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MONEY TALKS - Christensen's work on innovation a must-read for any manager

editor • Oct 29, 2015 at 12:51 PM

Over the last couple years, the business world has been obsessed with the work of a Harvard professor named Clayton Christensen.

Christensen writes about innovation, and particularly what he calls disruptive innovation. A disruptive innovation is an industry killer the car was a disruptive innovation to the horse and buggy or an industry creator the personal computer, for example. It's certainly the right topic for a professor to take on at the opening of the 21st century, when the number of industries being disrupted and of others emerging is far greater than at any other time in living memory.

And for once, I can agree with the hype. I can wholeheartedly recommend Christensen's books to every businessperson and to every person who wants to better understand the microeconomic dynamics of the American economy.

Even if you're a businessperson in this day and age and you don't think your business is being disrupted: read the books. They'll show you where to look you're probably being disrupted and you don't even realize it. In fact, as Christensen points out, being disrupted actually feels good to most companies right up until the company's business collapses.

What makes Christensen's work so valuable and so unusual is that it is a work of science. It is not a memoir of past success, and it is not a self-help book. To describe what that means, Christensen employs the metaphor of flight, and I can think of none better.

When homo sapiens first started trying to fly, they strapped feathery wings on their arms and jumped off bridges. Only when they understood the forces of aerodynamics were they able to design an airplane wing, which looks nothing like a bird's, but which behaves the same way.

Christensen is looking to expose the forces that make good companies fail in the face of disruptive innovation and small, inexperienced companies grow big and strong because of the same.

In any large human endeavor, whether it's government, business, or even war, the system matters more than the players unless those players understand and master the system.

To give an example inspired by Christensen: A manager trying to create a disruptive innovation might formulate an impressive, even brilliant strategy. Then, he might send out several strongly worded memos outlining that strategy. Anyone who has been on the receiving end of such memos or who has sent them out will know how futile that is.

A better manager, a more scientific manager, will realize he must reshape the company's processes in order to effect the strategy he desires. He might introduce new incentives, or create new teams, or invent new procedures. In many cases these efforts will pay off.

However, one of the defining attributes of disruptive innovations is that they occur in either emerging markets or at the very bottom end of existing markets. In other words, they are distinctly unattractive to companies seeking to grow, or even to maintain the current size of their business. They start as small opportunities with low-end profit margins. In other words, a strategy of disruptive innovation will never get off the ground if the cost structure underlying the implementation of that strategy is not addressed.

All the incentive schemes and new procedural manuals in the world cannot overcome the irresistible force of a company's cost structure. Any company, even GE, has a finite amount of resources which includes the time it bought from its employees. It will simply never make sense for anyone to use the scarce resources under his control somewhere that will negatively effect the growth and profit margins of a corporation.

Christensen's work exposes not merely the necessity of a scientific understanding of the dynamics affecting companies' behavior, it illuminates some of the most powerful of those forces. It is a watershed work in the history of management science.

It is a must-read for any manager who seeks to take control of his, and his company's, destiny.

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