The Innovator’s Dilemma — 10 Years On

Stephen DeAngelis

June 22, 2007

BusinessWeek takes an online look at how the world has changed ten year’s after Clayton Christensen released his best selling book entitled The Innovator’s Dilemma [“Clayton Christensen’s Innovation Brain,” by Jena McGregor, 15 June 2007]. The magazine points out, for example, when the book was released only Honda had a hybrid car (the Insight). A GM vice president called it “an interesting curiosity” that didn’t make economic sense. Now GM has five hybrid models in a field dominated by the Toyota Prius, which was introduced the same year as Christensen’s book (1997).

The magazine lists other innovations that have occurred over the past decade. In 1998, the world was introduced to Google and Internet search engines and advertising have never been the same. The next year (1999) Blackberry changed the way millions of people stay connected. The last year of the twentieth century (or first year of the twenty-first depending on how you count — 2000), MinuteClinic pioneered “retail health care” with low-cost, same-day appointments in retail settings for treating minor ailments or health needs such as ear infections or flu shots. In 2001, iPods took the world by storm and resurrected slumping Apple fortunes. Second Life, a virtual world I’ve written about before [Virtually No Escape], was introduced in 2002. Skype, the “dirt-cheap” Internet phone service was introduced in 2003. Building on the phenomenon created by My Space, Facebook became the next big thing in 2004. Rupert Murdock, who now owns My Space, has offered to swap it to Yahoo for a substantial portion of that company’s stock. The following year (2005) You Tube took the Internet by storm and generated numerous imitators. Last year (2006) an old name in electronic gaming, Nintendo, revived its fortunes with its innovative Wii game system, outselling new products offered by both Sony and Microsoft.

With globalization rapidly advancing, increasing the complexity of threats faced by corporations, McGregor asks how relevant Christensen’s ideas remain.

“Very, says Robert Sutton, professor of management science and engineering at the Stanford Engineering School and co-founder of Stanford’s d.school. ‘There are very few books, whether you do innovation in the academic world or in the business world, that you have to understand equally well,’ he says. ‘You have to know it.’ In essence, the dilemma Christensen describes—how to serve your core business while finding new markets and watching out for new entrants in your blind spot—is as critical today as it was 10 years ago. While reading it today can plunge you into a bit of a time warp—’Internet appliances,’ those devices for the kitchen counter that would only browse the Web and respond to e-mail, did not upend the PC industry—Christensen’s ideas still resonate. Criticisms of the book tend to surround its lack of solutions, which Christensen tried to correct in his follow-up, The Innovator’s Solution, which was published in 2003 to less fanfare. One reason the first book was so well-received, says Roger Martin, the dean of the Joseph L. Rotman School of Management at the University of Toronto, is that Christensen doesn’t criticize managers, as many ivory tower professors do in their books. Rather, a major theme is that great managers miss disruptive innovations precisely because they’re focused on their customers, working hard to create returns for shareholders, and trying to do everything right.”

McGregor provides some excerpts from an interview she conducted with Christensen on the ten-year anniversary of his book’s release. One of her questions focused on the fact that Christensen’s book seems focused on technology more than innovation.

(Mc) Your book focuses heavily on disruptions that are caused by advances in technology. More than ever, however, managers are defining “innovation” in a broader context, from breakthrough business processes to business models to customer experiences.

(C) I think when I wrote The Innovator’s Dilemma, my brain really was a technological brain and I was looking for a technological explanation. So I called it “disruptive technology.” Then as I helped people to try and use the ideas, it became very clear there really isn’t anything [it doesn’t apply to]. Disruption really is a business model innovation. Most disruptions have a technological enabler that [allows] people to make simpler products that are more affordable and accessible for people. In The Innovator’s Solution, I recanted. We called it disruptive innovation [rather than disruptive technology]. Basically I was wrong in labeling it a technological phenomenon.

