20 years after Disruptive Innovation

The theory of disruptive innovation was introduced in the Harvard Business Review in 1995 and it has since become part of common business parlance. Twenty years after the publication of the original article, Clayton Chistensen, Michael Raynor, and Rory McDonald present a state of the art in a recent HBR article.

The authors fear that

disruption theory is in danger of becoming a victim of its own success. Despite broad dissemination, the theory’s core concepts have been widely misunderstood and its basic tenets frequently misapplied. Furthermore, essential refinements in the theory over the past 20 years appear to have been overshadowed by the popularity of the initial formulation. As a result, the theory is sometimes criticized for shortcomings that have already been addressed.

And they are not pleased either with the way the expression itself is being used.

Too frequently, they use the term loosely to invoke the concept of innovation in support of whatever it is they wish to do. Many researchers, writers, and consultants use “disruptive innovation” to describe any situation in which an industry is shaken up and previously successful incumbents stumble. But that’s much too broad a usage.

Nor how

executives with a good understanding of disruption theory tend to forget some of its subtler aspects when making strategic decisions.

They identify four points that get overlooked or misunderstood:

  1. Disruption is a process.
  2. Disrupters often build business models that are very different from those of incumbents.
  3. Some disruptive innovations succeed; some don’t.
  4. The mantra “Disrupt or be disrupted” can misguide us.

 

disruptive innovation

The latter part of the article reviews ways in which the authors’ thinking about disruptive innovation has evolved and it ends on a cautionary note:

Disruption theory does not, and never will, explain everything about innovation specifically or business success generally. Far too many other forces are in play, each of which will reward further study. Integrating them all into a comprehensive theory of business success is an ambitious goal, one we are unlikely to attain anytime soon.

See also A new version of Porter’s five-forces model.

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What really matters in business

Jason Fried via Fast Company on what matters:

  • Are you profitable?
  • Are you building something great?
  • Are you taking care of your people?
  • Are you treating your customers well?

Turning in a profit while building something great in the service of your customers and your people. That’s as complete a précis as they come. Much along the lines of Peter Drucker’s 5 questions.

Inevitable strategy

Roger Martin illustrates the difference between Mintzberg‘s emergent strategy and deliberate strategy:

Every company has a strategy. Whether it ‘does strategy’ explicitly or not, the choices that it makes on a daily basis result in the company operating on some part of the playing field (i.e. making a where-to-play choice) and competing there in some fashion (i.e. making a how-to-win choice). It matters not a whit whether the industry is highly uncertain, every company competing in it has a strategy.

Without making an effort to ‘do strategy,’ though, a company runs the risk of its numerous daily choices having no coherence to them, of being contradictory across divisions and levels, and of amounting to very little of meaning. It doesn’t have to be so. But it continues to be so because these leaders don’t believe there is a better way.

Are ‘big data’ making strategists redundant?

Not yet, says Andrew Hill at FT.com:

Unlike intelligent fridges that can buy their own groceries online, large data-driven companies can’t order their own strategic direction. Even if they could, they would need someone sitting in front of a dashboard to decide, on the basis of abundant data, which innovation to bless with scarce capital. That, at least, will come as a relief to CEOs, as they struggle to keep their heads above water.

Best way to plan is to look backward

Invert, always invert.” Turn a situation or problem upside down. Look at it backward. What’s in it for the other guy? What happens if all our plans go wrong?

Where don’t we want to go, and how do you get there? Instead of looking for success, make a list of how to fail instead — through sloth, envy, resentment, self-pity, entitlement, and the mental habits of self-defeat. Avoid these qualities and you will success.

Tell me where I’m going to die, that is, so I don’t go there.

Charlie Munger quoted in Warren Buffett, The snowball, p. 770.

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Best Buy: Is no competition at all good for you?

With the closure of Circuit City earlier this year — and Comp USA before that — Best Buy is the only remaining national electronics chain. On its face, that would seem like a good thing for the company. But analysts argue that Best Buy has inherited a lump of coal. – via Best Buy Plans to Take on Low-Cost Rivals With Services.

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Sony, Amazon and the pricing of “regular” books

Sony Electronics announced that it was lowering prices for new and best-selling books in its e-book store, to $9.99 from $11.99.

Book publishers have worried about the $9.99 flat price ever since Amazon.com introduced it for its Kindle reader in 2007, fearing that it could cannibalize sales of higher-priced hardcover books. -via NYTimes.com.

Considerations:

  • “We have to offer value. It’s clear e-books should be less expensive than regular books, with the savings on printing and logistics getting passed on to the consumer.”
  • “We all know that these companies are taking a loss and that’s not going to continue forever.”  “$9.99 has now become the effective price for e-books in August of 2009. Let’s just take a breath and see how long this lasts.”
  • In response to the $9.99 list price, some publishers are thinking about postponing the release of the digital versions of their most popular books, lengthening the period in which only the higher-priced hardcover versions are available. This is similar to the approach taken by Hollywood studios, which allow DVD sales and rentals only after a film has left theaters.
  • Sony’s price cut on digital books and the new devices may not be enough to help it catch up to Amazon.
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