Clayton Christensen has been the undisputed expert on Disruptive Innovation. In this post, I will breakdown his complete works on disruption – a theory of competitive response to an innovation. His theories have been relevant to me in my interests of entrepreneurship, product management, and trying to articulate world’s problems.
The content of this summary is derived from Christensen’s books of The Innovator’s Dilemma (1997), The Innovator’s Solution (2003), Seeing What’s Next (2004), and Competing Against Luck (2016). Lastly, I will supplement the theories in these books with external research criticizing or supplementing his work.
Why Understand Christensen’s Theories on Innovation
Understanding his theories holistically – from inception to now – will allow a leader (product manager or an executive) to best apply these theories to understand his or her business landscape. Furthermore, and most importantly, it will allow the leader to be aware of the anomalies, shortcomings, areas of further research about his proposed theories.
Understanding The Innovator’s Dilemma (1997)
The Innovator’s Dilemma (1997), the original Christensen’s work, began with seeking an answer to: Why do well-managed firms with commanding market leadership position, consistently fail to innovate products and result in their own downfall?
Christensen’s answer was that it is because the incumbents do everything “right” that cause them to fail. Specifically, the marketing departments of incumbent companies don’t take risks with new innovative products whose potential is unknown.
“The basic lessons, according to Christensen, are that:
- technical improvements on the supply side tend to outpace technical needs on the demand side, leading to all products moving consistently upmarket, and
- that existing markets are always significantly larger than new markets, and thus it doesn’t make sense for an established firm to expend disproportionate resources on not-yet-existing markets.” [See Figure 1 below for visualization] Source: Innovation Group – UCSB
“What should we conclude from this? Christensen notes that disruptive innovation always favors entrants. We should not expect well entrenched players to innovate as radically or creatively as new players. If one is an established player, this is pretty bad news. Christenson’s advice is to spin off separate divisions or units to concentrate on disruptive innovation; only groups small enough to pursue uncertain and currently negligible markets will have a good chance at creating disruptive change.” Source: Innovation Group – UCSB
Further Research and Shortcomings for The Innovator’s Dilemma
Despite being a widely popular theory, there were (and still are) some significant shortcomings and room for further research. More specifically;
- Over Simplification: Research finds agreement with Christensen’s core theories but also emphasizes room for further research as it seems oversimplified. In his later works, Christensen, has built upon his “simple” theory of innovation to tease out the nuisances.
- Generalization of Incumbent’s Ability: Christensen has been criticized for over-generalization of Incumbent’s ability to reorganize resources and processes for a disruptive or low-end innovation. Other research found that “ability to adapt” and “technologically fit alert” factors of an incumbent firm might be of greater importance than spinning out a separate organization. (Meeus & Oerlemans, 2000)
- Further Research for Case Studies: Scope of industries and case studies was quite limited to disk drives and diggers and Meeus & Oerlemans Research with Dutch Industrial. Thus, a call for further research and case studies was widely requested by the community.
The Innovator’s Solution (2003)
The Innovator’s Solution (2003), as the name suggests, had the goal of arming the leaders with how “The Innovator’s Dilemma (1993)” can be solved. This book dug deeper into the “how” as compared to the previous book – which only gave high-level details of spinning out a separate organization for disruptive innovations.
Furthermore, Christensen also updated the model of disruptive innovation. The original model for disruptive innovation (Source: Innovator’s Delimma 1993) had two axes upon which the markets were sustained or disrupted (See Figure 1). In this book he added a third dimension that represented non-consuming contexts – “New-Market Disruption” as shown in Figure 2 below;
The “New-Market Disruption” created performance measures (affordability, speed, or business model) that enable the non-consumers to do something that was previously prohibited. As compared to low-end market disruption, new market innovations were different because they targeted non-consumers as opposed to over-served consumers.
This introduces a triple threat for leaders in incumbent firms. First, they risk someone producing a cheaper or simpler widget for low-end customers. Second, they face the threat of consumers shifting from the current value network (or performance criteria) to new-market as its performance improved along a given trajectory. Lastly, the same leaders are expected to product profitable growth at a level that investors demand. In reality, “roughly one in ten businesses are capable of this type of growth” (Christensen, The Innovator’s Solution, 2003, P1). Christensen suggests that innovation offers promising growth for companies for whom sustaining growth offers little potential for growth.
