Where Does Growth Come From – Clayton Christensen

Clayton Christensen is an award-winning Harvard Business School professor and author of five books, including The Innovator’s Dilemma, which received the Global Business Book Award for the best business book of the year.

Types of Innovation

  • Potential Innovation
  • Sustaining Innovation
  • Disruptive/Growth Innovation
  • Efficiency Innovation

Potential Innovation

  • Characteristics or attributes of a person doesn’t cause the person to buy a specific product
  • Most successfully innovations focus on a job that people need to do
  • Example with McDonald having immense data on cohorts of target demographics of their milkshake. To improve their milkshake, one idea was to invite those individuals of that cohort and ask how to improve it. After the improvements, sales did not increase.
  • Thought of it differently where the customer is the person has a job out there, that requires the McD milkshake to get the job done. The secret is to understand what the job is.
  • 50% of customers bought milkshake before 8:30 in the morning, only thing they bought and alone. Figured out they had a long drive to work.
  • Jobs are very stable over time, but the method changes overtime (idea of the job of shipping an item from one place to another -> from railroads, to airplanes, to Uber)
  • Idea of “start with why”
  • Start with what is the job I need to do given the situation I’m in (what the job the customer needs to do)
  • What are the experiences in purchase and use that we need to provide in order to do the job perfectly? (how customer will choose us)
  • What and how to integrate? (what we can do that other people can’t)
  • What kind of brand to apply to the product? (how will people know what product does the job best?)

Sustaining Innovation

  • Make good products better
  • Help keep margins healthy, mechanism for gaining market share, don’t create growth

Disruption and Growth Innovation

  • Industries always target the customers who have the most money and best access to product and service, because R&D is so costly and complicated
  • 2 trajectories of every markets: improvement that customers are able to utilize on their lives (flat), improvement from better products where the services provided is greater what the customer actually needs (accelerating)
  • Incumbent companies who are at the top of the industries will still be at the top after battle of innovation is over. New company cannot ever win by doing it just better than incumbent companies.
  • Disruption companies where you can make not just the product better but more affordable + accessible, will win + a product/service that the incumbent cannot easily replicate
  • Blackberry being disrupted by Apple, now Apple is being disrupted by Samsung
  • Floppy disk being disrupted by CDs, then hard drives, then flash drives

Efficiency Innovation

  • Allow us to make more with less

Why are We Not Able to Keep Growth?

  • Reason 1: Abundance and scarcity: Take care of what’s costly, and can waste what’s abundance
  • Reason 2: Measure our success with ratios instead of whole numbers. Easier to outsource (reduce cost) than to make more profits, so focus becomes cost reduction rather than creating growth

Other Notes

  • 9 recessions since world war 2, in the first 6 recession, takes 6 months to recover. The next took 15 months. 01/02 took 39 months to recover. 08 took 6 years.
  • SP, Moody have very short-term metrics that span 1-2 years. No metrics available to determine how well the company will do in the next 10 years. Research has to be done on your own
  • Disruption is built within the business model of the enterprise not by developing the best technology, but how you deploy it determines its disruptiveness