4/10/2015Copyright Clayton M. Christensen1 Creating new growth and Managing it more effectively Clayton Christensen Harvard Business School cchristensen@hbs.edu.
Post on 14-Dec-2015
218 Views
Preview:
Transcript
04/18/23 Copyright Clayton M. Christensen 1
Creating new growthand
Managing it more effectively
Clayton ChristensenHarvard Business School
cchristensen@hbs.edu
– Focus investments where returns are most attractive
– Understanding the customer is the key to successful innovation
– Big markets generate bigger businesses than small markets
– Outsource low value-adding activities that aren’t your core competence
– Ignore sunk and fixed costs; make decisions based upon marginal costs and marginal revenues
Principles we teach that aren’t always true:
04/18/23 Copyright Clayton M. Christensen 3
Decentralization is disruptive, and is hard to catch
Per
form
ance
Time
40% 20% on $2,000
Disruptive
Innovations
Time
Sustaining innovations
Incumbents dominate sustaining battles
Entrants typically win at disruption
Ability to use
improvements
Pace of performance
improvement
45% on$250,000
60% on$500,000DEC
Data GeneralPrimeWang
NixdorfHewlett Packard
Honeywell
112/04/18 Copyright Clayton M. Christensen 4
7%
4%
Quality of m
inimill-produced steel
12%
8%
18% 22%
% of tons
Ste
el
Qu
alit
y
19801975 1985 1990
Rebar
Angle iron; bars & rods
Structural Steel
Sheet steel
25–30%55%
Little boys beat giants by disruption
Quality of in
tegrated mills
’ steel
112/04/18 Copyright Clayton M. Christensen 5
Quality of m
inimill-produced steel
Ste
el
Qu
ali
ty
19801975 1985 1990
Rebar
Angle iron; bars & rods
Structural Steel
Sheet steel
Disruption generates repeated upside surprise
Index of 30 successful (Ex Post ) disruptors: 46% per
year for 10 years post-IPO
Performance of Disruptive Innovation Fund (ex ante) 2002-2010: 29% per year
$1
$1
$2
$4
$8
$16
1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Nucor Closing Stock Price Adjusted for Stock SplitsNucor share price (adjusted for splits)
$1
$2
$4
$8
$16
$32
27% CAGR
04/18/23 Copyright Clayton M. Christensen 6
Non-c
onsu
mer
s
or N
on-
cons
umin
g
occa
sions
Diff
ere
nt
measu
reO
f Perf
orm
ance
Time
Per
form
ance
Time
Pocket radios
Portable TVs
Hearing Aids
Tabletop Radios, Floor-standing TVs
Path taken byvacuum tube manufacturers
Expensive failure almost always results when disruption is crammed into direct competition with established technology
Path being taken by:•Electric vehicles•Solar electricity•Wind power•Biofuels
PROCESSES:
Ways of working together to address recurrent tasks in a
consistent way: training, development, manufacturing,
budgeting, planning, etc.
04/18/23 Copyright Clayton M. Christensen 7
What is a business model, and how is it built?
PROFIT FORMULA:
Assets & fixed cost structure, and the margins & velocity
required to cover them
THE VALUE PROPOSITION:
A product that helps customers do more effectively, conveniently & affordably a job they’ve been trying to do
RESOURCES:
People, technology, products, facilities, equipment, brands, and cash that are required to deliver this value proposition
to the targeted customers
© 2007 Innosight LLC 8
7%
4%
Quality of m
inimill-produced steel
12%
8%
18% 22%
% of tons
Ste
el Q
ualit
y
19801975 1985 1990
Rebar
Angle iron; bars & rods
Structural Steel
Sheet steel
25–30%55%
Evaluating investments on marginal rather than full costs biases incumbent leaders to leverage what they have, instead of building what they need
Quality of in
tegrated mills
’ steel
$350285
65
Minimill$350
15335
Marginal$350340
10
ExistingPriceCostNet
Outsourcing often sets in motion disruptive business model liquidation
Mother boards
Computer assembly
Supply chain& logistics
Product design
Brand
Dell AsusTek
Simple circuit boards
Mother boards
Computer assembly
Supply chain& logistics
Product design
Brand
Wall Street Analysts
Pharmaceutical Cos.
