Category: Christensen, Clayton

Steve Jobs Framing a Decision in Terms of Christensen’s “The Innovator’s Dilemma”

The following passage is Steve Jobs speaking, as quoted by Walter Isaacson.

(p. 532) It’s important that we make this transformation, because of what Clayton Christensen calls “the innovator’s dilemma,” where people who invent something are usually the last ones to see past it, and we certainly don’t want to be left behind. I’m going to take MobileMe and make it free, and we’re going to make syncing content simple. We are building a server farm in North Carolina. We can provide all the syncing you need, and that way we can lock in the customer.

Source:
Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

Arne Duncan Endorses Christensen’s Disruption of All Levels of Education

DisruptingClassAndChristensen2013-01-11.jpg

Source of book image and photo of Christensen: http://images.businessweek.com/ss/08/12/1215_best_design_books/image/disruptingclass.jpg

(p. C6) Clayton Christensen is a provocative thinker, and I have been greatly influenced by his work on disruptive innovation and how it can transform education.

For the full review essay, see:
Arne Duncan (author of passage quoted above, one of 50 contributors to whole article). “Twelve Months of Reading; We asked 50 of our friends to tell us what books they enjoyed in 2012–from Judd Apatow’s big plans to Bruce Wagner’s addictions. See pages C10 and C11 for the Journal’s own Top Ten lists.” The Wall Street Journal (Sat., December 15, 2012): passim (Duncan’s contribution is on p. C6).
(Note: the online version of the review essay has the date December 14, 2012.)

Christensen’s books suggesting disruptive innovations for education are:
Christensen, Clayton M., Curtis W. Johnson, and Michael B. Horn. Disrupting Class: How Disruptive Innovation Will Change the Way the World Learns. updated ed. New York: NY: McGraw-Hill, 2011.
Christensen, Clayton M., and Henry J. Eyring. The Innovative University: Changing the DNA of Higher Education from the inside Out. San Francisco, CA: Jossey-Bass, 2011.

Steve Jobs Was Deeply Influenced by Clayton Christensen’s “The Innovator’s Dilemma”

(p. 408) Microsoft was willing to license its Windows Media software and digital rights format to other companies, just as it had licensed out its operating system in the 1980s. Jobs, on the other hand, would not license out Apple’s FairPlay to other device makers; it worked only on an iPod. Nor would he allow other online stores to sell songs for use on iPods. A variety of experts said this would eventually cause Apple to lose market share, as it did in the computer wars of the 1980s. “If Apple continues to rely on a proprietary architecture,” the Harvard Business School professor Clayton Christensen told Wired, “the iPod will likely become a niche product.” (Other than in this case, Christensen was one of the world’s most insightful business analysts, and Jobs was deeply (p. 409) influenced by his book The Innovator’s Dilemma.) Bill Gates made the same argument. “There’s nothing unique about music,” he said. “This story has played out on the PC.”

Source:
Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

“Innovation” Should Be Reserved for Electricity, Printing Press, Telephone and iPhone

LightBulbInnovationGraphic2012-05-29.jpg Source of graphic: online version of the WSJ article quoted and cited below.

(p. B1) “Most companies say they’re innovative in the hope they can somehow con investors into thinking there is growth when there isn’t,” says Clayton Christensen, a professor at Harvard Business School and the author of the 1997 book, “The Innovator’s Dilemma.”
. . .
Scott Berkun, the author of the 2007 book “The Myths of Innovation,” which warns about the dilution of the word, says that what most people call an innovation is usually just a “very good product.”
He prefers to reserve the word for civilization-changing inventions like electricity, the printing press and the telephone–and, more recently, perhaps the iPhone.
. . .
Mr. Berkun tracks innovation’s popularity as a buzzword back to the 1990s, amid the dot-com bubble and the release of James M. Utterback’s “Mastering the Dynamics of Innovation” and Mr. Christensen’s “Dilemma.”
. . .
(p. B8) Mr. Christensen classifies innovations into three types: efficiency innovations, which produce the same product more cheaply, such as automating credit checks; sustaining innovations, which turn good products into better ones, such as the hybrid car; and disruptive innovations, which transform expensive, complex products into affordable, simple ones, such as the shift from mainframe to personal computers.
A company’s biggest potential for growth lies in disruptive innovation, he says, noting that the other types could just as well be called ordinary progress and normally don’t create more jobs or business.
But the disruptive innovations can take five to eight years to bear fruit, he says, so companies lose patience.
It is far easier, he adds, for companies to just say they’re innovating. “Everybody’s innovating, because any change is innovation.”

For the full story, see:
LESLIE KWOH. “You Call That Innovation? Companies Love to Say They Innovate, but the Term Has Begun to Lose Meaning.” The Wall Street Journal (Weds., May 23, 2012): B1 & B8.
(Note: ellipses added.)

