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Emerald Group Publishing Limited
Copyright © 2004, Emerald Group Publishing Limited
The dilemma finds a solution
The dilemma finds a solution
Don MitchellDonald Mitchell is Chairman and Chief Executive Officer of Mitchell and Company (www.mitchellandco.com), and co-author of The Ultimate Competitive Advantage, The Irresistible Growth Enterprise and The 2,000 Percent Solution.
The Innovator's Solution: Creating and Sustaining Successful GrowthClayton M. Christensen and Michael E. RaynorPublished by Harvard Business School Press
The Innovator's Solution builds on Professor Christensen's landmark book, The Innovator's Dilemma, and explains how managers can overcome the vulnerability he described in the earlier book toward managers in large companies being blindsided by new entrants bringing disruptive technology and products to bear.
Professor Christensen and Dr. Raynor observe, based on the studies of others, that few large companies are able to grow shareholder returns faster than average for as long as ten years. Worse still for managers, the authors note that studies of those few firms which have grown faster are often contradictory in their findings. Described best practices in such studies may be nothing more than an accidental reaction to a temporary situation.
The authors go on to create a generalized theory of what needs to be done in every situation that a company may face in creating and responding to disruptive technologies and products. It's as though Michael Porter had taken his tomes on competitive advantage and provided a single theory for when to apply what. As such, The Innovator's Solution is one of the most advanced books for creating management processes that generate disruptive technologies and business models to discomfit the competition in profitable ways.
The theory encourages you to seek out needs and customers that are not being served now and are unattractive to potential competitors. You should seek to replace something that potential customers are now doing unsatisfactorily for themselves. Find a way to provide for those needs flexibly in efficient ways (you will probably have a proprietary process in the beginning, but will need to deconstruct that in doing only modules of the whole process). Develop and apply new management processes to create and implement such disruptive offerings. Be aggressive in making the disruptive offerings profitable, and develop your organizational capability to grow with the disruption's success. This advice is contrary to what most companies do now.
The book is very well done both in terms of ideas and the way they are communicated. Appreciating Figure 2-3 on page 44 is alone worth the price of the book. The authors have created a graphic there to explain how markets develop in growth and competitive characteristics. No one who sees this graphic depiction will ever think about competitive and development strategies in the same way again.
Although the authors use examples from many different industries, the most detailed and compelling examples come from technology-based companies and industries. I found the Sony examples particularly interesting for their repeated creation of new markets and business models.
The book beautifully elaborates on the thinking processes that companies use to lose competitive advantage ... and should help many leaders counter these wrong-headed thoughts and instincts.
Why, then, does the book have so much theory? As the authors candidly point out at the end, there are few models for what they are proposing. As a result, they have cobbled together a theory from bits and pieces of concepts that appeal to them and seem to fit with one another. Only with experience can we tell how good this theory is. But their theory is worth understanding and considering.
The authors seem to have missed the bulk of examples of fast-growing companies that have made continuing business model innovations in the last decade. That omission appears to be because they relied on the published literature prior to 2003 to find examples, rather than doing their own research from scratch. Since continuing business model innovators are seldom written about by academics and consultants, these are a little hard to find. A large number of such innovators appear in service industries (such as Clear Channel Communications, Education Management, Iron Mountain, Jordan's Furniture, Paychex, and the Virgin Group) which are infrequently mentioned in The Innovator's Solution. Surprisingly, many continuing business model innovators in software, semiconductors, computer components and medical testing are missing. I suspect that the proposed theory could be much improved by considering these cases. I look forward to seeing what the authors have to say in the future as they look at more cases.
Without attempting to know if the theories are right or not, I can mention my own subjective reactions. The authors seem to be overly focused on products as compared to business models. It is helpful to use both starting points for strategic thinking. Analyzing customer behavior by considering what job customers are trying to do seems to me to be too simplistic. The most disruptive products, technologies and business models have often created changes in behavior where customers do things for the first time. On the other hand, the points made about how to beat the most powerful competitors, select the right target customers, scope the business correctly, avoid commoditization, manage strategic development, work with the right sources and amounts of funding, and the role of senior executives struck me as more often on the mark than not based on my own research and experiences. Any of the chapters except chapter 3 would probably make helpful reading for just about anyone.
Don't be put off by the authors' emphasis on theory. They are trying to help make you more practical, not more abstract. Think of their theory as being like an operating manual for a new product. You may get better results by having clear instructions rather than relying totally on trial and error.
I was extremely impressed by the gracious and thorough acknowledgments in the book of the thinking and research of others. Even when the authors point out the extreme weaknesses and limitations of a particular piece of work, they praise the positive aspects of that work in kind and thoughtful ways. I cannot remember the last time I read an academic book that took such a considerate approach.