Petroleum Majors
Auto companies
IT departments
Customer Supplier
Bloomberg
CROs.
Halliburton,Schlumberger
Tier One Suppliers
TCS, Infosys, Wipro
Outsourcing often sets in motion disruptive business model liquidation
112/04/18 Copyright Clayton M. Christensen 11
The right product architecture
depends upon the basis of competition
Compete by improvingspeed, responsiveness and customization
Per
form
ance
Time
Compete by improvingfunctionality &
reliability
IBM Mainframes, Microsoft Windows
Proprietary, in
terdependent archite
ctures
Dell PCs, LinuxModular o
pen architectures
Changes in product architecture have profoundly changed the architecture of the computer industry
Equipment
Materials
Components
Product design & assembly
Operating system & applications software
Sales & distribution
Field service
Intel, Komag, etc.
Compaq, Dell, Gateway
Best Buy
Geek Squad
Microsoft
1960 - 1980 1980 - 1990 1990 - Present
IBM
Con
trol
Dat
a
Dig
ital E
quip
men
t
Monsanto, Sumitomo Metals, Shipley, etc.
Teradyne, Nikon, Canon, Applied Materials, Millipore, etc.
App
le C
ompu
ter
© 2007 Innosight LLC 13
Modular Architectures
Per
form
ance
Time
Interdependent Architectures
Integrated companies with proprietary products typically commoditize their suppliers
CommoditizerIBM
CommoditizeeApplied Magnetics
General Motors Dana Corp.
P&G Dow Corning
© 2007 Innosight LLC 14
Copy features
Add features
The law of conservation of attractive profits
Commoditization thru modularity, over-shooting
De-Commoditization: services & productsthat make use of the product more effective
De-Commoditization: sub-systems that drivethe performance of the modular product
112/04/18 Copyright Clayton M. Christensen 15
So what should theHarvard Business School Do?
Market Understanding that Mirrors how Customers Experience Life
“The customer rarely buys what the company thinks it is selling him” - Peter Drucker
Three levels in the architecture of a job
04/18/23 Copyright Clayton M. Christensen 17
What’s the job-to-be-done – the basic problem the customer is facing, and the result that she needs?
(Each job has functional, emotional & social dimensions)
What are the experiences in purchasing, using and living with the product that we need to
provide in order to get the job done perfectly?
What and how must we integrate in order to provide these experiences?
Targeting the job enables precision in product development
04/18/23 Copyright Clayton M. Christensen 18
Product category
Too many features; wrong
features
Customer category
One-size-fits-none product
Job to be doneProper
integration of all needed experiences
– The market is much larger
– Their share is smaller
– Their real competitors aren’t in their product category
– Growth potential is greater, because non-consumption is usually a major competitor
– They can integrate properly
– Building a valuable brand is straightforward
Companies that segment markets by job find:
Integrating correctly to provide the experiences that get the job done is the
essence of defensible differentiation
• Ikea vs. Levitz
• SAS vs. (_____)
• Zara vs. H&M
• Federal Express vs. Emery Air Freight, UPS
• Disney vs. Six Flags
• OnStar vs. Toyota, Volvo
• Hilti power tools04/18/23 Copyright Clayton M. Christensen 20
– Focus investments where returns are most attractive
– Understanding the customer is the key to successful innovation
– Big markets generate bigger businesses than small markets
– Outsource low value-adding activities that aren’t your core competence
– Ignore sunk and fixed costs; make decisions based upon marginal costs and marginal revenues
Principles we teach that aren’t always true:
top related