management circles that it has become a cliche. The irony is how a phrase destined to strike terror into the hearts of established businesses was first articulated in a book by a Professor at that pillar of the establishment, Harvard Business School. The prof's name was (and is) Clayton Christensen. His now iconic book, "The Innovator's Dilemma."
In his cover quote, Intel CEO Andrew Grove called it 'Lucid, analytical - and scary.' Which is doubly ironic because Christensen is one of the most gentlemanly people you are ever likely to meet. But what he described was the way in which innovation was transforming the world as we knew it then -and know it now. The book was published in 1997 and presaged many of the ways in which technology was about to turn business on its head.
Fast forward 15 years and society finds itself again facing massive dislocation. In addition to Silicon Valley, the asymmetric threats emanate from Shenzhen, Bangalore and a host of other locales most Americans can not spell, let alone find on a map. Christensen is still at it. And what he is saying most recently is further food for management thought: that we have become too complacent, we avoid the unexpected and the unpleasant in order to focus on our 'core competencies' so as to 'optimize our variables.' That is MBA speak for pushing the dirty work off on someone else who works for a pittance and does things that no highly paid 'symbolic analyst' would care to brag about in a Brooklyn or Palo Alto Starbucks.
But that someone else, in the process of figuring out how to wring a living from assembling the guts of the 'new, new thing' is also learning how to eat our lunch. The real threat, Christensen reminds us, is that we are at risk of becoming 'stuck at the top' of a value chain whose basis has shifted. JL
Brad Nolan comments in Blogging Innovation (hat tip Greg Satell):
"Clayton Christensen is an inspiring guy. Not only has he disrupted the business world throughout his career as one of the foremost innovation academics, he has also overcome a bout with cancer and a recent stroke.
Introduced as “the Kobe Bryant of the innovation world,” he kicked off the 2011 World Innovation Forum. He began by informing the audience of close to 1,000 that after his stroke one month ago, he had to relearn to speak one word at a time. He then went on to discuss some of the reasons good companies falter. He offered two particularly surprising explanations: applying business school management principles and focusing on core competencies.
What causes innovation to be a crapshoot is following the management principles taught in business schools.
This is not the explanation one would expect from a Harvard Business School professor. He went on to say that if you’re doing everything by the book, then you are doomed. His point was that disruptive innovation often comes from unexpected places – the tiny competitor, the startup company in the garage, the rebel manager. To some extent, necessity fuels innovation. It’s cozy at the top, and coziness is not a hotbed for disruption. Christensen also warned that with China and India coming on strong, the U.S. needs to continue to innovate or the country is in danger of getting “stuck at the top” the way Japan’s economy did. It is important to push for innovation in both good times and bad.
Focusing on core competencies and outsourcing noncore activities can cause good companies to fail
Christensen told the cautionary tale of how Dell’s repeated outsourcing of noncore activities to Asustek ultimately led to the liquidation of Dell’s business model. At every step, it seemed like Dell’s managers were making a rational decision; focusing on the highly profitable aspects of their business and diminishing costs for the rest. There are two dangers with this approach. First, companies need to think about what their core competencies need to be in the future, not just what is most profitable now. It is important to forecast where the market is gong and anticipate how you will serve your customers as the landscape changes. Second, if you continue to outsource everything from customer service to distribution you wind up losing contact with your customers. Suddenly, you are completely removed and out of touch with the people whose problems your products/services are supposed to be solving.
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