Further Research and Shortcomings for The Innovator’s Solution
By the time the Innovator’s Solution was released, participants of the innovation community (i-e Procter and Gamble) had tested and applied the theories put forward by Clayton Christensen. Therefore, the following supplements were put forward by external research;
- Guidance of Running Separate Organization – Rigby (2007) research and report agreed with the concept of “Disruptive Growth Engine” (Christensen, The Innovators Solution, 2003). To supplement, it provided additional guidance on running a separate innovation organization in companies. Particularly, CEO’s are advised to expect profits early from their innovation engines. It further highlights the need to research further into guidance for the CEO for challenges of keeping the separate organization running.
- Organization’s Culture and Appetite for Innovation – Another research (Drew, Sarasvathy, Read, Wiltbank, Ohlosson, 2011) built on the “Disruptive Growth Engine” by exploring the need for entrepreneurial spark or company’s culture to innovate that will fuel the processes and systems.
- Entrepreneurial Talent Required – Which talent is best suited to implement or lead the innovation organization? Another research (Fontela, Guzmán, Pérez, & Santos, 2006) emphasized and expand upon the entrepreneurial skill that can be developed in executives.
- Fatality of Disruptive Innovation – A research has focused on downplaying the threat of disruption, as suggested by Christensen, by emphasizing that many “disrupted” products co-exist happily with the disruptor. (Sood & Tellis, 2011)
- Launchpad for Disruptive Innovation – The above research has also highlighted that disruptive innovation is more likely to come from an incumbent organization than a startup. (Sood & Tellis, 2011)
Seeing What’s Next (2004)
The feedback on Christensen’s work to-date suggested that leaders were beginning to understand the world through the lens of low-end and new market innovations. However, they were not able to understand the market or apply it in a “repeatable and methodological fashion” (Christensen, Anthony, & Roth, Seeing What’s Next, 2004, P XXXI).
Therefore, the primary purpose of Seeing What’s Next was to put forward a systematic approach to apply the theories from The Innovator’s Dilemma and The Innovator’s Solution. This way the leaders are able to “[see] what’s next” in the market.
Further Research and Shortcomings for Seeing What’s Next
There is little criticism or response from the community for Seeing What’s Next. This is because Christensen does not explore any of the core-theories on Innovation in this book – which have been the focus for criticism in his previous books. Despite that, some notable research include;
- Structure for Implementing – Christensen’s three-stage model needed to be supplemented with a structure to implement directly in an organization. For example, who in the organization would use this model and how do they get appropriate support and insight across the business. (Smith and Saritas, 2011)
- Other Supplements – Furthermore, company’s culture is just as likely to contribute to successful innovation. (Sood & Tellis, 2011)
Competing Against Luck (2016)
Competing against Luck has been a much-needed supplement to Disruption theory. To quote from the book, “Disruption, a theory of competitive response to an innovation, provides valuable insights to managers seeking to navigate threats and opportunities. But it leaves unanswered the critical of question of how a company should innovate to consistently grow. It does not provide guidance on specifically where to look for new opportunities, or specifically what products and services you should create that customers will want to buy”
“This book introduces the Theory of Jobs to be Done to answer these questions and provide clear guidance for companies looking to grow through innovation. At its heart, Jobs Theory explains why customers pull certain products and services into their lives: they do this to resolve highly important, unsatisfied jobs that arise. And this, in turn, explains why some innovations are successful and others are not” (Christensen, Competing Against Luck (2016), Page 17-18)
Next Steps for Understanding Christensen’s Theories
The books noted above provide a cohesive model for managers to approach innovation. The Innovator’s Dilemma book explores and identifies the dilemma. The Innovator’s Solution book prescribes a solution to that dilemma and updates the framework. Seeing What is Next book gives a methodological approach to applying the framework from within a company. Lastly, Competing Against Luck (2016) explores innovation from a customer’s perspective to answer causes growth.
Christensen’s refinement and application of his Innovation theories are being continued at Christensen Institute – a non-profit aimed at “changing the world through disruptive innovation. Their research is something I try to follow and study to understand the theory being applied and testing against real-world problems. I am excited to study the impact of his theories in companies to-date and hope that more problem-solvers (product managers and leaders) can equip themselves with the understanding of his theories.