The Innovator’s Solution: Creating and Sustaining Successful Growth by Clayton Christensen

Summary

  1. The solution to the innovator’s dilemma is two-fold: first, get top-level commitment by framing an innovation as a threat during the resource allocation process; later, shift responsibility for the project to an autonomous organization that can frame it as an opportunity 

Key Takeaways

  1. Overview
    1. The structures and initial conditions that are required for successful growth are enumerated in the chapters in this book. They include starting with a cost structure in which attractive profits can be earned at low price points and which can then be carried up market; being in a disruptive position relative to competitors so that they are motivated to flee rather than fight; starting with a set of customers who had been nonconsumers so that they are pleased with modest products; targeting a job that customers are trying to get done; skating to where the money will be, not to where it was; assigning managers who have taken the right courses in the school of experience and putting them to work within processes and organizational values that are attuned to what needs to be done; having the flexibility to respond as a viable strategy emerges; and starting with capital that can be patient for growth. If you start in conditions such as these, you do not need to see deeply into the future. Attractive choices that lead to success will present themselves. It is when you start in conditions that are opposite to these that attractive options may not appear, and the right choices will be difficult to make
    2. Never copy others. One of the most valuable contributions you can make is to keep watching for changes in circumstances. If you do this, you can understand when and why changes need to be made long before the evidence is clear to those whose vision is not clarified by theory. 
    3. Never say yes to a strategy that targets customers and markets that look attractive to an established competitor. 
    4. If your team targets customers who already are using pretty good products, send them back to see if they can find a way to compete against nononsumption
    5. If there are no nonconsumers available, ask your team to explore whether a low-end disruption is feasible
    6. Never try to change the behavior or process of the customer
    7. Segment the market in ways that mirror the jobs that customers are trying to get done
    8. Look towards the low-end for the opportunity to change the basis of competition
    9. Develop competencies where money will be made in the future rather than where it was made in the past 
    10. Integration to modularity is a key cycle, competition forces modularity which leads to power which leads to integration (the rise and fall)
    11. Be impatient for profit and keep your company growing so that you can be patient for growth 
  2. Executives must answer 3 sets of questions to determine whether an idea has disruptive potential
    1. Is there a large population of people who have not had the money, equipment, or skill to do this thing for themselves, and as a result have gone without it altogether or have needed to pay someone with more expertise to do it for them?
    2. To use the product or service, do customers need to go to an inconvenient, centralized location?
    3. Are there customers at the low end of the market who would be happy to purchase a product with less (but good enough) performance if they could get it at a lower price?
    4. Can we create a business model that enables us to earn attractive profits at the discount prices required to win the business of these overserved customers as the low-end?
    5. Is the innovation disruptive to all of the significant incumbents in the industry? If it appears to be sustaining to one or more significant players in the industry, then the odds will be stacked in that firm’s favor, and the entrant is unlikely to win
  3. Other
    1. Need to develop products for the circumstance and not the customer, the chain needs to communicate the circumstance, and not necessarily to the customer
    2. Needs to by symmetry of motivation across the entire chain of entities that add value to the product on its way to the end customer. Win/win
    3. Disruption causes others to be disinterested in what you are doing. This is exactly what you want with competitors: you want them to ignore you. But offering something that is disruptively unattractive to your customers – which includes all of the downstream entities that compose your channel – spells disaster. Companies in your channel are customers with a job to get done, which is to grow profitably 
    4. To succeed with a nonintegrated, specialist strategy, you need to be certain you’re competing in a modular world. When the functionality and the reliability of a product are not good enough to meet customers’ needs, then the companies that will enjoy significant competitive advantage are those whose product architectures are proprietary and that are integrated across the performance-limiting interfaces in the value chain. 
    5. Core competence, as it is used by many managers, is a dangerously inward-looking notion. Competitiveness is far more about doing what customers value than doing what you think you’re good at. 
    6. The Law of conservation of attractive profits states that in the value chain there is a requisite juxtaposition of modular and interdependent architectures, and of reciprocal processes of commoditization and decommoditization, that exists in order to optimize the performance of what is not good enough. The law states that when modularity and commoditization cause attractive profits to disappear at one stage in the value chain, the opportunity to earn attractive profits with proprietary products will usually emerge at an adjacent stage. 
    7. Emergent processes should dominate in circumstances in which the future is hard to read and in which it is not clear what the right strategy should be. This is almost always the case during the early phases of a company’s life. However, the need for emergent strategy arises whenever a change in circumstances portends that the formula that worked in the past may not be as effective in the future. On the other hand, the deliberate strategy process should be dominant once a winning strategy has become clear, because in those circumstances effective execution often spells the difference between success and failure
    8. Senior executives have 3 jobs when it comes to disruptive growth: be the interface between disruptive and mainstream business and determine which of the corporation’s resources should go to the new business and which should not; shepherd the creation of a process we call the disruptive growth engine; and to sense when the circumstances are changing and to keep teaching others to recognize these signals – start before you need to, get a senior manager in charge, get an expert team of movers and shapers, train the troops 

What I got out of it

  1. Great to read these books alongside Moore’s books – so much to learn from the general progression and regression of entire industries, what to look out for, and how to take advantage of them