Harvard and M.I.T. Free Online Courses May Disrupt Mid-Tier Universities

(p. A17) In what is shaping up as an academic Battle of the Titans — one that offers vast new learning opportunities for students around the world — Harvard and the Massachusetts Institute of Technology on Wednesday announced a new nonprofit partnership, known as edX, to offer free online courses from both universities.
Harvard’s involvement follows M.I.T.’s announcement in December that it was starting an open online learning project, MITx. Its first course, Circuits and Electronics, began in March, enrolling about 120,000 students, some 10,000 of whom made it through the recent midterm exam. Those who complete the course will get a certificate of mastery and a grade, but no official credit. Similarly, edX courses will offer a certificate but not credit.
But Harvard and M.I.T. have a rival — they are not the only elite universities planning to offer free massively open online courses, or MOOCs, as they are known. This month, Stanford, Princeton, the University of Pennsylvania and the University of Michigan announced their partnership with a new commercial company, Coursera, with $16 million in venture capital.
. . .
Education experts say that while the new online classes offer opportunities for students and researchers, they pose some threat to low-ranked colleges.
“Projects like this can impact lives around the world, for the next billion students from China and India,” said George Siemens, a MOOC pioneer who teaches at Athabasca University, a publicly supported online Canadian university. “But if I were president of a mid-tier university, I would be looking over my shoulder very nervously right now, because if a leading university offers a free circuits course, it becomes a real question whether other universities need to develop a circuits course.”

For the full story, see:
TAMAR LEWIN. “Harvard and M.I.T. Join to Offer Web Courses.” The New York Times (Thurs., May 3, 2012): A17.
(Note: ellipsis added.)
(Note: the online version of the story is dated May 2, 2012, and has the title “Harvard and M.I.T. Team Up to Offer Free Online Courses.”)

Finance and Strategy Should Be More Integrated

ChristensenClayton2011-07-19.jpg“‘God never said that finance and strategy are fundamentally different functions.’ –Clayton Christensen” Source of caption and photo: online version of the WSJ interview quoted and cited below.

MR. MURRAY: We’ve talked about the innovator’s dilemma, but what’s the solution?
MR. CHRISTENSEN: The financial function stands in the way of much of this. God never said that finance and strategy are fundamentally different functions, yet the business schools decided to teach strategy and teach finance. This gets implemented in companies where strategy is the responsibility of this group, and finance this group. And a lot of the things that make sense financially make no sense strategically.
. . .
MR. MURRAY: The United States has led the world in various types of innovation for much of the past century. Is that something that will continue?
MR. CHRISTENSEN: I am very worried about America. I was thinking about this hard over the past year. It turns out that the majority of the entrepreneurs that made Silicon Valley happen weren’t Americans. They were from Israel, China and India. We were a magnet to bring to our shores the best technologists in the world. Now our message to the rest of the world is, “You guys, we don’t want you.” The minute we say that and push those to Singapore and to Britain and elsewhere, I worry.

For the full interview, see:
Alan Murray, interviewer. “The Innovator’s Solution; Clayton Christensen, Glenn Hutchins and Ellen Kullman on being cutting edge–without breaking the bank.” The Wall Street Journal (Weds., June 27, 2011): C9.
(Note: bold and italics in original; ellipsis added.)

Entrepreneur Ken Olsen Was First Lionized and Then Chastised

OlsenKenObit2011-05-16.jpg“Ken Olsen, the pioneering founder of DEC, in 1996.” Source of caption and photo: online version of the NYT article quoted and cited below.

I believe in The Road Ahead, Bill Gates describes Ken Olsen as one of his boyhood heroes for having created a computer that could compete with the IBM mainframe. His hero failed to prosper when the next big thing came along, the PC. Gates was determined that he would avoid his hero’s fate, and so he threw his efforts toward the internet when the internet became the next big thing.
Christensen sometimes uses the fall of minicomputers, like Olsen’s Dec, to PCs as a prime example of disruptive innovation, e.g., in his lectures on disruptive innovation available online through Harvard. A nice intro lecture is viewable (but only using Internet Explorer) at: http://gsb.hbs.edu/fss/previews/christensen/start.html

(p. A22) Ken Olsen, who helped reshape the computer industry as a founder of the Digital Equipment Corporation, at one time the world’s second-largest computer company, died on Sunday. He was 84.

. . .
Mr. Olsen, who was proclaimed “America’s most successful entrepreneur” by Fortune magazine in 1986, built Digital on $70,000 in seed money, founding it with a partner in 1957 in the small Boston suburb of Maynard, Mass. With Mr. Olsen as its chief executive, it grew to employ more than 120,000 people at operations in more than 95 countries, surpassed in size only by I.B.M.
At its peak, in the late 1980s, Digital had $14 billion in sales and ranked among the most profitable companies in the nation.
But its fortunes soon declined after Digital began missing out on some critical market shifts, particularly toward the personal computer. Mr. Olsen was criticized as autocratic and resistant to new trends. “The personal computer will fall flat on its face in business,” he said at one point. And in July 1992, the company’s board forced him to resign.

