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MEMO
Date: Feb. 27, 2004
To: Steve Crosby
From: Candace Stuart
Re: A must-read for company presidents like yourself
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I know you have no shortage of reading material; if nothing else, we keep you well supplied as publisher and president with Small Times copy in the rough. But the book I selected for this issue’s review is a total winner, one that anyone trying to put his or her company on a growth trajectory should consult. It’s written for corporate managers, but the insights are so keen and universal that it applies to businesses large and small involved in all sectors.
It’s “The Innovator’s Solution,” a sequel to “The Innovator’s Dilemma.”
The dilemma outlined by author Clayton Christensen is that corporations that succeed at serving their most coveted and profitable customers leave chinks in the lower end of the market for upstart disruptors who later dethrone them. In the sequel, Christensen, a Harvard prof, partners with his former student Michael Raynor, who is now a director at Deloitte Research, to flag the pitfalls and suggest strategies to avoid the trap.
I can see this book serving the two extremes in our readership: the Intels, IBMs and other incumbents as well as tadpole startups with princely aspirations. The same institutional land mines that derail corporate attempts to be entrepreneurial create openings for opportunistic bottom-feeders.
The tadpoles-turned-frogs will face identical pressures if they are kissed by success: the seemingly commonsensical strategy to invest in markets where the money is, not where it will be; to look for new markets when the corporation is in a tailspin rather than develop the next generation of disruptive technologies while business is soaring; and the pressure to project increasing growth rates as the downward spiral worsens.
Remember this when Small Times is big.
Christensen and Raynor have little use for generalizations. They repeatedly dismiss what they term “the one-size-fits-all” approaches in any aspect of business, including product development and marketing. They encourage managers to recognize the circumstances that affect markets, customers, suppliers, distributors, etc., and to adjust game plans as the circumstances change.
“The principal refrain of this book is that blindly copying the best practices of successful companies without the guidance of circumstance-contingent theory is akin to fabricating feathered wings and flapping hard,” they write. “Replicating their success is not about duplicating their attributes; it’s about understanding how to generate lift. Good theories are circumstance-based.”
In keeping with their vision, they liken products not to things but to jobs that customers hire. Using a milkshake as an example, they first observe who hires a milkshake and for what job. The answer: bored commuters and parents harried by children. The commuter needs a thick shake to kill time on the drive while the parent needs a thinner shake that kids can handle. A one-slurp-serves-all shake is destined for the “jobs wanted” column.
This is an intriguing way to view everything from palm pilots to publications. Both, by Christensen and Raynor’s broad reckoning, qualify as technology. The next challenge is defining whether they’re sustaining or disruptive technologies. Personally — and it’s not just because I like the underdog role — I’m bucking for disruptive.
Disruptive technologies typically make inroads with the underserved and the “nonconsumer.” The underserved are those who want less than current providers offer. (Think me and cell phones. I want one for the emergency flat tire and that’s it.) Most entrenched businesses see the low-volume, low-profit underserved as distracting and even detrimental to the bottom line.
Nonconsumers are the untapped masses that hold the greatest potential for profits — down the road. It usually takes time to build growth through the underserved and nonconsumer, which is good because the established companies don’t see what’s happening. Unless they’ve absorbed the lessons in “The Innovator’s Solution,” which spells out how corporations can succeed as disruptors, too.
“It’s the creation of new disruptive businesses that allow companies to exceed investor expectations and therefore to create unusual shareholder value,” they write. “For precisely the reasons why established companies are prone to underestimate the growth potential in disruptive businesses, investors likewise have consistently underestimated (and therefore been pleasantly surprised by) the growth potential of disruptions.”
There are times where “The Innovator’s Solution” didn’t fulfill its duties for me, but they are rare. “Commoditization” lost me on the fifth syllable every time I read it, which was often in one chapter. But for the most part Christensen and Raynor avoid academic tedium and business jargon. They offer concrete examples based on sound research and astute observation, and they credit their sources clearly and generously.
I’ll gladly hire them again if they decide to make this Innovator thing a trilogy. I certainly got my money’s worth in “Solution” and bet our readers will, too.