Strategy, Disruption, Innovation and Resilience


Disruptive innovation in a low growth world

There is no data about the future … just theories

I was fortunate enough to attend a lecture at Cass Business School, London given by Prof Clayton Christensen of disruptive innovation fame.

Christensen’s opening words were ‘There is no data about the future’, a statement that immediately resonated with me. These words encapsulate the problems that most organizations are trying to grapple with at the moment. In spite of the fact that, as Christensen observes, we have no data about the future, we still insist on projecting the future from the past, a process that is becoming more and more misleading as our newly interconnected world increases in complexity.

Christensen’s next words added increasing relevance and resonance as he explained that we need theories to think about the future. For me, the development of theories that can explore the future in a far more imaginative way than either traditional quantitative forecasts or hopeful and convenient groupthink, is very much a ‘guiding compass point’.

As I have touched upon in past briefings, one theory about the future that is gaining a lot of traction is the proposition that the US and large swathes of the West face a prolonged period of slow, if not zero growth. This is a proposition that, as I have argued in the past, any organization needs to explore to build resilience.

Some of Christensen’s ideas about disruptive innovation raise important questions that organizations really need to explore in the context of strategy-making for a low growth world, but before getting to these, a brief refresher on Christensen’s disruptive innovation model.

 

A theory of disruption

Christensen’s theory centres upon the using technology to disrupt a market.

The idea is that established competitors focus on improving their existing products and using technology (current and new) to keep on continually improving this product and probably making it more expensive in the process. This is accompanied by a mind-set that has two rules. The first is that we think about our customers and their needs in terms of our current products. The second rule is that when new technology comes along we use it to develop a new product that is more sophisticated and we then sell it only to a (relatively speaking) few who can afford it. The end result is that many established players keep developing more and more sophisticated products that end up being out of the reach of many.

However, disruptors upset established players in a couple of simple moves. The first is that they use technology (typically new, although that doesn’t always have to be the case) to, quite simply, dramatically cheapen and broaden the appeal of the product. This has the effect of opening up a huge new marketplace to customers who could only have dreamt about enjoying the product in the past. You might not get all the features of products offered by established competitors but for the many that can now afford the disruptors’ products, ‘something that helps us is a lot better than nothing’.

Two examples come to mind. The first is one that I always use – eBay. Traditionally, auctions were the domain of largely the well-off few who understood how auctions worked. eBay opened up a huge new market to those who hadn’t even thought about buying or selling at auction. But there’s another example that Christensen used – that of the Indian manufacturer Godrej who used a new take on technology to produce a simple, cheap refrigerator for those who couldn’t previous afford a conventional refrigerator. It can’t freeze and produce ice for a martini, but it can chill and preserve food which is a huge step forward for those who could only dream of a traditional refrigerator – you can read about this story here.

Succeeding in a low growth world: critical questions and critical disruption

Everything started to come together in my mind when Christensen talked about how to research customers. Typically, we ask customers what they want or need. Good stuff to a degree, but this tends to get us in an ‘existing product-centric’ mind-set. Christensen’s approach is simple but subtly very different. Christensen says that you should talk to customers about what jobs (or tasks) they have to do. Then, use the results to think about what your organization can do to help with these jobs and get them done.

This is the point at which we can combine the theory of disruptive innovation with Christensen’s questions to help us to think about what our organizations should do to face a low growth word. Try asking these questions about a low growth world:

#1: What jobs do our customers have to do now?

#2: Which of these jobs will disappear in a low growth world?

#3: How will the remaining jobs change?

#4: What new jobs will appear?

#5: How will job priorities change?

Then think about what your organization does, its core capabilities and the technology it has access to (or could have access to) and consider how you could respond to help get these jobs done directly or indirectly in a low growth world.

But this is only half the job.

When you’ve thought about these issues – you could well find a substantial degree of misfit between what you do now and what your customers will need in a low growth world, which takes us full circle back to the need to use disruptive innovation … but this is not just to appeal to new customer groups but to continue appealing to current customer groups.

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