For the full obituary, see:
GLENN RIFKIN. “Ken Olsen, Founder of the Digital Equipment Corporation, Dies at 84.” The New York Times (Tues., February 8, 2011): A22.
(Note: ellipsis added.)
(Note: the online version of the story is dated February 7, 2011 and has the title “Ken Olsen, Who Built DEC Into a Power, Dies at 84.”)

Gates writes in autobiographical mode in the first few chapters of:
Gates, Bill. The Road Ahead. New York: Viking Penguin, 1995.

Christensen’s mature account of disruptive innovation is best elaborated in:
Christensen, Clayton M., and Michael E. Raynor. The Innovator’s Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.

Under Health Care ‘Reform’ the Total Cost of Health Care Will “Go through the Roof!”

BushJonathanAthenahealth2010-12-20.jpg

“Jonathan Bush, nephew of one former president and cousin of another, built a small medical practice into a national enterprise with nearly 1,200 employees.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B10) In the world of health care innovation, the founder and chief executive of Athenahealth has an outsize name. In part, that’s because his name is Jonathan Bush, and he is the nephew of one former president and the cousin of another. But it’s also because his company has mastered the intricacies of the doctor-insurer relationship and become a player in the emerging medical records industry.

Based in Watertown, Mass., Athenahealth offers a suite of administrative services for medical practices. It collects payments from insurers and patients, and it manages electronic health records and patient communication systems. All of this is done remotely through the Internet — or “in the cloud,” as Mr. Bush puts it. Doctors don’t have to install or manage software or pay licensing fees; instead, Athenahealth keeps a percentage of the revenue.
. . .
Q. What’s going on in the health care industry to deliver that kind of growth to you?
A. We are a disruptive technology. We are the only cloud-based service in an industry segment full of sclerotic, enormous, personality-free corporations that have been in business making 90 percent margins doing nothing for decades and decades.
Q. What keeps other companies from building cloud-based systems?
A. For software companies, the biggest barrier to entry is that they give up their business model. Those companies would get hammered on Wall Street if they started selling a service that they have to deliver at a loss for five years. In terms of new entrants, there are two things that we’ve done that would take a good decade to replicate. One, we’ve built out the health care Internet. We’ve been building connections into insurance companies and laboratories and hospital medical records for years and years and years.
And the other barrier to entry is that rules engine. Every time a doctor anywhere in the country gets a claim denied, we have analysts ask the Five Whys. When we get to root cause, we write a new rule into Athenanet and from that day on, no other doctor gets that particular denial from that particular insurance company ever again. We now know of 40 million ways that a doctor can have a claim denied in the United States. The average practice has to rework about 35 percent of their claims, and we only have to rework about 5 percent of ours.
Q. What’s the prognosis for bill collecting under health care reform?
A. Well, there’s going to be new connectors and a whole series of new insurance products that will be managed by the states’ health insurance commissioners. And the law provides for every state to do all of these its own way, so they will have their own rules and regulations, and each state will do it differently. That sounds like springtime in Complexity Land.
Q. What do you think will happen to the total cost of health care under reform?
A. Oh, it’s going to go through the roof! It’s widely accepted that this is not a cost-reform bill — it’s an access bill. It’s in fact a cost-expansion bill.

For the full story, see:

ROBB MANDELBAUM. “Views of Health Care Economics From a C.E.O. Named Bush.” The New York Times (Thurs., September 9, 2010): B10.
(Note: ellipsis added.)
(Note: the online version of the article has the date September 8, 2010.)

Christensen’s Innovator’s Dilemma Is “Most Influential Business Book”

(p. W3) . . . in today’s world, gale-like market forces–rapid globalization, accelerating innovation, relentless competition–have intensified what economist Joseph Schumpeter called the forces of “creative destruction.”
. . .
When I asked members of The Wall Street Journal’s CEO Council, a group of chief executives who meet each year to deliberate on issues of public interest, to name the most influential business book they had read, many cited Clayton Christensen’s “The Innovator’s Dilemma.” That book documents how market-leading companies have missed game-changing transformations in industry after industry–computers (mainframes to PCs), telephony (landline to mobile), photography (film to digital), stock markets (floor to online)–not because of “bad” management, but because they followed the dictates of “good” management. They listened closely to their customers. They carefully studied market trends. They allocated capital to the innovations that promised the largest returns. And in the process, they missed disruptive innovations that opened up new customers and markets for lower-margin, blockbuster products.

