Clayton M. Christensen's Blog

November 19, 2011

Keep the faith. That's what I said to a client who is going through a crisis of confidence. Over the summer he had put together the underpinnings of what on paper looked like a promising growth business. But — as is usually the case — the more he analyzes, the more he doubts; the more he shows the results of his analysis to senior leaders, the more questions they ask, and the more they doubt.


If you are doing something that hasn't been done before, careful analysis will by definition highlight reasons to not proceed. Market demand can't be validated. Experts dismiss technological assumptions. Partnership discussions stall. There is always something that causes this crisis of confidence. Harvard Professor Rosabeth Moss Kanter has seen this so frequently that she coined Kanter's Law: Everything can look like a failure in the middle. When you first formulate an idea, excitement peaks. But the more you study that idea, the more you realize the challenges that lie in front of you.


Innovators need a heavy dose of faith. They need to trust their intuition that they are working on a big idea. That faith need not be blind. For example, I combine well-grounded research that highlights patterns of successful innovation and my own field experience into a short checklist of factors that indicate whether or not an idea has potential (in a future post I'll provide more color about using this checklist). I make sure there's a good story behind the idea. Dissenters may poke holes in the story, but at least it's there.


Read the rest at Scott's Harvard Business Review blog.

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Published on November 19, 2011 16:00 • 259 views

November 10, 2011

In 1995, a young Harvard Business School Professor co-authored an article in Harvard Business Review, "Disruptive Technology: Catching the Wave." He and his co-author proposed a new causal mechanism that explained the surprising failure of highly-regarded companies. The most punishing innovations, they argued, were the ones that were easy to dismiss at first blush — simple, affordable solutions that took root outside the mainstream market. The authors called these "disruptive" solutions and provided a straightforward prescription for leaders looking to turn disruption into an opportunity. They suggested that companies should find a customer who loved the disruptive solution despite its limitations and create a separate organization to commercialize it.


Of course, that young HBS professor was Innosight co-founder Clayton Christensen. Since then, he has written over a half-dozen books and many more Harvard Business Review articles, almost all of which touch on disruption in some way. Academic journals have dissected the disruptive innovation theory and hundreds of thousands of students around the world have seen Christensen's famous model.


Yet, the innovator's dilemma persists. Just ask executives at Blockbuster Video, Sony, Nokia, Microsoft, Hertz, Kodak, Delta, and nearly all newspaper companies. That's not to say that there haven't been success stories. But they're notable because they are exceptions.


So, why has this dilemma persisted?


Read the rest at Scott's Harvard Business Review blog.

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Published on November 10, 2011 16:00 • 85 views

October 30, 2011

Over the past year I've shifted my presentation materials so they include mostly pictures and 96 point font. That's good for audiences (at least, I think it is), but bad when I get the kind of request that landed in my in-box last week.


"I'm doing an innovation update at one of our meetings and I'm hoping you can assist me with some conversation starters," a senior leader said to one of our clients. "The main point of the presentation is to get the audience thinking proactively and positively about how they can contribute to innovation."


I had presented a slideshow on this exact topic in April. Unfortunately, my slides consisted of a big picture of a black box, a photo of Steve Jobs, headshots of eight academics, a screenshot of an Old Spice advertising campaign, and a picture of my favorite haircut place in Singapore. The slides are pretty, but they won't help a thirdparty who lacks the context.


So, my colleague Josh Suskewicz and I put our heads together and came up with the 10 innovation myths that we encounter most often in the field.











Myth


Reality



Innovation is random
Innovation is a discipline — it can be measured and managed. Consider how Procter & Gamble's structured approach to innovation allowed it to triple its innovation success rate and double the size of a typical initiative.


Only creative geniuses can innovate
Innovation is distinct from creativity. While creativity can help, people who aren't intrinsically creative can create high-impact innovation if they follow the right process.


You're either an innovator or you're not
Research recounted in The Innovator's DNA described how innovation is about 30 percent nature and 70 percent nurture.




Read the rest at Scott's Harvard Business Review blog.

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Published on October 30, 2011 17:00 • 82 views

October 20, 2011

About a year ago I miscalculated — badly — on the Microsoft Kinect. In terms of speed of adoption, only Apple's iPad has rivaled the Kinect. Aside from some tough comments on my blog, the long-term repercussions were low.


