The Disruptive Innovator

It’s not often that one comes on books that change the way one thinks. Examples that have that kind of impact on me are Donald Schon’s The Reflective Practitioner: How Professionals Think in Action, Neil Postman’s The Disappearance of Childhood , Thomas Kuhn’s The Structure of Scientific Revolutions and Howard Gardner’s Frames of Mind: The Theory of Multiple Intelligences.

And of course Clayton Christensen’s The Innovator’s Dilemma, which has shaped my thinking about innovation ever since I read it many years ago. But although I knew his work, I knew very little about the man himself, which is why I found Larissa MacFarquhar’s New Yorker profile of him such riveting reading.

It appears in the May 14 issue and is, alas, behind the paywall, but the online summary gives a flavour of it.

In industry after industry, Christensen discovered, the new technologies that had brought the big, established companies to their knees weren’t better or more advanced—they were actually worse. The new products were low-end, dumb, shoddy, and in almost every way inferior. But the new products were usually cheaper and easier to use, and so people or companies who were not rich or sophisticated enough for the old ones started buying the new ones, and there were so many more of the regular people than there were of the rich, sophisticated people that the companies making the new products prospered. Christensen called these low-end products “disruptive technologies,” because, rather than sustaining technological progress toward better performance, they disrupted it.

It’s eerie how Christensen’s analysis still resonates. A few weeks ago, Kamal Munir from the Judge Business School gave a terrific talk in my Arcadia Seminar series at Cambridge University Library about his investigation of how Kodak fumbled the digital future. By any definition, Kodak was a great company which not only dominated its market, but had effectively created that market. And yet when the early digital cameras (like the Sony Mavica) arrived, the crappy technical quality of the images they produced was one of the factors that led Kodak to underestimate the threat that they would represent to its future. (Another factor was that the margins on digital photography were minuscule compared with the 70 per cent margins that Kodak was squeezing out of analog photography.)

And the innovation story goes on. We’re seeing it currently in the Higher Education business. Traditional universities are expensive and inefficient as teaching institutions, but most of them persist in believing that their USPs are such that scrappy online alternatives will never pose a serious threat. And it’s true that at the moment most online offerings are still pretty chaotic, variable and uncoordinated. But if Christensen’s analysis is correct, the challengers will eventually prove “good enough” for many customers (especially as the costs of traditional university courses continue to escalate) — with the result that he observed all those decades ago in industries like disk storage and steel-making. Caveat vendor.

Interestingly, MacFarquhar says that one of the people who first spotted Christensen’s work was Andy Grove:

One of the first C.E.O.s to understand the significance of Christensen’s idea was Andy Grove, the C.E.O. of Intel. Grove heard about it even before Christensen published his book, “The Innovator’s Dilemma,” in 1997. Intel brought out the Celeron chip, a cheap product that was ideal for the new low-end PCs, and within a year it had captured thirty-five per cent of the market. Soon afterward, Andy Grove stood up at the COMDEX trade show, in Las Vegas, holding a copy of “The Innovator’s Dilemma,” and told the audience that it was the most important book he’d read in ten years.

I’ve always thought that Grove was one of the most insightful CEOs of all time. He also understood the real significance of the Internet long before most people got it — as when he declared in 1999 that “in five years’ time all companies will be Internet companies or they won’t be companies at all”. What he meant was that the Net would become like the telephone or mains electricity: a utility that would transform the world in which everyone did business. Grove was much ridiculed for the declaration at the time. But he had the last laugh.