Seeing What's Next: Using Theories of Innovation to Predict Industry Change
From BookJive
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| Author: | Clayton M. Christensen |
| Publisher: | Harvard Business School Press |
| Published: | |
| Pages: | 312 |
| ISBN-10: | 1591391857 |
| Category: | Array |
Contents |
[edit] Overview
[edit] Theory in Action
Using in-depth case studies of five industries—education, aviation, semiconductor, healthcare, and telecommunications—Seeing What’s Next: Using Theories of Innovation to Predict Industry Change by Clayton M. Christensen outlines a three part predictive model that will help readers separate true signals of change from meaningless “noise”, evaluate the likely winners and losers in competitive battles, and predict whether the choices firms make will increase or decrease their chances of success.
The book provides actionable diagnostics and tools and illustrates how these tools enable decision-makers to answer critical questions including: Could disruption help fix our ailing school systems? Why do airlines find it so difficult to sustain acceptable profits? Which start-up firms are worth watching? What signs would indicate that they are setting themselves up as disruptions? Do theories of innovation apply to healthcare or is this industry somehow different? What role does the government or its regulatory bodies play in enhancing or inhibiting innovation in an industry? What can a country’s government do to create an environment that favors disruptive innovation? How should companies think about expanding overseas? Are there ways for them to think about innovation overseas in a disruptive manner?
From education to healthcare programs, Seeing What’s Next seeks to help develop a way of thinking to change the future of failing firms. It provides tips to help investors make smarter choices, to assist analysts to point out better recommendations for clients, and shows executives a better way to understand what separates threats from opportunities and how to develop an intuition to predict industry change by using theories of innovations. “The goal here is to dramatically increase the odds of getting things right in an area where wrong decisions can be devastating.”
[edit] Core Theories of Innovation
The Disruptive Innovation Theory that illuminates processes by which new entrants to an industry can achieve success by utilizing simple, low-cost innovations. Established companies invariably stick to sustaining innovations (improvements, both small and radical to existing products) and avoiding disruptive innovations (innovations that require new markets or change the structure of existing ones).
The Resources, Processes, and Value Theory that explains why established organizations fail to market disruptive technology. An organization’s value chain and cost structure define it’s managements decisions and prioritization regarding the outlay of capital towards the particular disruptive technology. The ability to down-market (try to capture and accommodate a less profitable market) as opposed to up-marketing (fulfilling the needs of existing customers) usually does not coincide with ideas of good management that originally created the organization’s success. Business models and value networks used to deliver disruptive innovations are usually so different from the established organization’s that even if it tries to co-opt the disruption before it becomes mainstream, its processes and resources won’t allow it to do so effectively. When asked about his superior abilities as a hockey player, Wayne Gretzky replied, “I skate to where the puck is going to be, not to where it was.”
The Value Chain Evolution Theory, which assesses whether a company has made the right organizational design choices to compete successfully. It stresses the importance of a company to evolve its value chain to focus on improving performance towards what customers need and to outsource the features and improvements that customers don’t want and won’t pay more to use—right now. Solving hard problems allows firms to capture value. Forward-thinking firms move to solve tomorrow’s hard problems because solving tomorrow’s hard problems creates tomorrow’s profits.
[edit] 3-Part Model for Change
Seeing What’s Next suggest following a three-part process to use theories of innovation in order to predict industry change.
Component 1: Look for signs of companies coming out of the woodwork who are meeting the needs of at least three customer bases—undershot customers who think existing solutions aren’t good enough; overshot customers who think solutions are too good; and non-consuming customers (or not customers?) who are people who don’t have the skills, wealth, or ability to benefit from existing solutions.
Process to Analyze Industry Change
Signs of undershot customers—consumers eagerly snatching up new products, steady or increasing prices, and struggles of companies offering de-featured products. Undershot customers look for sustained innovations that close the gap between what is on the market and what job they are looking to get done.
Overshot customers are reluctant to buy new versions of products, declining prices and new companies offering de-featured products. Overshot customers look for “good enough” technological performance at low prices.
Non-consumption customers turn to those with the skill or training for service, a market limited to those with great wealth and the need to go to centralized, inconvenient locations to consume. Non-consumers welcome new market disruptive innovations that make it simpler and more convenient for them to solve problems themselves.
Component 2: Analyzing competitve battles to pick the winning firms from the loser. There are two components to this analysis: The first is identifying the combatant’s strengths, weaknesses, and blindspots. The second is evaluating resources (what it has), processes (how it does business), and values (how its capital and resources are allocated). Most of the analysis should focus on the processes—which determine what a company can or cannot do—and values—what a company will or will not do. Look for the company that is accomplishing what its opponents have neither the skills nor the motivation to do.
Component 3: Look at the important strategic choices that help determine the ultimate winners and losers. Start by determining whether or not the company is following a preparation regime that facilitates finding the disruptive path. Check management team experience, verify that the company is encouraging emergent forces, confirm that the company’s investors will allow it to follow a disruptive path. Follow this with ascertaining how the entrants are choosing suppliers, distributors, and ancillary partners. “Entrants residing in free-standing value networks that do not interact with incumbents have the greatest chance of driving industry change; entrants locating themselves within an established value network create the possibility of incumbent co-option.”
Last, look to see if the incumbents have developed the skill of capitalizing on disruptive trends. Incumbents that have nurtured this capability could respond to a disruptive threat by setting up a separate organization or use an established process to deflect the disruptive threat.
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