Disruptive Innovation: It’s All About Process, Baby

I’m reading a book (when I have time, which is clearly not very often) called The Innovator’s Dilemma by Clayton M. Christensen of Harvard Business School.  It was recommended to me by my very smart friend and colleague Jonathan Groves.  I’m not very far along, but thought I would share a bit of what I’ve read so far, and maybe post a few updates as I go along.  In a nutshell, it’s downright creepy how well this book appears to apply to the news organizations — and I suspect there are many things we can learn from it.

Not to be too dire, but Christensen researches failed companies.  He wants to understand why sometimes, extremely well-managed companies who do everything business schools and consultants and self-help books prescribe still manage to go under.  They are responsive to their customers.  They invest in research and development and come up with advanced, highly functional new products that could bring them higher profits. They are extremely well-respected in the business community.  But still, they fail.

Why?  Well, it turns out that good firms fail when what he calls a “disruptive technology” comes along.  Disruptive technologies are a strange breed of innovation.  At least in the short term, they often actually perform WORSE than the products they are replacing.  Loyal, already-established customers may not want them (hello, older newspaper readers).  They often promise lower profit margins, and they first become popular in emerging or insignificant markets.

So these smart companies, listening with respect and astute care to their current customers, can’t build a case for investing in these technologies — until it is too late.  There are huge “first-mover” advantages, but relatively little solid information to go on before making the leap.  This scenario plays out often in the computer industry.  It also happened to Sears, which failed to see the threat of the discount retailers until it was too late.

I haven’t gotten to all of Christensen’s advice on how to deal with disruptive innovation yet.  One thing he recommends is that managers set up a new and autonomous organization that is charged with developing a new business around the technology.  This new business would be unburdened by the profit expectations of the established organization.  Interesting.

Here’s another one that I find even more interesting and relevant to my own work on how newspapers manage change.  “Once they’ve found the right people, too many managers then assume that the organization in which they’ll work will also be capable of succeeding at the task.  And that is dangerous…People are quite flexible, in that they can be trained to succeed at quite different things…But processes and values are not flexible. A process that is effective at managing the design of a minicomputer, for example, would be ineffective at managing the design of a desktop personal computer.  Similarily, values that cause employees to prioritize projects to develop high-margin products, cannot simultaneously accord priority to low-margin products.  The very processes and values that constitute an organization’s capabilities in one context define its disabilities in another context.”

Although process isn’t the whole story, organizational research also generally reflects Christensen’s point, and anyone who has spent time in the newsroom can see the truth of this.  When an entire newsroom is geared around the process of putting out  the daily paper, it is extremely difficult to do things differently.  It’s not that the people involved in that process aren’t smart or flexible.  Sure, it makes people justifiably nervous to have to learn new skills, but most journalists I’ve talked to are willing to try, and even tend to get excited about it or find out it wasn’t as bad as they thought.  But until the processes change, little true change in the product can occur.

1 Comment

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One response to “Disruptive Innovation: It’s All About Process, Baby

  1. JG

    The story of the steel industry in Chapter 4 is especially applicable. In the ’80s, the large integrated-mill manufacturers ceded the least profitable markets to the minimills, concentrating on their core customers. They slashed their workforce from 93,000 to 23,000, and invested more than $2 billion in improving plant and equipment. Profitability in their core markets soared.

    But eventually, the minimills improved their technologies to the point where they could invade the integrated-mill markets. The minimills, brought up on lower profit margins, could undercut the big dogs. And by then, the integrated mills were helpless.

    Compare that to the newspaper industry’s tactics in the 1990s.

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