That's pretty much what happens to a pundit who gets it wrong — nothing.


Life is tougher for the strategist. A prescient call provides career rocket fuel, while the wrong one can be career limiting. So how to sift through the noise to evaluate the predictions that warrant the most careful attention? Watch out for the following four types of pundits.


The non-user. This pundit makes bold predictions about a product or service he's never used. Remember, a wide gulf separates a corporate press release or a carefully scripted demo and in-the-field reality. I ran into this trap when I started getting excited about Research in Motion's Playbook before the product had even been officially launched. The product's performance didn't live up to early press releases and has struggled in the market.


The projector. This pundit makes predictions about markets that she doesn't participate in. For example, in 2008 a company called Peek launched a seemingly game-changing device that made it simple for people to access their email on the go. Many tech savvy reviewers said the product would take off because its simplicity would appeal to everyday users. The reviews convinced me to buy a Peek for my wife, but watching her use the device for five minutes led me to believe that as simple as the device seemed, it just didn't fit into my wife's life. That Christmas present quickly turned into a paperweight.


Read the rest at Scott's Harvard Business Review blog.


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Published on October 20, 2011 17:00 • 72 views

October 9, 2011

"We were too busy being strategic to do something obvious," said Mr. Harish Bhat, the COO of the Time Products division of Titan Industries Limited.


That was just one of many choice lines I heard when listening to Bhat talk about Titan's efforts to create new growth businesses, including two new and successful watch lines: RAGA, for women, and Fastrack, for younger consumers.


Titan is about a $1.5 billion unit of The Tata Group, a massive Indian conglomerate. The world's fifth largest watchmaker, it owns 60% of the Indian market, and has been growing robustly. As Bhat went through his presentation, I wrote down the following lessons:




1. "Live" new markets. It would be easy for Titan to focus most of its efforts on deepening its penetration in its strongest market segments. But Titan consciously chose to go after markets in which it had significant growth potential. For example, Titan's research suggested that as few as 20% of Indian females owned watches. For both its RAGA and Fastrack lines, Titan put people who "looked" like the target consumer in key leadership roles, and spent a good deal of time trying to understand target customers in a deeper way. Importantly, senior leaders invested time in understanding the markets and consumers as well. "We didn't just sit and watch a presentation or engage in long-winded analytical debates. We did it." Involvement helped Titan make bold decisions later on. "When a leap of faith is shared by the senior leadership team, it is that much easier to take."


2. Rethink the offer. Titan found that potential female consumers were put off by relatively utilitarian watches, but they would happily wear multiple bracelets, rings, and chains. The team at Titan wondered what would happen if they turned a watch into an elegant piece of jewelry that a woman would happily wear. Growth exploded.


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When targeting the youth markets, Titan ran different types of advertisements and created very different looking watches, under the racy brand name, Fastrack. As Fastrack watches took off, Titan decided to stretch the brand into new categories such as sunglasses. In both cases Titan rethought key elements of its offer, and reaped the benefits.


Read the rest at Scott's Harvard Business Review blog.

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Published on October 09, 2011 17:00 • 76 views

October 6, 2011

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To mark the passing of one of the world's all-time great innovators, some of the leaders of Innosight are reflecting on what Steve Jobs taught the world. He leaves as his legacy a set of lessons about innovation that will continue to inspire us for generations to come. These are just eight of the main takeaways from his remarkable career and life:


1. The zen of knowing what customers want without actually asking them

One of our favorite Steve Jobs quotes came as his answer to the question: What market research did you do that led to the iPad? "None," he replied. "It's not the customer's job to know what they want."


Innosight co-founder and Harvard Business School professor Clayton Christensen says that Steve Jobs helped teach us to shun focus group-type research and instead carefully observe what people are trying to do, not just functionally but socially and emotionally too. "His instinct was not to focus on the customer, but rather to focus his innovations on the job that the customer is trying to do."


2. A passion for breakthrough experiences

In a world without Steve Jobs, we might still look at computers and phones as utilitarian tools. But Matthew Eyring, Innosight's managing partner, says that Jobs turned them into objects of desire by channeling his "passion to blend art, design, and technology to create breakthrough customer experiences."


That passion made all the difference in the way we feel about Apple and its products. "Using one of his products was akin to having an ongoing dialogue with someone who actually knew what a great customer experience was," adds Eyring, "and he cared obsessively about delivering it."


