until their newly spawned competitors eventually overtake them.
In The Innovator's Solution, Christensen and Raynor present a manual for managers of long-established companies wishing to generate their own disruptive technologies to help insure the periodic regeneration of growth. Much of it is devoted to identifying criteria by which disruptive technologies and their markets can be identified, and making sure that organizations and processes are fine-tuned to turn the tables on upstart competitors who might be doing the same.
The authors propose four guidelines for developing a "disruptive growth engine." They include: (1) "start before you need to," (2) "appoint a senior executive to shepherd ideas into the appropriate shaping and resource allocation processes," (3) "create a team and a process for shaping ideas," and (4) "train the troops to identify disruptive ideas" which often result from observations of the circumstances in which potential customers "hire" products or services to achieve a result.
The catch is that no organization, in the opinion of the authors, has ever been able to create a "disruptive growth engine." This is a significant departure from much conventional research wisdom that relies on the study of select groups of companies representing best practice. In fact, near the end of their carefully reasoned presentation, the authors acknowledge that few organizations have been able to achieve more than one disruptive technology in their lifetimes. Why is it so difficult? Does it require too much continuity of leadership, focus on long-term performance, willingness to cannibalize existing products, organization disruption, or investor patience? If so, is this one of those unattainable ideals that looks good only on paper? Or will these ideas spawn the first generation of disruptive growth engines? What do you think?