October 19, 2003
The Innovator's Solution: Creating and Sustaining Successful Growthby Christensen, Raynor
A seminal work on disruption—for everyone confronting the growth paradox.
For readers of the bestselling The Innovator’s Dilemma—and/em>/strong>
An innovation classic. From Steve Jobs to Jeff Bezos, Clay Christensen’s work continues to underpin today’s most innovative leaders and organizations.
A seminal work on disruption—for everyone confronting the growth paradox.
For readers of the bestselling The Innovator’s Dilemma—and beyond—this definitive work will help anyone trying to transform their business right now.
In The Innovator’s Solution, Clayton Christensen and Michael Raynor expand on the idea of disruption, explaining how companies can and should become disruptors themselves. This classic work shows just how timely and relevant these ideas continue to be in today’s hyper-accelerated business environment.
Christensen and Raynor give advice on the business decisions crucial to achieving truly disruptive growth and propose guidelines for developing your own disruptive growth engine. The authors identify the forces that cause managers to make bad decisions as they package and shape new ideas—and offer new frameworks to help create the right conditions, at the right time, for a disruption to succeed. This is a must-read for all senior managers and business leaders responsible for innovation and growth, as well as members of their teams.
Based on in-depth research and theories tested in hundreds of companies across many industries, The Innovator’s Solution is a necessary addition to any innovation library—and an essential read for entrepreneurs and business builders worldwide.
October 19, 2003
October 3, 2003
In The Innovator's Dilemma, Harvard Business School professor Clayton Christensen showed how companies that focus on high-end products for profitable customers can be blindsided by "disruptive" innovations from new competitors - innovations that target low-end customers seeking cheaper products. In The Innovator's Solution, Christensen and co-author Michael Raynor, a director at Deloitte Research, show established companies how to create disruptions rather than being destroyed by them - how to turn innovative ideas into new disruptive products that will lead to long-term profitable growth.
Managers have long sought ways to predict the outcome of competitive fights based around innovations, but it has, in recent years, become increasingly difficult to do so. The authors write that it's not simply a matter of big companies having the resources to stomp out smaller competitors or to bring about incremental changes or innovations that enable them to outlast the competition. It is the circumstances of innovation that often determine whether incumbent industry leaders or upstart companies win a competitive fight.
Disruptive innovations do not attempt to bring better products to established customers in existing markets, the authors explain. Instead, they introduce products and services that are not as good as existing products, but which are simpler, more convenient, and less expensive than existing items.
Disruption often paralyzes industry-leading companies, which are more accustomed to bringing about sustaining innovations. In other words, the authors write, established companies are motivated to focus on pushing innovations to meet the needs of their high-end customers. This leaves the door open for new entrants to target your low-end customers. Eventually, however, the new entrant will make improvements and move up-market - now targeting your high-end customers.
The authors explain that disruptions create and exist in value networks - contexts within which companies respond profitably to the common needs of a class of customers through evaluating and establishing appropriate processes and channel partners. Two kinds of disruptions can create new value networks:
1. New-market disruptions. These disruptions all but create a need in customers, by virtue of their affordability and simplicity of ownership. Canon's desktop photocopiers, for example, made photocopying in one's office (rather than shipping a job out to a print shop) easy, and, as a result, people made a lot more copies. As improvements are made in new-market disruptions, the authors write, the companies that foster them are able to pull customers out of old, mainstream value networks and into new ones.
2. Low-end disruptions. Disruptions that take root at the low end of the original, mainstream value network do not create new markets, but simply feature low-cost models that pick off an established firms' least attractive customers. Low-end disruptions typically motivate incumbents into attack mode.
Launching a single successful disruptive business can create years of profitable growth. Launching a sequence of growth businesses requires leaders to repeatedly use sound theories to make solid key business-building decisions. From these activities, a predictable, repeatable process for identifying, shaping and launching successful growth can coalesce. Such an engine would have four critical components.
- Step 1: Start Before You Need To. The authors write that the best time to invest for growth is when the company is growing. To build what will be a respectable growth business in five years' time, you must start now, adding new units to your portfolio of growth businesses as dictated by the growth needs of the corporation five years hence.
- Step 2: Put a Senior Manager in Charge. The authors explain that creating a successful disruptive growth engine requires the careful coaching of the CEO or another senior manager with the confidence and power to exempt a venture from an established corporate process, to declare when different processes need to be created, and to ensure that the criteria being used in resource allocation are appropriate to the circumstance of each venture and the needs of the company.
- Step 3: Create an Expert Team of Movers and Shapers. Ideas often lose their disruptive growth potential in the shaping process that they go through in order to get funded, the authors write. The challenge here is to create a separately operating process through which ideas can be shaped into high-potential disruptions.
- Step 4: Train the Troops. The authors explain that sales, marketing, and engineering employees are best positioned to encounter disruptive growth ideas, and thus should be among the first of the company's "troops" to be trained in the language of sustaining and disruptive innovation. Copyright © 2003 Soundview Executive Book Summaries
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Meet the Author
Clayton M. Christensen is the Kim B. Clark Professor of Business Administration at Harvard Business School. He is the author of eight critically acclaimed books, including the bestsellers How Will You Measure Your Life?, The Innovator’s Dilemma, and Disrupting Class. Christensen is the cofounder of Innosight, a management consultancy; Rose Park Advisors, an investment firm; and the Innosight Institute, a nonprofit think tank.