Innosight principal Josh Suskewicz says that this lesson can be applied to almost any business. "You can always ask 'what would Steve Jobs do?' when working on innovation projects because it is essentially shorthand for saying 'are we absolutely certain that what we're designing will delight our customer?'"


3. A holistic approach to innovation

While Apple is best known for product innovation, Steve Jobs focused just as much innovation on the business systems that turned mere products them into profit-spinning enterprises.


"Apple makes cool gadgets, for sure," says Scott Anthony, managing director of Innosight Asia-Pacific. "But Steve Jobs also developed highly innovative revenue models (99 cents for digital songs), created entirely new channels (iTunes and the App Store), re-thought the in-store retail experience (the Apple Store), and developed innovative advertising approaches. Innovation isn't just about bells and whistles – it's about new ways to create, deliver, and capture value."


4. A radical approach to simplicity

When the first iPod came out, the elegant click wheel made it seem revolutionary.


Innosight venture partner Hari Nair says the lesson is expressed best in his favorite quote from Jobs: "Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it's worth it in the end because once you get there, you can move mountains."


5. Failure as the only path to success

After Steve Jobs was fired from Apple at age 30, he picked himself up and started NeXT, which turned into a spectacular failure as well as the launching pad for the Apple renaissance. "A powerful lesson from his life is that we must not be afraid to fail," says Innosight principal Robyn Bolton. "In fact, we should be willing to fail, to fail grandly, and then to learn from it, adjust, and try again."


6. Iconoclastic thinking

Jobs was a counterintuitive revolutionary who made "think different" the motto of his company, supported by posters of history's iconoclasts, from Gandhi to Einstein to Picasso. Innosight principal Tim Gustafson attributes this powerful competitive advantage to Jobs' relentless questioning, always asking: "Why do we always do it that way?" Innosight partner Kevin Bolen agrees. "He made a discipline of unconventional thinking."


His counterintuitive thinking often sent rivals into deep fits of confused denial. Innosight principal Alasdair Trotter cites his favorite quote from Microsoft CEO Steve Balmer, who in January 2007 dismissed the first iPhone: "There's no chance that the iPhone is going to get any significant market share. No chance. It's a $500 subsidized item…It is the most expensive phone in the world and it doesn't appeal to business customers because it doesn't have a keyboard which makes it not a very good email machine."


Natalie Painchaud, Innosight's director of client learning, notes that Jobs didn't focus on what other people think he should be doing but rather trusted his own intuition, as he so eloquently stated at Stanford: "Your time is limited, so don't waste it living someone else's life. Don't be trapped by dogma — which is living with the results of other people's thinking. Don't let the noise of others' opinions drown out your own inner voice."


7. An unconventional view of innovation management

While many business leaders cite Jobs as a model for how to manage innovation, Jobs' own role models came from outside the world of business. And at the top of his list were John, Paul, George and Ringo. "My model for business is the Beatles," Jobs said in a 2008 interview on 60 Minutes. "They were four guys who kept each other's negative tendencies in check; they balanced each other. And the total was greater than the sum of the parts."


A lifelong Beatles fanatic, Jobs wasn't just talking about the wisdom in their songs but about strategies for turning out innovations that are as insanely great as Beatles albums. "Apple is a very collaborative company," he once explained an interviewer. "We have zero committees but lots of teams." All through Apple's comeback years, Jobs met with each of these talent-rich groups once a week. "What I do all day is meet with teams of people," he said. "We have wonderful arguments. But we trust people to come through with their parts, and to bring it all together into a product."


8. Disrupting your own market

While most companies have a tendency to invest in their successful core business, Jobs was always seeking ways to disrupt Apple's own market with cheaper, simpler solutions—the iPad being a prime example.


"He was one out of 1,000 entrepreneurs, who having tasted success, are able to profitably figure out how to cannibalize his own products before others did," says Dick Foster, Innosight's lead director.


All this is why "Steve Jobs will remain for decades, and perhaps centuries to come, a role model for the spirit of America, the spirit of entrepreneurism and the spirit of the better life that entrepreneurs allow all of us to enjoy through their cleverness, their cunning and their drive," Foster continues. "He is a role model for the youth of the world. He was made for America, and America was made for Steve Jobs."

