Read: Christensen, C. (2006).
Why Good Companies Fail to Thrive in Fast-Moving Industries.
Question
- Take Christensen’s ideas and apply them to the clinical research industry. Is the clinical research industry likely to face disruptive innovation challenges?
Chapter 5. Give Responsibility for Disruptive Technologies to Organizations Whose Customers Need Them. From: The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail, Chapters Copyright 2021. Harvard Business School Publishing Corporation. All Rights Reserved. Harvard Business Publishing distributes in digital form the individual chapters from a wide selection of books on business from publishers including Harvard Business Press and numerous other companies. To order copies or request permission to reproduce materials, call 1-800-545-7685 or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business Publishing, which is an affiliate of Harvard Business School. 1109BC ISBN: 9781647822590 January 5, 2016 CHAPTER 5 | PART 2: MANAGING DISRUPTIVE TECHNOLOGICAL CHANGE Give Responsibility for Disruptive Technologies to Organizations Whose Customers Need Them FROM The Innovator’s Dilemma When New Technologies Cause Great Firms to Fail by Clayton M. Christensen HARVARD BUSINESS REVIEW PRESS This document is authorized for use only by Kristopher Durham in Design Thinking - Fall 2021 at Wake Forest University Medical School, 2021. FM.indd 4 12/10/15 6:26 PM This document is authorized for use only by Kristopher Durham in Design Thinking - Fall 2021 at Wake Forest University Medical School, 2021. FM.indd 32 12/10/15 6:26 PM Contents In Gratitude Preface PART TWO: MANAGING DISRUPTIVE TECHNOLOGICAL CHANGE 5 Give Responsibility for Disruptive Technologies to Organizations Whose Customers Need Them About the Author This document is authorized for use only by Kristopher Durham in Design Thinking - Fall 2021 at Wake Forest University Medical School, 2021. FM.indd 7 12/10/15 6:26 PM This document is authorized for use only by Kristopher Durham in Design Thinking - Fall 2021 at Wake Forest University Medical School, 2021. FM.indd 8 12/10/15 6:26 PM This document is authorized for use only by Kristopher Durham in Design Thinking - Fall 2021 at Wake Forest University Medical School, 2021. In 1990 I began asking the two questions that would eventually help shape this book. First, “Why is success so difficult to sustain?” And second, “Is successful innovation really as unpredictable as the data suggests?” By that time I’d been a strategist at the Boston Consulting Group, where I’d had unusual opportuni- ties to see at every level how companies competed, and I had cofounded CPS Technologies to commercialize advanced-materials technology developed in MIT labs. But neither career path had yet to fully answer those two questions that were keeping me up at night. So, at thirty-eight, with the support of my wife and months before our fifth child was born, I became a doctoral student and made those questions my life’s work. I’m happy to say I got the answer to the first, and—with the continued help of tremendous colleagues drawn to the subject over the last two decades—I’m still homing in on the second. In this new edition of The Innovator’s Dilemma, I’ll show you some of the exciting new research we’ve conducted since the book was first published two decades ago. Why is success so difficult to sustain? This was, and still is, an import- ant question, because when you look across the sweep of business history, most companies that once seemed successful—the best practitioners of best practice—were in the middle of the pack (or, worse, the back of it) a decade or two later. And we discovered something unsettling and counterintuitive. What often causes this lagging behind are two principles of good manage- ment taught in business schools: that you should always listen to and respond Preface FM.indd 9 12/10/15 6:26 PM This document is authorized for use only by Kristopher Durham in Design Thinking - Fall 2021 at Wake Forest University Medical School, 2021. to the needs of your best customers, and that you should focus investments on those innovations that promise the highest returns. But these two princi- ples, in practice, actually sow the seeds of every successful company’s ultimate demise. That’s why we call it the innovator’s dilemma: doing the right thing is the wrong thing. This dilemma rears its head when a type of innovation that we’ve termed disruptive technology arises at the low end of the market, in the simplest, most unassuming applications. Explaining this paradox is the pur- pose of this book. Incidentally, another scholar who subsequently joined me in the study of this phenomenon, Michael Raynor of Deloitte Research, has noted that dis- ruptive technology is probably the cause behind the “creative destruction” that economist Joseph Schumpeter observed to be the primary engine of economic progress more than half a century ago. I think Michael is right. And what about that second question, the one about successful innova- tion really being as unpredictable as the data suggests? Here’s an illustra- tion that I think helps show what I mean: all venture capitalists convince themselves—to various degrees—that the companies they’re investing in will succeed. Otherwise