Note: I read and then reviewed this “business classic” when it was first published and recently re-read it. I am even more impressed now than I was then.
In a previous work, The Innovator’s Dilemma, Christensen examines why so many companies fail to remain competitive “when they confront certain types of market and technological change….the good companies — the kinds that many managers have admired for years and tried to emulate, the companies known for their abilities to innovate and execute….It is about well-managed companies that have their competitive antennae up, listen astutely to their customers….invest aggressively in new technologies, and yet they still lose market dominance.” According to Christensen, the innovator’s dilemma occurs when the logical, competent decisions of management which are critical to the success of their companies are also the reasons why they lose their positions of leadership. I wholly agree with Christensen that a given problem must first be fully understood before efforts to solve it are initiated. The challenge is even greater when the given problem poses a dilemma which (in essence) involves a paradox: Whatever has been essential to success can also cause failure. What to do?
In The Innovator’s Solution, Christensen and Raynor offer a wealth of strategies and tactics to solve such a dilemma, revealed by their rigorous research on hundreds of different companies. In their book, they summarize “a set of theories that can guide managers who need to grow new businesses with predictable success — to become disruptors rather than disruptees — and ultimately kill the well-run, established competitors.” More specifically, Christensen and Raynor suggest appropriate responses to situations such as these:
• When a disruptive foothold is needed which competitors “will be happy to ignore or be relieved to walk away from”
• When there are opportunities to help customers “get done more conveniently and inexpensively what they are already trying to get done”
• When a low-end disruption is feasible and a business model is therefore necessary “that can make attractive profits at the discount prices required to capture customers at the low end of the market”
• When determining the criteria for selecting members of a management team for a new venture
NOTE: Christensen and Raynor correctly suggest that among the most important criteria is sufficient prior experience with solving problems comparable with those the new venture seems certain to encounter.
• When disruption (and competing against non-consumption in particular) “requires a longer runway before a steep ascent is possible.”
Christensen and Raynor have no illusions whatsoever about the difficulties of creating and then sustaining successful growth, however “growth” may be defined and measured. Moreover, they observe “To our knowledge, no company has been able to build an engine of disruptive growth and keep it running and running.”
For many decision-makers who read The Innovator’s Solution, I think it will prove be the most valuable business book they ever read. Why? Because it will guide and inform their efforts with associates to design, activate, and then maintain “a well-functioning disruptive growth engine.” Even then, they must keep it mind that no such mechanism will keep “running and running” forever. Improvisation and adaptability are imperative. Eventually, a new “engine” will be required but at least they will possess the knowledge and experience needed to produce another one.
In my opinion, Crossing the Chasm (1991) and Inside the Tornado (1995) are most valuable when read in combination. In fact, I strongly recommend that they be read at least once a year, in combination, because Moore’s insights in both will become even more relevant as a global marketplace that both exands in terms of scope and depth and contracts in its of terms of engagement, especially focus on localities, niches, and analytics. Moreover, the relevance includes but is not limited to the high tech community.
Chasm “is unabashedly about and for marketing within high-tech enterprises.” It was written initialky for he entire high tech community “to open up the marketing decision making during this [crossing] period so that everyone on the management team can participate in the marketing process.” In Chasm, Moore isolates and then corrects what he describes as a “fundamental flaw in the prevailing high-tech marketing model”: the notion that rapid mainstream growth could follow continuously on the heels of early market success.
Moore defines a market as a set of actual or potential customers for a given set of products or services who have a common set of needs or wants, and who reference each other when making a buying decision. The final point may be the least intuitive, but Moore says, “the notion that part of what defines a high-tech market is the tendency of its members to reference each other when making buying decisions– is absolutely key to successful high-tech marketing.”
Many business plans are based on a traditional Technology Adoption Life Cycle, a smooth bell curve of high tech customers, progressing from Innovators, Early Adopters, Early Majority, Late Majority, and finally Laggards. In turn, this model becomes the foundation for a high-tech marketing model which says the way to develop a market is to work the curve from left to right, progressively winning each group of users, using each “captured” group as a reference for the next. Moore demonstrates that in fact, there are cracks in the curve, between each phase of the cycle, representing a disassociation between any two groups; that is, “the difficulty any group will have in accepting a new product if it is presented the same way as it was to the group to its immediate left.” The largest crack, so large it can be considered a chasm, is between the Early Adopters and the Early Majority. Many (most) high tech ventures fail trying to make it across this chasm.
Early Adopters are the rare breed of visionaries “who have the insight to match an emerging technology to a strategic opportunity driven by a ‘dream’. The core dream is a business goal, not a technology goal, and it involves taking a quantum leap forward in how business is conducted in their industry or by their customers…Visionaries drive the high-tech industry because they see the potential for an ‘order-of-magnitude’ return on investment and willingly take high risks to pursue that goal. They will work with vendors who have little or not funding… As a buying group, visionaries are easy to sell but very hard to please… because they are buying a dream…They want to start out with a pilot project, which makes sense because they are ‘going where no man has gone before’ and you are going with them. This is followed by more project work, conducted in phases with milestones, and the like.”
According to Moore, “You can succeed with the visionaries, and you can thereby get a reputation for being a high flyer with a hot product, but that is not ultimately where the dollars are. Instead, those funds are in the hands of more prudent souls who do not want to be pioneers”
The Early Majority are pragmatists who “care about the company they are buying from, the quality of the product they are buying, the infrastructure of supporting products and system interfaces, and the reliability of the service they are going to get… Pragmatists tend to be ‘vertically’ oriented, meaning that they communicate more with others like themselves within their own industry than do technology enthusiasts and early adopters… It is very difficult to break into a new industry selling to pragmatists. References and relationships are very important…Pragmatists won’t buy from you until you are established, yet you can’t get established until they buy from you….”
Moore notes that, “On the other hand, once a startup has earned its spurs with the pragmatist buyers within a given vertical market, they tend to be very loyal to it, and even go out of their way to help it succeed. When this happens, the cost of sales goes way down, and the leverage on incremental R&D to support any given customer goes way up. That’s one of the reasons pragmatists make such a great market: “They like to see competition… Pragmatists want to buy from proven market leaders because they know third parties will design supporting products around a market- leading products… aftermarket…
“Overall, to market to pragmatists, you must be patient. You need to be conversant with the issues that dominate their particular business. You need to show up at the industry-specific conferences and trade shows they attend. You need to be mentioned in articles that run in magazines they read. You need to be installed in other companies in their industry. You need to have developed applications that are specific to their industry. You need to have partnerships and alliances with the other vendors who serve their industry. You need to have earned a reputation for quality and service.
In my opinion, the best sources for those with a special interest in disruptive technologies are the books that Clayton Christensen has authored or co-authored, notably The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail, The Innovator’s Solution: Creating and Sustaining Successful Growth, and Seeing What’s Next: Using the Theories of Innovation to Predict Industry Change.