Michael E. Raynor is a director with Deloitte Services LP. He works with senior executives in the world’s leading corporations across a wide range of industries. He is the author of three critically acclaimed books: The Innovator’s Solution, coauthored with Clayton M. Christensen, The Strategy Paradox, and The Innovator’s Manifesto. Raynor publishes regularly in leading magazines and scholarly journals.
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The dilemma for top-ranking companies is that by doing all of the things that lead to success, they may doom themselves to failure. Disruptive innovations typically debut at the low end of the market or among nonusers, as unprofitable, unpromising and crude products, in comparison to the mainstream standards. Then, established companies make the understandable mistake of ignoring them, only to be overtaken from below. Author Clayton M. Christensen¿s previous classic, `The Innovator¿s Dilemma¿, identified this problem. This subsequent book offers a solution by helping managers identify potentially disruptive innovations, correctly read the market and the competitive environment, and develop a response. This book is not quite as innovative or provocative as its predecessor, but it is a valuable extension of Christensen¿s theory. If you want to know what your company can do about this serious competitive problem, we recommend this solid follow-up.
One of the best on strategy in large corporations
Clayton Christensen and Michael Raynor set the tone immediately by showing that most companies cannot sustain growth and by explaining to readers how stock markets factor in growth in the price of any publicly-traded stock. Growing faster than what stock markets see now and expect in the future is essential to move up a stock price. The resource allocation process is the key culprit in humbling many market leaders when dealing with disruptive innovations. That process typically invites up-market flight rather than head-to-head fight with new market entrants. That flight mechanism is applicable not only to product/service makers, but also to their distributors and retailers. Unlike a sustaining innovation, a disruptive innovation is not compatible with the business model of market leaders. Christensen and Raynor call this behavioral pattern asymmetric motivation. The way out of asymmetric motivation is for the leadership of an established player 1. to frame the disruptive innovation as a threat during the resource allocation process and 2. to shift responsibility for the project to an autonomous organization that has the relevant experience to frame it as an opportunity. The leadership needs to have a clear understanding of the respective impact of resources, processes, and values on what an organization can or cannot accomplish. Resources and processes are often enablers while values often represent constraints. Unlike deliberate processes, emergent processes should dominate when the future is hard to predict and the right strategy is not yet clear. That is especially true at the beginning of a company¿s existence. Once the winning strategy becomes clear, deliberate processes become a must to maximize the changes of success. Christensen and Raynor continue their analysis by sub-dividing disruptive innovations into two categories: new-market disruptions competing with ¿non-consumption¿ and low-end disruptions that go after the proverbial ¿low-hanging fruit.¿ Charting the upward path for a new-market disruption is more daunting because nobody has ever walked the walk. In practice, the distinction between the two types of disruptive innovations is not always clear-cut due to the existence of hybrid disruptions that combine new-market and low-end approaches. Christensen and Raynor also point out that an innovation that passes the new-market or low-end test must be disruptive to all of the significant established players to deserve the label of disruptive innovation. Christensen and Raynor clearly show that new entrants in turn do not escape from the up-market urge. After driving out the last established market player competing in a certain market segment, cut-throat competition forces new entrants to also move up market for greener pastures. Christensen and Raynor also reflect on why an overwhelming majority of new products fail miserably in the market-place. Attribute-based segmentation for which data are often available is the lead explanation for these failures. That type of market segmentation too often ignores the jobs that people and companies need to get done and how a product or service can be ¿hired¿ for that purpose. Targeting a product or service at the circumstances in which the target audience finds itself, rather than at the target itself is the key to success. Christensen and Raynor drive that point home very well with their story about the milkshake doing a different job for a bored commuter and his/her child at different times of the day. Christensen and Raynor blame the counterproductive attribute-based segmentation to 1. fear of focus, 2. senior executives¿ demand for quantification of opportunities, 3. the structure of channels, and 4. advertising economics and brand strategies. Christensen and Raynor pursue their analysis by looking at the traditional distinction between core and non-core competences. Unlike competitiveness that is focused on what a customer values,
Clearly written, the book integrates good theory with examples and case analysis from the past, present, and future. This book will revolutionize how strategy is formulated. But I recommend reading the Innovator's Dilemma first. If you want to read just a few good business books that actually help, read this one, along with the Innovator's Dilemma and 'All the Right Moves' from London Business School profesor Constantinos Markides.
I ordered this for my boss. He read it Tgiving weekend and had one of the assistants buy him 5 more on the following Monday. We're now buying 25 more for senior management, plus another 10 for our board of directors! Gift giving will be easy this year!
Christensen and Raynor explain how innovation can be a predictable process that delivers sustainable and profitable growth. They identify the forces that cause managers to make bad decisions and present their ideas and a new framework to help product developers to create the right conditions, at the right time, for a disrupting-technology to succeed in the company and the market. They provide real-life examples from many different companies that sustain their claims. This is a book that you would really enjoy and the most important thing are the strategies that you can apply in your own project.
Clayton Christensen has created another essential read for understanding the central issues facing the survival of corporations today. It should take its place on your bookshelf along side Christensen's first book ('Innovator's Dilemma'), Foster's 'Creative Destruction', and Watts' 'Slingshot Syndrome: Why America's Leading Technology Firms Fail at Innovation'. All highly recommended.