For the full commentary, see:
ALAN MURRAY. “The End of Management; Corporate bureaucracy is becoming obsolete. Why managers should act like venture capitalists.” The Wall Street Journal (Sat., AUGUST 21, 2010): A17.
(Note: ellipses added.)

The most complete and current account of Christensen’s views can be found in:
Christensen, Clayton M., and Michael E. Raynor. The Innovator’s Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.

HP Turns Down Wozniak Again

(p. 193) But I went to talk to the project manager, Kent Stockwell. Although I had done all these computer things with the Apple I and Apple II, I wanted to work on a computer at HP so bad I would have done anything. I would even be a measely printer interface engineer. Something tiny.

I told him, “My whole interest in life has been computers. Not calculators.”
(p. 194) After a few days, I was turned down again.
I still believe HP made a huge mistake by not letting me go to its computer project. I was so loyal to HP. I wanted to work there for life. When you have an employee who says he’s tired of calculators and is really productive in computers, you should put him where he’s productive. Where he’s happy. The only thing I can figure is there were managers and submanagers on this computer project who felt threatened. I had already done a whole computer. Maybe they bypassed me because I had done this single-handedly. I don’t know what they were thinking.
But they should’ve said to themselves, “How do we get Steve Wozniak on board? Just make him a little printer interface engineer.” I would’ve been so happy, but they didn’t bother to put me where I would’ve been happiest.

Source:
Wozniak, Steve, and Gina Smith. iWoz: Computer Geek to Cult Icon: How I Invented the Personal Computer, Co-Founded Apple, and Had Fun Doing It. New York: W. W. Norton & Co., 2006.

How HP Turned Down the Apple PC

Wozniak tells the story of how he offered to develop the PC within HP, but HP turned him down. The story seems highly compatible with the account of disruptive innovations given by Clayton Christensen.
Another aspect of the story is worth highlighting. Sometimes it is alleged, as e.g., with the Tucker auto story, that large incumbent corporations suppress innovations. But in this case, although HP did not want to develop the PC themselves, they did not try to keep Wozniak and Jobs from developing it on their own.

(p. 175) Before the partnership agreement was even inked, I realized something and told Steve. Because I worked at HP, I told him, everything I’d designed during the term of my employment contract belonged to HP.

Whether that upset Steve or not, I couldn’t tell. But it didn’t matter to me if he was upset about it. I believed it was my duty to tell HP about what I had designed while working for them. That was the right thing and the ethical thing. Plus, I really loved that company and I really did believe this was a product they should do. I knew that a guy named Miles Judd, three levels above me in the company structure, had managed an engineering group at an HP division in Colorado Springs that had developed a desktop computer.
It wasn’t like ours at all–it was aimed at scientists and engineers and it was really expensive–but it was programmable in BASIC.
I told my boss, Pete Dickinson, that I had designed an inexpensive desktop computer that could sell for under $800 and could run BASIC. He agreed to set up a meeting so I could talk Miles.
(p. 176) I remember going into the big conference room to meet Pete, his boss, Ed Heinsen, and Ed’s boss, Miles. I made my presentation and showed them my design.
“Okay,” Miles said after thinking about it for a couple of minutes. “There’s a problem you’ll have when you say you have output to a TV. What happens if it doesn’t look right on every TV? I mean, is it an RCA TV a Sears TV or an HP product that’s at fault?”
HP keeps a close eye on quality control, he told me. If HP couldn’t control what TV the customer was using, how could it make sure the customer had a good experience? More to the point, the division didn’t have the people or money to do a project like mine. So he turned it down.
I was disappointed, but I left it at that. Now I was free to enter into the Apple partnership with Steve and Ron. I kept my job, but after that I was officially moonlighting. Everybody I worked with knew about the computer board we were going to sell.
Over the next few months, Miles would keep coming up to me. He knew about BASIC-programmable computers because of his division out in Colorado, and even though they didn’t want my design, he said he was intrigued by the idea of having a machine so cheap that anyone could own one and program it. He kept telling me he’d been losing sleep ever since he heard the idea.
But looking back, I see he was right. How could HP do it? It couldn’t. This was nowhere near a complete and finished scientific engineer’s product. Everybody saw that smaller, cheaper computers were going to be a coming thing, but HP couldn’t justify it as a product. Not yet. Even if they had agreed, I see now that HP would’ve done it wrong anyway. I mean, when they finally did it in 1979, they did it wrong. That machine went nowhere.

Source:
Wozniak, Steve, and Gina Smith. iWoz: Computer Geek to Cult Icon: How I Invented the Personal Computer, Co-Founded Apple, and Had Fun Doing It. New York: W. W. Norton & Co., 2006.

The main Christensen book is:
Christensen, Clayton M., and Michael E. Raynor. The Innovator’s Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.