Learning about Disruptive Innovation and Thank you Mr. Christensen
What a sad day! I recently read in The Economist about the death of Clayton Christensen on January 23rd, 2020. Christensen wrote one of the best business books of the last 100 years, “The Innovator’s Dilemma”. The New York Times wrote a beautiful article about his life that I would recommend anyone to read. It shows the person behind the business practitioner and professor that we may have all heard about or imagine that he was from his writing.
When I first read his book in the late 90´s (I have read it partially and completely a dozen times), I was flying on an overnight flight to Sao Paulo, Brazil. I picked up the book at a bookstore at the DFW airport. As I read it, highlighting parts of text, writing key learnings on the margins and making notes on the back of my boarding pass on potential immediate actions that I could take myself, what struck me the most was how rational his arguments were. I still remember smiling when I realized the overwhelming simplicity and logic of his line of thought. It was like when the complexity of a puzzle suddenly dissipates to unveil an easy solution and one gets the feeling that the solution was obvious and always there — we were just failing to see it because we only looked at the puzzle from one perspective.
The Harvard School Business professor argued that organizations become obsolete, not because they become lazy or stupid, but because the organizations become overly rational about their recent successes. They are trapped in providing the customer with one single solution, and making that solution, as effective and efficient as humanly possible. When a product becomes successful, the organization pours over that product to make it the best in that class, ignoring changing trends in the industry, over-engineering the solution to satisfy the most profitable customers. The book brought a lot of memories and realizations.
When I was getting my bachelor’s degree in Michigan, I pursued, among others, a major in Management Information Systems. Just to date myself, I was learning about Cobol, dBase and Lotus. As part of that major, we had to complete a real project within the community. One of my group members, Mary, knew about an auto shop that was thinking about getting computers. We were tasked with the project of supporting the automation of their processes. That required numerous meetings with the different stakeholders in the auto shop, from the mechanics to the inventory managers to the financial managers. We did not include the auto shop’s customers because, at the point, we could simply not figure out how to involve the customer in the processes. And that was part of the problem. All we did was to automate the existing process, converting paper form into digital forms, automating the flow of forms and authorizations as it was implemented at that time. We basically converted the manual processes into computerized processes. During a meeting, I remember suggesting that we should install a computer in the lobby of the shop to allow the customer to kick off the process by listing the mechanical issues as well as any potential budget constraints. My idea was shut down — the auto shop manager just wanted to improve efficiency in the process by using computers to help them with the record keeping. Basically, do whatever was being done but in a “more efficient” way. I write the “more efficient” way in quotes because I saw mechanics printing out the form from the computer, writing on it, completing the process manually as usual, and then giving all the paperwork to the overworked secretary to enter and create the digital trail. There was not real hunger to improve the processes through change. Finetuning was all the stakeholders desired, regardless of what changing consumer or market trends were in the horizon.
There is a story that I like to tell my students in my strategic management course. It is about Frederic Tudor, the so-called, king of ice. Tudor made a fortune by perfecting the business of collecting, preserving and shipping ice to warmer climates. Carl Seaburg and Stanley Paterson wrote a great book entitled “The Ice King: Frederic Tudor and His Circle”, detailing the biography of that successful Bostonian. Tudor was able to perfect the shipping of ice, minimizing the melting of the ice into warmer waters, growing a small fortune on the sale of ice. In the early 1800s, Tudor was selling ice to places as far an India. Eventually, he missed the changing trends, the arrival of electricity and, with it, electric refrigeration. Still, he perfected with the help of some associates the collection, harvesting and storage of ice, as well as the efficient shipment of ice across long distances, as well as storage in those warmer destinations.
Christensen´s “The Innovator´s Dilemma” argued against the complacency of the big firms. At the time that I was reading that book, I was working for Nokia, selling mobile handsets in Latin America. When I first started to sell and market the Nokia handsets in South America, Motorola was the uncontested number one player, with a strong grip in the overall global market of cellular phones. But they ignored the rise of digital technologies such as GSM in Europe and TDMA in the Americas. Motorola was convinced that they had the best analog cellular handset and that they knew what the consumers and local mobile operators wanted. We at Nokia were hungry for success and we saw how the use of mobile phones was changing, from an elite-type of product to a mass-consumption product. We also saw that digital technology would bring savings to the mobile operators, by allowing them to dedicate each channel to more than one single analog user. That reduced overall costs of the line and fomented an exponential growth of digital users. The arrogance of Motorola blinded them, and they did not see Nokia coming. By the way, the same happened to us at Nokia with the arrival of Google’s Android, the iPhone and the touch-screen mobile phones — we thought we knew better.
And, there is one thing that may not change over time. I like to quote Henry Ford. Maybe it is because my father-in-law worked for Ford for many decades and studied Henry Ford, telling me about all Ford’s successful and failed enterprises. Ford once famously said that if he would have asked the consumers what they wanted, they would have answered faster horses. When I use that quote, I ask my students what they think Ford meant. I hear everything from “consumers don’t know what they want” to “consumers are usually wrong”. In my opinion, consumers do know what they want, they may just not know how to word it. Hearing about “faster horses”, I would assume (in hindsight now) that consumers were requesting “faster means of transportation”. For an entrepreneur, it is important to understand consumer behavior to identify those needs and wants that the consumers may have but that they are not wording in a clear manner. Disruptive innovation could be the bread and butter of entrepreneurship, slicing through the big firms’ biases and cognitive dissonance. Entrepreneurs should be exploiting a better understanding of consumer behaviors and changing market trends, ignored by the myopic large successful organizations, to identify those paths that no one has taken. And beware — eventually, if successful, that myopic large organization could be your own organization.