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Published on October 06, 2011 17:00 • 81 views

September 22, 2011

Delegation is a necessary survival skill for senior executives. But when executives delegate their discovery-related innovation tasks, the odds of them finding the surprising insights that often spur transformative-growth businesses decrease dramatically.


This thought crossed my mind as I participated in a review session for an interesting new growth business that a large company was considering. The session seemed innocent enough. Senior executives actively participated in the discussion. They made thoughtful comments and helped the team clarify how it should take the idea forward. Not surprisingly, the team members had more questions than answers, but they left with a clear plan to go learn more about the things they didn't know.


After the meeting, it was clear that executives would turn back their attention to "normal" activities, and would expect to hear an update from the team in about 90 days.


Sounds reasonable enough, right? But remember: the most powerful businesses don't result from careful analysis; they emerge, often unexpectedly, from trial-and-error execution (a point made nicely by Roger Martin in his recent blog post). What happens if (when) after the review meeting the team discovers something unexpected that warrants a significant course correction? Strategy can't always be scheduled.


Even worse, the dissociation of leadership from learning decreases the odds that the team will pay attention to the unexpected insight. Consider a remarkable stream of research that Peter Sims describes in his must-read book, Little Bets.


Read the rest at Scott's Harvard Business Review blog.


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Published on September 22, 2011 17:00 • 62 views

September 21, 2011

"Summer" is a bit of an odd concept when you live 85 miles north of the Equator, and the weather seems to be pretty stable throughout the year. Yet, three sets of experiences over the past few months provided the kind of stimulation that led to at-the-beach-like reflections — and point to ways to accelerate the generation of breakthrough insights.


The first experience involved extensive field visits to India and China as part of work with a multinational company looking to boost growth in those markets. Our team collectively spent about 100 days across the two markets, visiting urban areas, rural areas, homes, retail locations, hospitals, and more.


The two markets are often lumped together because they both have massive populations and are reasonably geographically proximate. But the striking thing about them is how very different they are. India and China are fascinating, diverse, and distinct. You can get only a smidge of understanding about what makes each country tick from reading about them. (Tarun Khanna in particular has written some useful books on the topic.) But nothing replicates actually being on the ground. If these countries are important for your company's future, commit to spending at least two weeks in each market over the next year. Make sure to get out of the six-star hotels to actually experience real life. The investment of time will pay big dividends.


Read the rest at Scott's Harvard Business Review blog.

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Published on September 21, 2011 17:00 • 70 views

September 20, 2011

A vision for a smart energy grid has been around for at least 10 years, yet adoption remains painfully low, with only 5 million smart meters and 140,000 programmable communication thermostats installed across the United States.


Many barriers are holding up deployment of an "energy internet," including technology, public policy and business model issues. But perhaps the biggest hurdle is the fundamental misalignment with the way consumers actually behave. In other words, how can we get consumers to care about smarter energy management?


To answer this question, some energy entrepreneurs are embracing what Innosight has long advocated as the game-changer in mass adoption of a new technology: a true understanding of the "jobs" for which a customer hires a company's products. Those jobs aren't just functional, but social and emotional. After all, the acceptance of smart meters and other new energy technologies will require the formation of entirely new habits such as shutting off TVs and computers when not in use and doing laundry at off-peak times.


At Innosight, we define habit conversion as the process of moving a new behavior from the conscious mind to the habitual unconscious mind. More compelling products, services and pricing can be a part of what drives consumers, but the process also needs to embrace the underlying psychology as well.


The energy industry has a long way to go to understand the total picture of what motivates consumers. In a 2011 study, the Smart Grid Consumer Collaborative, a public-private research group, found that 75% of the households most likely to adopt smart meters are either completely unaware or only remotely informed about the technology. Yet the same study showed that nearly 70% of consumers want to know more and are open for engagement. The player that finds the right consumer engagement model, then, can drive massive change in one of the world's largest industries.


Learning from Tendril's Approach to Consumer Motivation

We recently spoke with Tim Enwall, the founder and CIO of Tendril, an energy internet company that's paving the way for the power industry to harness ubiquitous computing. The company sells software applications for the smart grid and currently has deals with 35 utilities and service providers who have 70 million customers around the world.