Later in the interview, Christensen’s answer a question with an example of a product that he thinks would do well — a car designed for road warriors. Being on the road as much as I am, I think he has a point.

(Mc) In The Innovator’s Dilemma you warn that the maxim “staying close to your customers” can lead you astray. Wouldn’t a cursory reading of the book say “don’t listen to your customers?”

(C) You’re exactly right. The cursory reading is “don’t listen.” The deep reading is you have to be careful which customers you listen to, and then you need to watch what they do, not listen to what they say. This is catching on with one of the big automobile companies in Detroit. If you look for the jobs that people hire a car to do, the opportunities for innovation are extraordinary. There are about 30 million Americans for whom [a car] serves as their office. Isn’t it interesting that nobody has designed a car to work as an office? They pull up to Starbucks and go in to use their T-Mobile hot spot or if they’re in Silicon Valley they’ll pull up next to someone’s apartment building to mooch off their Wi-Fi because they can’t access the Internet in their car. They stop at a stoplight, their notebook computer falls onto the floor. They can’t recharge their computer because the electrical system was not designed to do it and there’s no docking station. They throw sales literature in the backseats. Nobody’s designed a car to do that job. If you understand the job, the opportunities to differentiate are just extraordinary.

Still later, McGregor confronts Christensen with definitional problems his book created.

(Mc) You’ve said “the most widespread and dangerous misunderstanding of the model is the equation of ‘new’ or ‘breakthrough’ with disruption.” Yet today, I feel like “disruptive” has become just that: A synonym executives use when they’re describing something big or bold. Why is that dangerous?

(C) Because it causes them to think that, “I’ll just take whatever hobby horse I have, because Clay’s study showed that disruptive products create these new growth markets. I’ll cause everyone to believe my idea’s going to do that.” In fact, big technological leapfrogs rarely create new growth. Almost all of them are defensive in character. The equation of disruptive with new and radical causes people to target markets that don’t exist. Andy Grove recognized this a lot sooner than I did. There are many prior connotations in the English language for the word disruption. He was worried that the word would be so misused that he called it “the Christensen effect” internally. The problem was I couldn’t call it the Christensen effect. In retrospect, it would have made things a lot clearer had I found a word that didn’t have so many other connotations. It gets hijacked.

One of things I think Christensen is saying is that you can’t disrupt a market that doesn’t exist. One of the problems my company faced was the lack of a market. I literally had to create a market for what Enterra Solutions offers because there is nothing quite like it on the market. Where this journey has led has surprised even me. Fortunately, being a small company, our flexibility has been up to the twists and turns we’ve encountered along the way. McGregor then asks Christensen about trying to create a culture of innovation — something I’ve addressed in several previous posts.

(Mc) I hear a lot of managers today talking about trying to create “innovators at all levels” and building innovation into every corner of a vast corporation. Is that a misguided idea? Isn’t that contradictory to what you say in Dilemma, which is that disruption happens in “spin-out organizations,” as you call them?

(C) Generally you create a lot of hype. People come up with lots of new ideas, but nothing happens. They get very disillusioned. Never does an idea pop out of a person’s head as a completely fleshed-out business plan. It has to go through a process that will get approved and funded. You’re not two weeks into the process until you realize, “gosh, the sales force is not going to sell this thing,” and you change the economics. Then two weeks later, marketing says they won’t support it because it doesn’t fit the brand, so we’ve got to change the whole concept. All those forces act to make the idea conform to the company’s existing business model, not to the marketplace. And that’s the rub. So the senior managers today, thirsty for innovation, stand at the outlet of this pipe, see the dribbling out of me-too innovation after me-too innovation, and they scream up to the back end, “Hey, you guys, get more innovative! We need more and better innovative ideas!” But that’s not the problem. The problem is this shaping process that conforms all these innovative ideas to the current business model of the company.

The interview concludes with the news that Christensen is working on two books looking at the U.S. healthcare system and public schools. He says the common theme is that both systems are fundamentally biased against innovation. Should be interesting reads.