Disruptive Innovation

Thanks Ajay for the introduction and inviting me to post an entry here for IT Vidya readers about Prof. Clayton M. Christensen and his upcoming seminar on Disruptive Innovation in Mumbai and Delhi. Instead of directly describing Prof. Christensen’s work and what to look for in this seminar, let me take a step back and create some context in which to evaluate them:

The World of Theory Making

Business thinking is an ironic industry. Despite prolific output of books, fads, & theories, and the world’s wealth & prosperity at stake--or perhaps, because of it--this is an industry that faces a dearth of good theory.

A dearth? Yes! A drought? Naught! For through every decade of fad there have been at least a luminary or two illuminating poorly understood phenomena with their incisive thought. The challenge for managers, then, is to pick out the rare grain of wheat from the pervasive chaff.

A manager’s job essentially is one of prediction. The only worthwhile basis of prediction is a good theory that accounts for the cause-effect relationships that exist in the phenomena under consideration--in this case, the phenomena is one of human-based systems running business enterprises under the purview of socio-economic forces playing out in the face of rapid technological advancements (and its problems). These systems by definition are complex. Take the four entities just mentioned: human-based systems, business enterprises, socio-economic forces, and technological advancement; all are interdependent and impact each other, amplifying any 'original effect' one of them has on the other three.

It’s no wonder then that building valid cause-effect relationships to predict what moves such complex phenomena seems more daunting and elusive than predicting the motion of heavenly bodies in the sky. What’re business gurus to do? Their path of least resistance is to take recourse in correlation. Reams of empirical data recording trends showing that when A is present, B also occurs, leading to an erroneous or an imprecisely understood notion of A causes B, without a formal understanding of exactly how or why does A cause B.

The difference between the effectiveness of two managers equipped with correlation and causality respectively is no less than that of two technologists given the mandate of landing a man on moon when one is equipped with Kepler’s correlations on the movement of heavenly bodies and the other with Newton’s laws of motion.

The Newtons of the Business World

So what are those few causal theories in business that match the seminal rigor and predictive success enjoyed by Classical Mechanics? By far, the most comprehensive and extensively applicable of them is the Theory of Constraints (TOC), created by an Israeli physicist, Dr. Eliyahu M. Goldratt, and made popular through his widely read business novel The Goal that has sold over 3 million copies worldwide.

Since many of you must be familiar with Dr. Goldratt’s work, it should give you some idea when I place Prof. Christensen’s work on the theory of innovation in a similar standard of theoretical rigor and pragmatic value.

Those familiar with TOC will know that the central insights therein are framed as solutions to some very fundamental conflicts or complex dilemmas that have mired the productivity of entire industries for decades together. Thus, it is interesting to note how Prof. Christensen’s first book was aptly titled The Innovator’s Dilemma. It elegantly captured the central dilemma posed by what Prof. Christensen coined as disruptive innovation, as opposed to the regular sustaining innovation.

Stated briefly, sustaining innovation refers to incremental improvements in a product or service along key parameters valued most highly by its biggest customers (think faster computers, longer lasting batteries, quicker credit approvals). Good companies in any industry do this remarkably well either by being first-to-market with these innovations or even by playing catch up with and killing any new entrants. Disruptive innovation, on the other hand, is that which brings a new value proposition and almost always leads to near-term sub-performance along the key parameters valued by a company’s biggest customers (think electric cars that take a full minute to reach 60 km/hr, early digital cameras producing grainy prints, choppy voice quality on VOIP).

The dilemma posed by disruptive innovation is that the very principles of good management that companies follow to become successful—listening to their best customers and investing aggressively to meet their next generation needs--are also the cause of their eventual downfall.

Typical of hard sciences’ (and thereby TOC’s) approach in resolving fundamental dilemmas, Prof. Christensen too creates a supra framework of the dynamics of innovation and the forces at play in organizations. Using this framework, he deduces the principles and process of The Innovator’s Solution that allows managers to address both the short-term need of their established businesses to stay profitable as well as the long-term need to deal with and launch disruptive change and growth.

Those who have pursued Dr. Goldratt’s It’s Not Luck, the sequel to The Goal, would instantly recall how the printing company under Alex Rogo when faced with virtual extinction from a new entrant with faster, higher productivity machines (a sustaining innovation) successfully creates a marketing solution that is indeed a disruptive innovation, and for very similar reasons cited by both Dr. Goldratt and Prof. Christensen, such innovations are virtually impossible to copy by the competition.

Beyond Books

So besides getting a quick refresher and lowdown on the seminal body of work that Prof. Christensen and his colleagues have created about disruptive innovation, what do I expect to gain from the seminar?

Well, for starters, I’m definitely looking forward to actually hearing the stuff directly from the horse’s mouth.

Secondly, it’s been almost a decade since Prof. Christensen started on this journey of demystifying the forces of innovation. His latest work, Seeing What’s Next takes an 'outside-in' view and applies the theories to predict change in various industries at large. So it seems to have come a full circle and I expect his presentation to put the various pieces of his decade long work in perspective and provide some unifying meta-data that helps in-depth perusal of his work.

Third, going by his latest work, Seeing What’s Next, and the increasingly important role that India and Asia are playing as the growth drivers of global economy, one can expect Prof. Christensen to throw some light on the disruptive opportunities present today or very soon heading our way in India.

And lastly, it would be fun posing some tough questions to the provocative professor from Harvard ;)

If any of you’re attending the Mumbai event on May 17th, I look forward to seeing you there. For those of you unable to attend, look out for my report on the seminar once I’m back.

- Rukesh