There's no doubt that the enabling technology will be available, says Enwall. He sees a near future in which every light switch, outlet, washer and dryer, thermostat, water heater, refrigerator and electric car contains a $2 chip that transmits energy usage information.


But today's average energy consumer is "asleep about energy," he says. The Boulder, Colorado startup's goal is to engage consumers along their "path of enlightenment" and bring them into a world where they are much more conscious about energy. Tendril aims to get consumers along this path by prioritizing three important, unsatisfied, widely-held jobs to be done:


1. Saving money – by cutting monthly energy bills.

2. Saving the planet – by reducing consumption of carbon-producing fuels.

3. Gaining control – via increased access to usage information, a need that has intensified with the increasing connectivity of everything.


The problem is that energy consumers are entrenched in a system that makes being passive about their consumption much easier than making small changes that could lead to big results.


Lessons from smoking and weight loss

That's where basic behavioral science comes in. He compares habit conversion in energy to weight loss or smoking cessation. Tendril went so far as to acquire a startup called Grounded Power that based its approach on what it had learned in building a successful smoking cessation website.


One main lesson is that "externally motivating tactics" don't work. Just as beating overweight people and smokers over the head with the message "you are going to die" fails to motivate people, exhorting people with some moral or environmental obligation to save energy is a proven loser. In addition, cutting checks to consumers in exchange for control over their thermostat or AC unit has also met with extremely low adoption rates.


Instead, the objective is to drive "intrinsic, internal motivation." As with smoking and weight loss, the idea is to get consumers to set achievable goals, such as how much money or energy they want to save. Software such as a smart phone app can then constantly show them how they are doing. Finally, the other driver that works is community support and competition.



[image error]*Creating new habits: Tendril Energize is a suite of apps that enable energy users to set goals of how much they'd like to cut costs and consumption—and then continually monitor progress.



Tendril starts by sending a consumer a paper statement with information on how their consumption compares to their neighbors, along with tips on how to improve. This typically arrives with their utility bills. As consumers increase awareness, Tendril encourages them to go online, see information in real time, set goals and commit to actions to achieve those goals.


Online, community users share stories and suggestions such as adding more clothes to loads of laundry, or purchasing intelligent power strips. As they learn more, consumers become more comfortable with more complex solutions, along the lines of Apple opening the app store a year after the iPhone was released. In the home energy management space such offerings include automated savings programs or smart appliances to 'set and forget'.


Using this behavior-driven approach has allowed Tendril to connect consumers to the smart grid and achieve positive results, with immediate 5% to 10% savings in energy consumption and costs being typical.


But companies like Tendril are really eyeing the bigger cost savings and longer-term efficiency benefits. Once enough consumers demonstrate they are willing to change their habits, utilities should get more and more interested in stepping up the marketing of new services, including more smart meters and a larger mix of renewable resources.


Over time, that could lead to new growth for the industry, especially as automobiles shift from being fueled by oil to being powered by electricity. With the proliferation of tablets and smart phone, there's a real chance it will be seen as habitual for consumers to manage it all.


Kristen Johannessen is an associate at Innosight. Summer associate Jessica Aldridge is a graduate student at Yale University.

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Published on September 20, 2011 17:00 • 73 views

September 1, 2011

Let me make one thing clear. I love entrepreneurs. I admire their creativity, ingenuity, and perseverance. I have stood in their shoes as we built out Innosight's core business and explored new geographies and offerings. I have also funded many entrepreneurs through our company's venture investment arm.


I am writing today, however, to praise corporate innovation.


Right now start-ups have undeniable sex appeal. If you ask twenty-somethings where they could go to have an impact, they will tell you a start-up. They have read the stories of Andrew Mason from Groupon and Mark Zuckerberg from Facebook, peers who have created billions of dollars in value. Having a movie made about your start-up? Sexy. Joining a faceless corporation manned by drones? Not so sexy.


But let's deal with the reality of entrepreneurship. Sure, there are entrepreneurs like Mason or Zuckerberg who win big. But the vast majority of new businesses fail. Further, while some start-ups legitimately have the potential to change the world, many more are fast followers looking for a "quick flip." That may be sure motivation for the financially oriented but it sure sounds like "selling out" to me.


Read the rest at Scott's Harvard Business Review blog.


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Published on September 01, 2011 17:00 • 77 views

Clayton M. Christensen's Blog

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