By Chris Lemmond
You may have read The Innovator’s Dilemma, perhaps the most influential book focused on business innovation. Here, author and guru Clayton Christensen highlights the dilemma companies face when they align too closely with their customers. They organize, invest resources, and build specific capabilities to deliver to the needs of their primary customers. Operating in a feedback loop, these companies become blind to emerging technologies and innovations where certain attributes aren't important to their current customers. Then, it’s too late. Companies get caught flat-footed and may be unable to respond or catch up to the market.
Christensen used the term 'disruptive' to describe these emerging technologies and innovations. Since then, the word has become embedded in the mainstream business vocabulary. Disruptive seems to denote anything that is new, big, different, or 'changes the game.’ With this understanding, disruptive isn't a helpful or instructive term for businesses to evaluate markets or to guide them to develop new products and services.
What's forgotten is the primary case study Christensen used to develop his insights into disruptive innovations. He focused on disk drives in the computer market of the 1980’s and 90’s. Seagate, the leading disk drive maker, had focused on developing large and high capacity disk drives demanded by its primary customers, the makers of desktops and minicomputers. It was a lucrative business. The price and value of disk drives were determined by ever-increasing capacity and performance.
Seagate became blinded, however, by the need for smaller and less expensive disk drives in the emerging markets of mobile and laptop computers. At the time, extreme drive performance and large capacity weren't as important for those products. Seagate saw small disk drives as a distraction, with a market too small to invest in. Sure enough, Seagate soon lost its market dominance in disk drives.
For Christensen, the two driving characteristics of disruptive innovations are 1) they have lower performance on the perceived primary driver of value for current products, and 2) they are much cheaper on that dimension. Disruptive innovations, in this definition, seem to start as down-market product or service options. In fact, they are bellwethers of larger trends or different market needs.
What to make of this? Christensen himself wrote several follow-ups to the Innovator’s Dilemma, clarifying his points and focusing on how companies can become more innovative organizations. My takeaway is that there are key questions businesses should always be asking to stay competitive.
The approach is to question and challenge the accepted wisdom on price, performance, and value. That seems easy until you realize that accepted wisdom is influenced by a company's current set of driving customers, who have specific needs within a current context. For the business delivering to those needs, It’s likely that many assumptions are unchallenged and deeply embedded in its operational strategies and business narratives.
The ‘forgotten’ Clayton Christensen would ask: ‘what new opportunities would be created If a new service or product reduced performance on what is believed to be the key value driver, and reduced the price of that component piece?” The reflexive response would be to assume that the result must be a market that is downscale, small, and low-margin.
This one question, however, can help to reveal rigid assumptions embedded in a business. It helps as a lens to erase artificially defined market boundaries. It helps to evaluate different trends at the margins. It is, of course, just a beginning.
We know businesses must be customer-focused and customer-centric to grow and survive. The dilemma is whether the strategies and focus necessary to support customer-centricity puts a business in a narrative bubble that limits its ability to respond and react to new market forces. Indeed, a disruption that upends the accepted 'truths' of price and performance might well be emerging! The next time you hear or read the word 'disruptive,' what will you think?
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