they wouldn’t invest in them in the first place, right? But they are correct in only 10 to 20 percent of the investments they make, so they have structured their whole industry on hedging their bets against the alleged unpredictability of innovation. (The amounts of their financial commitments, for example, vary greatly depending on statistical assessments of the risks involved.) The track record of innovators inside established companies is roughly the same. But think about it: if we could determine that innovation is inherently unpredictable—and not just a risk to manage like venture capitalists do—then it would lead us down a very different path, and research done by my colleagues and me seems to be indicating that this is, in fact, the case. For example, before World War II, if you were in the business of drilling for oil, 90 percent of the wells you drilled would be dry. Just like a venture capitalist’s, your instincts told you there might be oil in those places, but you spent 90 percent of your working life drilling dry holes. In the subsequent seventy-five years, however, geological researchers have developed theories that tell them what data to seek about structures deep in the earth, and those theories help them give meaning to that data. Now they can predict with much more accuracy whether oil is present before they start drilling. There’s no guaranteed guide to oil drilling yet, but today over 60 percent of the wells drilled strike oil. x | Preface FM.indd 10 12/10/15 6:26 PM This document is authorized for use only by Kristopher Durham in Design Thinking - Fall 2021 at Wake Forest University Medical School, 2021. Today, my colleagues and I are striving to bring to innovators, entrepreneurs, and the people who invest in them the same kinds of useful theories that those geologists brought to oil drilling. We want to help them know which pieces of information they need to collect, and how to interpret that information, so that they can become predictably successful at a rate that wasn’t possible in the past. And I’m thrilled to report that, since this book was first published, we have made substantial progress with these theories. It might seem audacious to assert that hard-headed, data-driven, results- oriented managers can benefit from using theories—indeed, the terms theory and theoretical connote impractical in modern business speak. But theories are statements of cause and effect—which actions yield which results, and why. As such, a good theory is consummately practical. The truth is, every time man- agers take an action or make a plan, they do it with the belief that if they take the actions they envision, they’ll get the results they need. So managers are in fact voracious consumers of theory. The problem—the reason why succeeding at innovation has seemed so unpredictable—is that researchers to date haven’t provided a body of theory that is valid and reliable enough to give innovators a solid sense of whether there is “oil down there” before they start drilling. Some who have read this book have been bothered that the examples I used to illustrate the effects of disruption are all drawn from the past. But perhaps that’s because those readers have been misled as to what theory actually is, and how it is built. Let me explain. Data only exists about the past. Theory must be derived, therefore, from careful observation of the past; then by categoriz- ing those observations and correlating those categories with the outcomes of interest; then by understanding what causes those outcomes; and finally by showing how that causal mechanism can produce different results in different circumstances. Theory is then improved by using it to predict: retrospectively to predict what should have happened in the past, and prospectively to predict what will happen in the future. That being said, the theory of disruption con- tinues to yield predictions that are quite accurate, in an astounding range of industries and applications—from satellites and national defense to computers and telecommunications; from retailing software to national economic devel- opment; and from health care to education. Hundreds of students, consultants, investors, executives, and academ- ics have joined with me to continue testing the theory of disruption and to research the problems of innovation. In many ways this book has become a common platform of understanding upon which we have gathered, and I’m Preface | xi FM.indd 11 12/10/15 6:26 PM This document is authorized for use only by Kristopher Durham in Design Thinking - Fall 2021 at Wake Forest University Medical School, 2021. incapable of expressing how grateful I am for all they have taught me since the first publication of this book. I can think of no professional pursuit more rewarding than joining with such kind, selfless, and intelligent people in the pursuit of light and truth. Countless articles and books have been written on this shared platform. I invite you to dig into this body of work, some of which is listed under my name on the Harvard Business School website. In doing so, I hope you will notice that The Innovator’s Dilemma, published two decades ago, is the last piece for which I was the sole author. All subsequent scholarship has been with dozens of