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Monday, October 25, 2004

Clayton Christensen Explains Disruptive & Sustaining Innovation -Part II Via Gartner

We covered the first part of the clayton christensen gartner fellow interview few weeks back. The second part of the interview has been now made available. He explains how opportunity should be framed as threat, how data analysis can actually hamper the innovation process, and finally, how sustainable innovation works and how to foster disruptive innovation. Mr Christensen offers several insights while fielding questions from the interviewer, Howard Dresner. Some key points of the second part interview:

- For an established organization, when constructing a business plan, they frame the opportunity initially as a threat, and then once they get the resources, to shift the focus to growth.The new game begins before the old game ends. The old game is generally still very profitable and successful during the time when the new one has to start, so the business almost has no appetite for opportunity when it's being fed. But if you frame it as a threat, which ultimately it will be, there's nothing dishonest about that at all. It's really the only way you can get a successful organization to be motivated. Then you just need to get it into an environment where the people in charge don't feel the threat. All they see is the opportunity.

- In a typical company, 80 to 90% of its money ought to be spent executing sustaining innovations. Disruption, is spoken widely just because not much has to be said about sustaining innovation. The established leaders, they have a very good track record in doing that.

- IT Org as an obstacle -Where the problem comes is, you generate data from the IT organization to measure performance in the past. Usually, that's a critical role. The data comes structured in a particular way, and almost always, it comes structured by product line and by business unit. All of this is good, but then the error comes, not necessarily from the IT organization, but from the executives who hire it. They come to think the market is structured along the lines in which the data are given to him. And so you start to measure market share by product category, because I have data by product category. It's that translation of measuring the performance of what we have, to now thinking the market is structured in the way we collect the data, and then using that to kind of drive your consumer understanding, at which you target the next markets. It's in those two translations the data becomes counter-productive in an organization. You're using it for things the IT organization did not generate it for.

- On who wins - Amost always, a company starts out in a direction conceived by the founder, and in 93% of companies that ultimately end up being successful, they figure out the original strategy doesn't work. But by kind of thorough experimentation and trial-and-error in the market, they happen upon or iterate towards a strategy and a business model that really is viable. At that point, companies that continue to kind of flounder and experiment in the market place, kind of fade away. And the ones that know, really get ahead of the pack, because in a disruption, you're rarely the only one who's trying this. There are five to fifty of you, trying to swim upstream here, and the one that gets out ahead fastest, is the one that really emerges as the winner.At that point, we have to flip the business around and drive the implementation of a deliberate — of the strategy that you now know works; drive it from the top. There, the ability to measure how successful you're being, given you know what to do, is very critical.
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