Friday, December 7, 2012

The Innovator's Solution

The Innovator's Solution is one sequel that doesn't disappoint! Christensen follows up the popular The Innovator's Dilemma (previously summarized on this site here) with this new book that helps deepen the reader's understanding of technological disruption in business.

It takes a brave man to tackle the seemingly unpredictability of disruption and make it sound like a predictable course of events. But that's what Clay Christensen does, and he makes a pretty good case that there are many elements to disruption that can be better predicted. He discusses various factors of a disruptive technology that companies should identify in order to formulate the best possible strategy.

One of my favourite discussions in the book related to the identification of whether an integrated (e.g. Apple, whereby it owns both the system's hardware and its software) or modular (e.g. Dell, whereby it sources the best available components) approach best suits a business. Christensen argues that this depends on whether the product/service has reached a point of satisfaction among customers along a particular dimension.

For example, when desktop computers were new and did not have nearly today's performance capabilities, customers were willing to pay for performance and therefore an integrated approach (which is better suited to optimize performance) made sense. As performance improved over time, the performance of PCs grew to become more than most customers required, and therefore a modular approach (and the higher efficiency it brings) started to make more sense. At that point, the criteria by which customers were satisfied shifted from performance to customization and convenience. This is where Dell's integrated approach (not with respect to performance, but with respect to customization and convenience) helped satisfy customers along a new dimension.

Of course, Christensen is only supplying another model for the reader to add to his toolkit. A number of examples prove this area is far from a predictable one, even if the theory can be helpful in understanding various dynamics. For instance, Christensen notes (in 2003, the publication date) that "adding even more features and functions to wireless handsets is over-shooting what its less-demanding customers can utilize". He goes on to predict that a modular handset industry utilizing Symbian's (Nokia) operating system is likely to take hold.

When analyzing RIM's dominant Blackberry position, Christensen recommends the company not copy the features implemented by its competitors. It's possible RIM followed this advice (one of RIM's co-founders, Laziridis, has spoken about The Innovator's Dilemma frequently), as the company focused on its strength (messaging) while a superior web browsing experience blew them away.

To me, Christensen also force-fits the model into areas it needn't belong. For example, he argues that Microsoft has taken a disproportionate share of the profit in the PC market because the operating system worked best with an integrated approach as its performance is not yet good enough for customers. I would argue that Windows does more than enough for most users, and that Microsoft enjoys ridiculous profitability because of the network effects of its software (i.e. it has a large share, and therefore more/better applications are written for it, which serves to increase its share in a feedback loop).

Don't let my negativity fool you, however, I'm still a big fan of the book. If you enjoyed the first book, as I did, you'll enjoy this one too. If you haven't read the first book, I recommend you start there.

There is, however, some overlap between the two books. Though the first six chapters contain a number of new concepts to help managers understand how to pursue or defend against disruption, the last half of the book appears to draw heavily on concepts already developed in the first one. In fact, it wouldn't surprise me if Chapter 7 (which is about the RVP framework) was copied straight out of the first book, as it was that familiar!

Happy reading!

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