Every company needs to grow, and innovation
is the ticket to sustainable and profitable growth. What
decisions can managers take to increase their probability
of successfully building innovation-driven growth businesses?
Many are convinced that it is impossible to predict with
confidence whether an innovation will succeed, so they feel
they need to place a number of bets with the hope that some
will be winners. Others believe that the best way
to create new growth businesses is to meticulously search
for detailed quantitative data to identify opportunities
and develop a rigorous plan to attack those opportunities.
But many times conclusive data is only available after the
game has already been won. Professor Clayton M. Christensen
of the Harvard Business School has another way. He suggests
using theory. A theory is a statement of what causes what
and why. Whether managers know it or not, they are voracious
consumers of theory. Every action a manager takes, every
plan a manager makes is based on some belief of cause and
have historically struggled to successfully manage innovation.
They get a bewildering array of often conflicting and confusing
advice. What has been lacking is a collection of well-grounded
theories that explain the actions managers should take in
particular circumstances. Through his recent research, Professor
Christensen has developed a set of theories to help guide
managers as they seek to answer seven critical questions
when trying to build new growth businesses, again and again:
- How can I beat powerful competitors? Companies should
look for situations where they can introduce disruptive
innovations that harness asymmetries of motivation. In
other words, they should pick the fights that powerful
competitors either cannot or will not contest. They can
do this by either seeking out non-consumers who will welcome
a simple product or by launching an attack on the low-end
of an incumbent's market among customers the incumbent
is actually happy to lose.
can I connect with customers? Customers hire
products to perform jobs that arise during their day-to-day
life. Companies succeed when they develop a product that
successfully matches a circumstance that customers find
themselves in. Traditional means of defining markets ï¿½
like product categories or demographics ï¿½ often
run counter to how customers live their lives and therefore
do not help companies successfully connect with customers.
integrated should I be? In circumstances where
products are not good enough to meet customer needs, a
company needs to be integrated to improve the product's
functionality. In circumstances where the product is more
than good enough, focused firms can beat competitors with
speed, responsiveness and customization.
should I set strategy? In highly uncertain situations
that typify disruptive innovations, following the typical
strategy-making process just doesn't work. In these uncertain
situations, some companies believe they need to fly by
the seat of their pants. However, companies can follow
a rigorous process by using an emergent strategy supported
by a discovery-driven planning process that enables them
to adjust their strategy when they encounter unanticipated
opportunities, problems and successes.
whom should I get funding? A company's financing
source should match its circumstances. Disruptive innovations
that need to take root in niche markets need investors
Investors that are impatient for growth will push a potentially
disruptive innovation towards large obvious markets where
the innovation's inherent strengths are actually weaknesses.
should the innovation reside? A company's resources,
processes and values define its capabilities and resultant
disabilities. When an opportunity fits a company's capabilities,
the company should run the innovation internally. When
opportunities do not fit a company's capabilities, the
company either needs to acquire the requisite capabilities
or house the innovation in a separate organization.
is the role of the CEO? Many CEOs have a simple
theory to help them decide how to spend their time. "Big-ticket"
decisions that involve a lot of money, they think, require
my close careful attention. Another approach suggests
the size of the decision is irrelevant. It suggests that
the CEO needs to get involved in circumstances when a
company's standard processes are not designed to do what
needs to get done.
[See also comments and additional graphics posted by Mark Madsen. See the complete list of OSBC 2004 presentations on IT Conversations.]